<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 26, 1998
REGISTRATION NUMBER 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
COGEN TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4911 76-0571474
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
COGEN TECHNOLOGIES, INC.
711 LOUISIANA, 33RD FLOOR
HOUSTON, TEXAS 77002
713/336-7700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RICHARD A. LYDECKER, JR.
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
711 LOUISIANA, 33RD FLOOR
HOUSTON, TEXAS 77002
713/336-7700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
CHARLES H. STILL JOSEPH A. COCO
FULBRIGHT & JAWORSKI L.L.P. SKADDEN, ARPS, SLATE, MEAGHER & FLOM
1301 MCKINNEY, SUITE 5100 LLP
HOUSTON, TEXAS 77010-3095 919 THIRD AVENUE
713-/651-5151 NEW YORK, NY 10022-3897
212/735-3000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
TITLE OF EACH CLASS OF SECURITIES TO BE MAXIMUM AGGREGATE AMOUNT OF
REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Common Stock, $.01 par value per share..... $500,000,000 $147,500
</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457 of the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
The Prospectus relating to the shares of Common Stock to be used in
connection with a United States and Canadian offering (the "U.S. Prospectus")
is set forth following this page. The Prospectus to be used in a concurrent
international offering (the "International Prospectus") will consist of the
alternate page set forth following the U.S. Prospectus and the balance of the
pages included in the U.S. Prospectus for which no alternate is provided. The
U.S. Prospectus and the International Prospectus are identical except that
they contain different front covers.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued , 1998
Shares
Cogen Technologies, Inc.
COMMON STOCK
--------
OF THE SHARES OF COMMON STOCK BEING OFFERED, SHARES ARE BEING
OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS AND
SHARES ARE BEING OFFERED INITIALLY OUTSIDE THEUNITED STATES AND CANADA
BY THE INTERNATIONAL UNDERWRITERS. ALL OF THE SHARES OF COMMON STOCK BEING
OFFERED HEREBY ARE BEING SOLD BY THE SELLING STOCKHOLDERS (THE "COMMON
STOCK OFFERING"). SEE "PRINCIPAL AND SELLING STOCKHOLDERS". THE COMPANY
WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF SHARES OF COMMON
STOCK BY THE SELLING STOCKHOLDERS. PRIOR TO THE COMMON STOCK OFFERING,
THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON STOCK OF THE COMPANY. IT
IS CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE PER
SHARE WILL BE BETWEEN $ AND $ . SEE "UNDERWRITERS" FOR A
DISCUSSION OF THE FACTORS CONSIDERED IN DETERMINING THE INITIAL
PUBLIC OFFERING PRICE.
--------
CONCURRENTLY WITH THE COMMON STOCK OFFERING, THE COMPANY IS OFFERING
$625.0 MILLION IN AGGREGATE PRINCIPAL AMOUNT OF % SENIOR NOTES DUE
(THE "DEBT OFFERING" AND, TOGETHER WITH THE COMMON
STOCK OFFERING, THE "OFFERINGS"). THE CLOSING OF EACH OF
THE COMMON STOCK OFFERING AND THE DEBT OFFERING ARE
CONDITIONED UPON THE CLOSING OF THE OTHER.
--------
THE COMPANY INTENDS TO APPLY TO LIST THE COMMON STOCK
ON THE NEW YORK STOCK EXCHANGE UNDER THE SYMBOL "CGT".
--------
SEE "RISK FACTORS" BEGINNING ON PAGE 12 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN RISKS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------
PRICE $ A SHARE
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<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) STOCKHOLDERS(2)
------------- -------------- ---------------
<S> <C> <C> <C>
Per Share.......................... $ $ $
Total(3)........................... $ $ $
</TABLE>
- -----
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended.
(2) Before deducting expenses payable by the Selling Stockholders, estimated
at $ . Pursuant to agreements between the Selling Stockholders and
the Company in connection with the formation of the Company, the Company
is obligated to pay its own legal, accounting, listing, printing and
other miscellaneous fees and expenses of the Common Stock Offering.
(3) The Selling Stockholders have granted to the U.S. Underwriters an
option, exercisable within 30 days of the date hereof, to purchase up to
an aggregate of additional Shares at the price to public less
underwriting discounts and commissions for the purpose of covering over-
allotments, if any. See "Principal and Selling Stockholders". If the
U.S. Underwriters exercise the option in full, the total price to
public, underwriting discounts and commissions and proceeds to the
Selling Stockholders will be $ , $ and $ , respectively. See
"Underwriters".
--------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to the approval of certain legal
matters by Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the
Underwriters. It is expected that delivery of the Shares will be made on or
about , 1998 at the office of Morgan Stanley & Co. Incorporated,
New York, N.Y., against payment therefor in immediately available funds.
--------
MORGAN STANLEY DEAN WITTER
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
, 1998.
<PAGE>
[PLANT PICTURES TO COME]
2
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE COMMON STOCK OFFERING MADE
HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE COMMON STOCK
OFFERED HEREBY NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE COMMON STOCK OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO
SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY
SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
CERTAIN PERSONS PARTICIPATING IN THIS COMMON STOCK OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
COMMON STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT THE COMMON STOCK
IN CONNECTION WITH THE COMMON STOCK OFFERING, AND MAY BID FOR AND PURCHASE
SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITERS".
UNTIL , 1998 (25 DAYS AFTER THE COMMENCEMENT OF THE COMMON
STOCK OFFERING), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................. 4
Risk Factors....................... 12
Debt Offering...................... 23
Dividend Policy.................... 23
Capitalization..................... 24
Selected Historical Combined Finan-
cial Data......................... 32
Management's Discussion and
Analysis of Financial Condition
and Results of Operations......... 34
Business........................... 47
Existing Venture and Plant Descrip-
tions............................. 51
Government Regulation.............. 74
Management......................... 82
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Transactions.................................................. 84
Principal and Selling Stockholders.................................... 87
Description of Capital Stock.......................................... 88
Description of Certain Indebtedness................................... 93
Shares Eligible for Future Sale....................................... 97
Underwriters.......................................................... 99
Certain United States Federal Income Tax Consequences................. 102
Legal Matters......................................................... 104
Experts............................................................... 104
Available Information................................................. 105
Glossary.............................................................. 106
Index to Combined Financial Statements................................ F-1
</TABLE>
----------------
The Company intends to furnish its stockholders annual reports containing
consolidated financial statements audited by its independent public
accountants.
----------------
3
<PAGE>
PROSPECTUS SUMMARY
The following information should be read in conjunction with, and is
qualified in its entirety by reference to, the more detailed information and
the combined financial statements appearing elsewhere in this Prospectus.
Unless otherwise indicated, the information in this Prospectus assumes that the
Underwriters' over-allotment option is not exercised. This Prospectus assumes,
unless otherwise indicated, the consummation of the Formation Transactions (as
defined in "Certain Transactions") in describing the Company and in presenting
other information in this Prospectus. In order to make distinctions where
necessary, references in this Prospectus to "Cogen" shall mean Cogen
Technologies, Inc. and references to the "Company" shall mean Cogen
Technologies, Inc. and its subsidiaries on a consolidated basis as if the
Formation Transactions had been consummated and the Company were the successor
to the interests which it will acquire pursuant to the Formation Transactions.
References to the "subsidiaries" or the "Company's subsidiaries" shall mean the
entities in which Cogen will acquire equity interests pursuant to the Formation
Transactions. References to the "ventures" shall mean the ventures or entities
in which the subsidiaries have equity interests and which in turn directly own
the independent power plants which form the core of the Company's business.
Such plants are referred to herein as the "Company's plants", the "Company's
independent power plants" or, singularly, as a "plant" identified by its
location. Certain information contained in this summary and elsewhere in this
Prospectus, including information with respect to the Company's plans and
strategy for its business, are forward-looking statements. Accordingly,
prospective investors should carefully consider the factors set forth herein
under the caption "Risk Factors" for a discussion of important factors that
could cause actual results to differ materially from the forward-looking
statements contained in this Prospectus, and investors are encouraged to
exercise caution in considering such forward-looking statements. Certain terms,
including particularly technical terms relating to the power generation
business, are defined under the caption "Glossary" appearing elsewhere in this
Prospectus.
THE COMPANY
The Company is engaged in the development, ownership, operation, acquisition
and financing of power generation facilities and the sale of electricity and
steam in the United States. The Company currently has interests in four power
plants having an aggregate nameplate capacity of 1,382 megawatts. In 1997,
these plants produced an aggregate 7,637 megawatt hours of electricity and
7,665 million pounds of steam.
The Company's principal assets consist of its substantial economic interests
in a 715 megawatt capacity Linden, New Jersey, cogeneration plant (the "Linden
Plant"), which sells its electric output to The Consolidated Edison Company of
New York ("Con Ed") under a contract having an initial term expiring in 2017, a
176 megawatt capacity Bayonne, New Jersey, cogeneration plant (the "Bayonne
Plant"), which sells its electric output to Jersey Central Power & Light
Company ("JCP&L") and Public Service Electric and Gas Company of New Jersey
("PSE&G"), under contracts having initial terms expiring in 2008 and a 146
megawatt capacity Camden, New Jersey, cogeneration plant (the "Camden Plant"),
which sells its electric output to PSE&G under a contract having an initial
term expiring in 2013. The Company has operating and maintenance responsibility
for the three principal plants and has contracted for the day-to-day operation
and maintenance of the plants with General Electric Company ("GE"). In
addition, the Company has an equity investment in a 345 megawatt capacity
Bethlehem, New York cogeneration plant (the "Selkirk Plant").
INDUSTRY
The Company is a participant in the highly competitive power generation
industry, which represents the third largest industry in the United States,
with an estimated end-user market of over $200 billion of electricity sales and
3,300 gigawatt hours of production in 1997. New regulatory initiatives have
been or currently are being adopted or considered at the federal level and in
approximately 45 states to increase competition in the domestic power
generation industry. In April 1996, the Federal Energy Regulatory Commission
("FERC") adopted Order No. 888, opening wholesale power sales to competition
and providing for open and fair electric transmission
4
<PAGE>
services by public utilities. At the state level, industry restructuring is
well advanced in various states including California, Massachusetts, New York,
New Jersey and Pennsylvania. This restructuring includes deregulation of
electric utilities and the introduction of customer choice. The regulatory
initiatives are expected to lead to the transformation of the existing market,
which is largely characterized by electric utility monopolies, having old,
inefficient, high-cost generating facilities, selling to a captive customer
base, to a more competitive market where end users may purchase electricity
from a variety of suppliers, including non-utility generators, power marketers,
public utilities and others.
The Company believes that these market trends will present substantial
opportunities for industry participants that are efficient and low-cost power
producers and are able to offer competitive rates to customers. The Company
believes that an additional opportunity is presented by the significant
deregulation and consolidation now affecting the power industry, which has
resulted in substantial divestitures of generation assets by traditional power
utilities and by certain independent power producers currently owning
relatively few plants. For example, as a result of regulatory initiatives,
approximately 12,000 megawatts of New York generating capacity has been sold or
offered for sale by utilities. Similar regulatory initiatives in New Jersey and
Pennsylvania are expected to cause utilities in those states to pursue similar
divestiture plans. At the same time, a number of industrial companies have also
announced plans to sell self-generation facilities and to re-deploy the capital
in their core businesses. These trends, which the Company believes are likely
to continue, should provide significant acquisition opportunities for the
Company.
The Company also believes that attractive opportunities for development of
new generation assets will arise in the next few years, principally due to a
projected increase in baseload demand in the Northeast and Mid-Atlantic regions
and the retirement of a significant number of existing power generation
facilities which are thirty or more years old.
STRATEGY
The Company's strategy is to maximize cashflow associated with its existing
power plants and to grow through expansion of the Company's existing operations
and through the acquisition and development of existing or new power generation
and related facilities. Specific aspects of this strategy are set-forth below:
. Maximize the Value of Existing Assets. The Company's high quality plant and
equipment and long duration power sales agreements have provided it with
stable long-term cashflow. In order to maintain the quality of these assets,
and to further increase margins, the Company's core strategy includes
continuous capital investment in current facilities to assure ongoing
efficiency consistent with high rates of return on capital. In keeping with
these objectives, the Company has systematically pursued technological
upgrades and retrofits to existing plants which increase output or operating
efficiency. As an example, the capacity of each of the nine gas turbines at
the Linden, Camden and Bayonne Plants has been increased by approximately
2.5 megawatts per gas turbine. At the Camden Plant, an inlet chiller system
recently was installed which increases the generation capacity of the plant
by 32,000 megawatt hours per year. In addition to these improvements, the
Company currently is considering a number of technology investments, some of
which, if implemented, the Company expects will (i) reduce fuel costs at the
Bayonne Plant, (ii) reduce water usage and associated expenses at the Camden
Plant, (iii) generate additional steam sales and electrical output through
modest expansion and the addition of equipment at the Camden Plant, (iv)
reduce water costs at the Linden Plant and (v) increase electrical output
through the use of chilled water equipment improvements at the Linden Plant.
The Company will continue to seek to add value to its existing projects and
its customers through mutually negotiated contractual and operating changes
such as those changes successfully negotiated to Linden Venture's power
purchase agreement with Con Ed in September 1990 and December 1993. The
Company will continue to monitor, revise and replace its fuel supply
arrangements to obtain a balance between immediate savings in gas and
transportation costs and the need to maintain regular and secure
relationships with various gas producers and transporters of gas.
5
<PAGE>
. Expand Existing Plants. The Company believes that all three of the plants in
which it has a substantial economic interest are capable of being expanded
not only through additions to existing plants but also through the
development and construction of new power plant facilities at the existing
sites. In this regard, the Company has permit applications pending and
presently is engaged in advanced strategic design work with respect to the
addition of a new 250 megawatt unit at the Linden Plant with a view to
utilizing such plant's direct interconnect with Con Ed in New York City.
With respect to the Bayonne Plant, the Company is considering the
installation of a new power facility at that location.
. Pursue Domestic Electricity Generation Acquisitions and Other Opportunities.
The Company believes that it will have ample opportunities to grow its
operations through acquisitions, development of new assets and through other
means, whether on its own or through partnerships with companies that have
complementary skills. This strategy is based on the Company's view that
baseload demand for power will increase over the next few years, and that
retirement of a significant number of existing plants will further spur the
need for additional capacity. In addition, a number of utilities in the
Northeastern United States have announced plans to divest power generating
assets, including Con Ed, General Public Utilities, New York State Electric
and Gas, and Niagara Mohawk Power Company. This development, together with
expected further consolidation in the independent power industry, may offer
the Company a number of opportunities to grow its business by making
strategically significant acquisitions, with an initial focus in the
Northeast. Longer term, the Company intends to continue to consider
opportunities for new developments of power generation facilities in the
Northeast and elsewhere in the United States. The Company has no plans for
expansion into the international arena.
The Company believes that the following competitive strengths will aid in the
successful implementation of its strategy:
. Efficient and Reliable Power Projects. The Company's three principal plants
have well-established and consistent records of service to their customers.
The average availability for all of these plants has exceeded 92% since
placed in operation. This record of service is principally the result of the
highly reliable combined-cycle technology, which generally is significantly
more efficient than that of a majority of the existing utility generating
facilities in the region, together with the operations and maintenance
practices of the Company.
. Favorable Contracts and Stable Cashflow. The Company's utility power
purchase contracts relating to its three principal plants have long-term
remaining lives, with expirations ranging from 2008 to 2017. For example,
the Linden Plant has nameplate electric capacity of 715 megawatts and
represents approximately 70% of the Company's power generating assets.
Linden Venture has a power purchase agreement which expires in the year
2017. In addition, all of the Company's existing power purchase agreements
are with large utilities which presently have investment grade senior debt
ratings. The Company's principal power plants historically have provided a
consistent and substantial cash flow to equity holders due to the fixed
payment components of the power purchase contracts which have provided
favorable margins over the ventures' fixed operating and financing costs.
Moreover, the variable energy payment components of such agreements, which
provide the second major component of pricing under such agreements, have
historically been well correlated to fuel costs at the Bayonne and Camden
Plants and have reflected a partial pass-through mechanism for fuel expenses
at the Linden Plant.
. Environmental Considerations. The Company's existing plants principally burn
natural gas, which is a clean burning fuel, and they employ advanced
environmental technology which makes them among the cleanest in the
industry. The existing plants also are operated in compliance with
applicable state and federal regulation.
. Regional Expertise in Northeast Power Markets. As a result of the location
of its existing assets and its active involvement in industry restructuring,
the Company has developed significant expertise in Northeastern power
markets. This expertise will provide the Company with a competitive
advantage in pursuing additional opportunities within the region.
6
<PAGE>
. Experienced Management. The Company's senior management team, led by the
founder of the Company's predecessor companies, Robert C. McNair, has an
aggregate of over 117 years of experience in the energy industry. The
Company currently operates plant and equipment that is widely viewed to be
among the safest and most environmentally advanced in the industry. The
Company's philosophy is to maintain a small, well-qualified management team
with expertise in all aspects of the independent power business, to actively
participate in a broad range of regulatory affairs governing the industry
and to retain additional experts in connection with the construction,
maintenance and operation of its plants.
. Disciplined Management Approach. The Company's management team has a
demonstrated track record in developing innovative financial structures for
its investments and has well-established criteria which govern its approach
to both development of new plants and acquisitions.
. Strong Financial Position. The Company believes that its high quality
assets, its federal income tax position and its long duration power supply
contracts provide it with the financial strength to access the capital
markets to obtain the capital needed to fund execution of its strategic
plan.
FORMATION
Cogen was incorporated in May 1998 to acquire operating control of three
entities operating independent power plants in New Jersey, together with an
indirect equity interest in a fourth plant operating in New York. Prior to the
consummation of the Formation Transactions, the Cogen ownership interests in
the plants were 82% beneficially owned by Robert C. McNair and members of his
family, and by entities controlled by his family (the "McNair Interests"). The
remaining 18% of such interests was beneficially held by other persons or
entities (the "Minority Interests") with no relation to the McNair Interests.
Upon consummation of the Formation Transactions, Cogen will own the interests
in the subsidiaries held by the McNair Interests and the Minority Interests.
See "Certain Transactions--Formation Transactions".
DIVIDEND POLICY
Cogen plans to pay dividends on the Common Stock of approximately $ per
share per quarter. During the initial years of the Company's operations,
dividends with respect to the Common Stock are expected to exceed the share of
the current and accumulated earnings and profits of the Company allocable to
the holders of the Common Stock (as determined for United States federal income
tax purposes). In such a case, such excess generally would be treated as a tax-
free return of capital up to a holder's basis in such holder's shares of Common
Stock and as capital gain thereafter. See "Dividend Policy".
The Company's principal executive office is located at 711 Louisiana, 33rd
Floor, Houston, Texas 77002, and its telephone number is 713/336-7700.
7
<PAGE>
THE OFFERING
Common Stock offered(1) by
the Selling Shareholders... million shares
Common Stock to be
outstanding after the
Common Stock Offering...... 44.9 million shares(2)
Debt Offering............... Concurrently with the Common Stock Offering,
the Company is offering (by a separate
prospectus) $625.0 million aggregate principal
amount of its % Senior Notes due
(the "Senior Notes"). The
closing of each of the Common Stock Offering
and the Debt Offering is conditioned on the
closing of the other.
Use of proceeds............. The Common Stock Offering is wholly a secondary
offering by the Selling Stockholders, and all
net proceeds therefrom will be paid to the
Selling Stockholders.
Proposed New York Stock
Exchange listing........... The Company intends to apply to list the Common
Stock on the New York Stock Exchange (the
"NYSE"), subject to official notice of
issuance, under the symbol "CGT".
- --------
(1) "Common Stock" refers to the common stock of Cogen, $.01 par value, and
"Common Stock Offering" refers to the offering of Shares of Common Stock
contemplated by this Prospectus.
(2) The number of Shares of Common Stock to be outstanding following the
consummation of the Common Stock Offering gives effect to the consummation
of the Formation Transactions and excludes shares of Common Stock issuable
upon the exercise of options, expected to be granted to employees,
including executive officers, prior to the consummation of the Common Stock
Offering which will remain outstanding after consummation of the Common
Stock Offering.
RISK FACTORS
Prior to making an investment in the Common Stock offered hereby, prospective
purchasers of the Common Stock should take into account the specific
considerations set forth under "Risk Factors" beginning on page 12 as well as
the other information set forth in this Prospectus.
8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
Cogen Technologies Group (the "Group") refers collectively to (i) McNair
Energy Services Corporation ("MESC") and its wholly owned subsidiary, Cogen
Technologies NJ, Inc. ("NJ Inc."), (ii) Cogen Technologies Camden, Inc.
("Camden Inc."), (iii) Cogen Technologies Linden, Ltd. ("Linden Ltd."), (iv) CT
Global Insurance, Ltd. ("CT Global"), (v) the limited partnership interests in
Cogen Technologies Camden GP Limited Partnership ("Camden GPLP") held by the
Minority Interests and (vi) Cogen Technologies Selkirk GP, Inc.. ("Selkirk GP
Inc.") and Cogen Technologies Selkirk, LP ("Selkirk LP"). NJ Inc. is the
managing partner of Cogen Technologies NJ Venture ("NJ Venture") which owns and
operates the Bayonne Plant. Camden Inc. is the general partner of Camden GPLP,
which is the general partner of Camden Cogen LP ("Camden Cogen") which owns and
operates the Camden Plant. Linden Ltd. is the general partner of Cogen
Technologies Linden Venture, LP ("Linden Venture"), which owns and operates the
Linden Plant. NJ Venture, Camden Cogen and Linden Venture are referred to as
the Cogen Technologies New Jersey Operating Partnerships or the "NJ
Partnerships". Selkirk GP Inc. and Selkirk LP hold general and limited
partnership interests in Selkirk Cogen Partners, L.P. ("Selkirk Venture"),
which operates the Selkirk Plant. CT Global insures certain interests of the
Group and the NJ Partnerships. The "Company" shall mean Cogen Technologies,
Inc. and its subsidiaries on a consolidated basis as if the Formation
Transactions had been consummated and the Company were the successor to the
interests which it will acquire pursuant to the Formation Transactions.
The following table sets forth, for the periods indicated, summary historical
financial data for the Group and summary pro forma financial data for the
Company. The summary historical balance sheet data as of December 31, 1997 and
1996 and the summary income statement and cash flow data for each of the three
years in the period ended December 31, 1997 for the Group are derived from
combined financial statements which have been audited by Arthur Andersen LLP
and are included elsewhere in this Prospectus. The summary historical balance
sheet data as of December 31, 1995, 1994 and 1993 and the summary income
statement and cash flow data for the two years ended December 31, 1994 are
derived from combined financial statements which have been audited by Arthur
Andersen LLP and are not included in this Prospectus. The summary historical
balance sheet data as of March 31, 1998 and 1997 and the summary income
statement and cash flow data for the three months ended March 31, 1998 and 1997
are derived from unaudited combined financial statements which include, in the
opinion of management, all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial data for such periods.
The summary pro forma financial data for the Company are based on numerous
assumptions and include adjustments as explained in the unaudited pro forma
financial statements of the Company and the notes thereto. All of the summary
historical and pro forma financial data should be read in conjunction with the
audited combined financial statements of the Group and the NJ Partnerships and
the unaudited pro forma financial statements of the Company, included elsewhere
in this Prospectus. The following information should not be deemed indicative
of the future operating results of the Company. See also, "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
9
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA(1)
THE COMPANY THE GROUP
------------------------ -----------------------------------------------------
THREE
MONTHS
THREE ENDED
MONTHS MARCH
ENDED YEAR ENDED 31, YEAR ENDED DECEMBER 31,
MARCH 31, DECEMBER 31, ------------- --------------------------------------
1998 1997 1998 1997 1997 1996 1995 1994 1993
--------- ------------ ------ ----- ------ ------ ------ ------ ------
(MILLIONS OF DOLLARS, EXCEPT AS NOTED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
FOR THE PERIOD ENDED:
Revenues:
Equity in earnings of
affiliates............ $ 37.1 $105.0 $ 37.5 $26.7 $106.7 $111.6 $ 99.5 $ 93.4 $104.6
Other revenues......... 0.5 2.2 0.5 0.6 2.2 2.3 0.8 -- --
------ ------ ------ ----- ------ ------ ------ ------ ------
37.6 107.2 38.0 27.3 108.9 113.9 100.3 93.4 104.6
------ ------ ------ ----- ------ ------ ------ ------ ------
Costs and Expenses:
Operating overhead..... 3.0 15.1 10.0 3.5 13.4 14.4 10.8 7.2 -- (2)
General and
administrative........ 4.6 15.3 4.9 5.1 19.8 10.9 10.4 12.2 6.2
Depreciation and
amortization.......... 0.1 0.2 0.1 0.1 0.2 0.2 0.2 0.2 0.6
Non-competition
payment(3)............ -- -- -- -- -- -- -- -- 14.8
------ ------ ------ ----- ------ ------ ------ ------ ------
7.7 30.6 15.0 8.7 33.4 25.5 21.4 19.6 21.6
------ ------ ------ ----- ------ ------ ------ ------ ------
Income from Operations:. 29.9 76.6 23.0 18.6 75.5 88.4 78.9 73.8 83.0
Other Income (Expense)
Interest and other
income................ 7.0 29.0 3.4 4.1 16.0 17.0 17.8 14.1 10.7
Interest expense....... (15.9) (66.0) (4.9) (5.7) (21.7) (23.2) (26.3) (25.8) (26.1)
Allowance for long-term
receivable............ -- 10.3 -- (1.8) 10.3 (10.3) 6.5 (6.5) --
------ ------ ------ ----- ------ ------ ------ ------ ------
Income Before Income
Taxes:................. 21.0 49.9 21.5 15.2 80.1 71.9 76.9 55.6 67.6
Income taxes(4)........ (8.0) (19.3) (4.8) (1.0) (5.1) (4.0) (7.6) (2.9) (4.1)
------ ------ ------ ----- ------ ------ ------ ------ ------
Net Income.............. $ 13.0 $ 30.6 $ 16.7 $14.2 $ 75.0 $ 67.9 $ 69.3 $ 52.7 $ 63.5
====== ====== ====== ===== ====== ====== ====== ====== ======
Pro forma net income per
share (in dollars)..... $ 0.29 $ 0.68 N/A N/A N/A N/A N/A N/A N/A
Pro forma weighted
average shares
outstanding (in
millions).............. 44.9 44.9 N/A N/A N/A N/A N/A N/A N/A
STATEMENT OF CASH FLOWS
DATA FOR THE PERIOD
ENDED:
Net cash provided by
operating activities... N/A N/A $ 11.8 $20.1 $ 67.4 $ 87.6 $ 67.1 $ 66.3 $ 49.8
Net cash provided by
(used in) investing
activities............. N/A N/A 1.4 (7.8) 7.8 17.2 12.6 (59.1) 10.1
Net cash used in
financing activities... N/A N/A 13.3 12.2 74.2 101.4 77.2 12.9 55.0
Distributions received
from affiliates........ N/A N/A 32.7 28.5 105.6 127.7 117.9 93.7 102.3
BALANCE SHEET DATA AT
END OF PERIOD:
Investment in
Affiliates............. $132.6 N/A $ 98.5 $96.0 $ 99.8 $ 98.4 $108.4 $123.5 $ 74.2
Total Assets............ 867.9 N/A 282.6 287.4 284.8 284.4 319.8 334.1 305.5
Long-Term Debt.......... 839.5 N/A 214.5 227.9 218.0 230.9 247.0 262.1 276.2
Owner's Equity
(Deficit).............. (4.3) N/A 26.9 9.5 20.4 3.6 21.8 15.7 (31.4)
OTHER FINANCIAL DATA:
Funds from
operations(5).......... N/A N/A $ 18.3 $14.2 $ 77.2 $ 69.6 $ 75.0 $ 55.3 $ 67.8
Ratio of earnings to
fixed charges.......... 1.8(6) 1.6(6) 3.1 2.8 3.2 3.3 3.3 2.3 2.5
</TABLE>
<TABLE>
<CAPTION>
THE NJ PARTNERSHIPS
-----------------------------------------------
THREE YEAR
MONTHS ENDED
ENDED MARCH DECEMBER
31, 31,
------------ ---------------------------------
1998 1997 1997 1996 1995 1994 1993
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING
INFORMATION:
Electricity revenues
($/millions)................. 118.5 118.4 456.5 458.0 407.6 407.6 403.8
Megawatt hours generated
(millions)................... 1,584 1,534 6,429 6,347 6,507 6,342 5,952
Average price per generated
kilowatt hour (cents)........ 7.043 6.813 6.722 6.611 5.914 6.056 5.620
Average heat rate
(MMBTU/Megawatts)............ 9,481 9,808 9,503 9,551 9,446 9,529 9,605
Average availability.......... 92% 93% 94% 93% 94% 92% 93%
Average capacity factor....... 93% 95% 95% 93% 95% 93% 88%
Steam revenues ($/millions)... 4.7 5.9 19.2 20.0 12.0 13.9 14.8
Steam produced (thousands of
pounds)...................... 1,661 1,850 6,301 6,205 5,409 5,191 5,039
Average price per thousand
pounds of steam produced
(dollars).................... 2.81 3.19 3.05 3.22 2.22 2.68 2.94
</TABLE>
10
<PAGE>
- --------
(1) As adjusted to give effect to the Formation Transactions, the Common Stock
Offering, the Debt Offering and the application of the proceeds thereof as
if such transactions had occurred on January 1, 1997 with respect to the
income statement data and March 31, 1998 with respect to the balance sheet
data.
(2) In 1994 Cogen Technologies Capital Company, L.P. began charging Linden Ltd.
and Camden GPLP for overhead costs that benefit the revenue producing
activities of such entities. Such overhead charges were not charged to
Linden Ltd. and Camden GPLP prior to 1994.
(3) Relates to payment made by Camden GPLP to another company under the terms of
an agreement which provided, among other things, that the other company and
its affiliates would not, in consideration for such payment, own or acquire
an interest in any facility producing electricity or thermal energy for sale
in Camden, New Jersey through December 31, 1993.
(4) Camden Inc. and Selkirk GP Inc. are S corporations and Linden Ltd. and
Selkirk LP are partnerships, and income taxes are recognized by the
individual partners or shareholders (with the exception of New Jersey state
income taxes which are recognized by Camden Inc.). Accordingly, such income
taxes are not recognized in the combined financial statements. MESC and CT
Global account for all income taxes and Camden Inc. accounts for New Jersey
state income taxes in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes". Deferred tax
assets and liabilities are recognized based on anticipated future tax
consequences attributable to differences between the financial statement
carrying amounts of assets and liabilities and their respective tax bases.
(5) Funds from operations ("FFO"), as presented herein, is defined as net income
before provision for deferred income taxes and depreciation and
amortization. FFO should not be considered in isolation or as a substitute
for net income, cash flow provided by operating activities or other income
or cash flow data prepared in accordance with generally accepted accounting
principles or as a measure of a company's profitability or liquidity. FFO,
as presented herein, may not be comparable to similarly titled measures
reported by other companies.
(6) Fixed charge ratio reflects increased interest income and increased expense
associated with an economic defeasance of the Linden Ltd. term loan pursuant
to which the Company has set aside, on a contractually irrevocable basis, an
amount invested in Treasury securities sufficient to repay the principal and
interest on the Linden Ltd. term loan.
11
<PAGE>
RISK FACTORS
An investment in the Common Stock involves a significant degree of risk.
Prospective purchasers should consider carefully the factors and cautionary
statements set forth below, as well as the other information provided
elsewhere in this Prospectus, before making an investment in the Common Stock.
When used in this Prospectus, the words "anticipate", "estimate", "expect",
"project" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, expected or projected. Among the key
factors that have a direct bearing on the Company's results of operations and
the industry in which it operates are the Company's reliance on, or revenues
from, third parties, the effects of various governmental regulations, the
fluctuation in fuel and operating costs and the costs and effectiveness of the
Company's strategy. These and other factors are discussed below and elsewhere
in this Prospectus.
ABSENCE OF COMBINED OPERATING HISTORY AND OTHER RISKS RELATED TO HOLDING
COMPANY STRUCTURE
Cogen was incorporated in Delaware in May 1998 to be a holding company and
has conducted no operations to date other than in connection with the
Offerings and the Formation Transactions, which involve the acquisition and
combination under a single holding company of substantial equity interests in
three independent power project ventures and an equity investment in a fourth
venture. The success of the Company will depend, in part, on the extent to
which it is able to combine effectively expanded and newly-acquired operations
with its existing operations. No assurance can be given that the Company's
management will be able to fully integrate newly-acquired operations,
including by centralizing accounting and administrative systems and
eliminating other unnecessary duplication, or otherwise manage effectively any
additional businesses it may acquire, or even to implement the Company's
acquisition strategy. Because the operations of the Company are conducted
primarily by the subsidiaries and ultimately by the ventures in which the
subsidiaries have interests, Cogen's cash flow and its ability to service
indebtedness, including its ability to pay the interest on and principal of
the Senior Notes and to pay dividends on the Common Stock, depend entirely
upon the earnings of the ventures and the subsidiaries and the distribution of
those earnings to Cogen. Cogen currently has no business other than its
ownership interests in the subsidiaries and its planned development and
acquisition business.
Each of the existing ventures in which the Company has an interest (other
than the Linden Venture) has been financed through, and the future ventures in
which the Company may acquire an interest may be financed through, non-
recourse project finance arrangements. These types of arrangements generally
require that the venture pledge as collateral to the venture lenders the
venture's cash flow, accounts and all other tangible and intangible assets of
the venture, and that the venture's owners pledge to the venture lenders the
partnership interests or other equity in the venture. Further, the debt
agreements to which the existing ventures are parties contain provisions
generally restricting the ability of the ventures to pay dividends, make
distributions or otherwise transfer funds to their owners, including the
Company, and contain restrictions on the ability of the ventures to, among
other things, incur debt, alter the plants or amend third party contracts. The
restrictions in such agreements generally require that, prior to the payment
of dividends, distributions or other transfers, the venture proposing to make
the payment must provide for the payment of other obligations, including
operating expenses (which include fuel payments), debt service and reserves.
The Company anticipates that future ventures would have similar restrictions.
A default under such debt agreements as to such restrictions or any other
covenants in the debt agreements could give the venture lenders the right to
accelerate the repayment of the debt and foreclose on the collateral securing
the debt, including the operating assets of a venture.
The Company's subsidiaries and ventures in which they have interests are,
and in the future are expected to be, separate and distinct legal entities
that will have no obligation, contingent or otherwise, to pay any amounts due
on the Senior Notes or in respect of dividends on the Common Stock or to make
funds available therefor, whether by dividends, loans or other payments, and
none of such subsidiaries and ventures are expected to guarantee the payment
of interest on or principal of the Senior Notes. Any right that the Company
has to receive
12
<PAGE>
any assets of any of its subsidiaries or ventures in which they participate
upon any casualty of the plants or liquidation, bankruptcy or reorganization
thereof, and the consequent right of the holders of the Common Stock or Senior
Notes to participate in the distribution of, or to realize proceeds from,
those assets, effectively will be subordinated to the claims of such
subsidiaries' and ventures' creditors (including holders of debt issued by
such subsidiaries or ventures or secured by their assets or cash flows and
trade creditors and other general unsecured creditors). After giving effect to
the transactions contemplated by the Offerings on a pro forma basis as of
March 31, 1998, $387.3 million of indebtedness of certain of the Company's
subsidiaries and ventures (exclusive of indebtedness of Selkirk Venture in
which the Company has a passive equity investment) would be effectively senior
to the Senior Notes, and, of course, would be senior to the rights of holders
of the Common Stock. In addition to the foregoing indebtedness, certain of the
ventures in which the Company has interests are structured such that holders
of certain preferred equity interests therein have a claim to the ventures'
distributable cash that must be satisfied before any remaining distributable
cash may be distributed to the Company's subsidiaries. These claims are,
therefore, likewise effectively senior to the claims of the holders of the
Company's indebtedness and the rights of the holders of the Common Stock. See
"Existing Venture and Plant Descriptions--Linden Cash Distributions",
"Existing Venture and Plant Descriptions--Camden Cash Distributions" and
"Description of Certain Indebtedness--Plant Project Financing". The indenture
relating to the Senior Notes (the "Indenture") is expected to impose
limitations on the ability of the Company, its subsidiaries and the ventures
to incur additional indebtedness. See "--Leverage" and "Description of Certain
Indebtedness--Senior Notes".
COMPETITION
The power generation industry is characterized by numerous strong and
capable competitors, including utilities, industrial companies and other power
producers. Many of these competitors have extensive and diversified
developmental or operating experience and financial resources equal to or
greater than those of the Company. Further, in recent years the power
production industry has been characterized by strong and increasing
competition with respect to both obtaining power sales agreements and
acquiring existing power generation assets. This competition has generally
resulted in reductions in prices paid for electricity, including reductions in
prices in new power sales agreements where available, and reduced operating
margins for merchant power plants which sell their power into the wholesale
market without long-term contracts. Similarly, such competition has caused
higher acquisition prices in some instances for existing assets through
competitive bidding practices. The evolution of competitive electricity
markets and the development of highly efficient gas-fired power plants have
also caused, or are anticipated to cause, downward price pressure in power
markets. Further, there is increasing competition among electric utilities
which, in response to state regulatory initiatives that are designed to give
all electric customers the ability to choose between competing suppliers of
electricity, effectively are being required to lower their costs, including
the cost of purchased electricity. Changes in law also could encourage greater
competition in electricity markets, which could result in both a decline in
the number of long-term power purchase contracts and in the rates paid by
electric utilities and other purchasers of electricity. Increasing competition
in the future likely will increase this pressure. Although purchase prices for
electricity under the power purchase agreements to which the Company's
ventures are party contain fixed price formulas, a decline in long-term rates
to be paid by electric utilities generally could indirectly adversely affect
the Company's profits in connection with any future merchant sales to power
purchasers (sales of power at market prices not pursuant to long-term
contracts). This competition has put pressure on electric utilities to lower
their costs, including the cost of purchased electricity, and increasing
competition in the future will increase this pressure. See "--Above Market
Power Purchase Agreements" and "--Risks Arising from Utility Regulation and
Deregulation". Because the Company's plants at present have long-term power
purchase agreements, the Company believes that the greatest immediate risks of
such competitive factors will relate to its ability to grow through
development or undertake acquisition of additional power generating businesses
which will provide attractive rates of return on invested capital.
GENERAL OPERATING RISKS
The operation of power generation and steam production facilities involves
many risks, including the breakdown or failure of power generation equipment,
transmission lines, pipelines or other necessary equipment
13
<PAGE>
or processes and performance below expected levels of output or efficiency.
While the Company's independent power plants (excluding the Selkirk Plant in
which the Company is an investor and does not have operating responsibility)
historically have operated at over 90% of then available capacity, these
plants have from time to time experienced certain equipment breakdowns or
failures. The Company's principal existing independent power plants are being
operated pursuant to separate operations and maintenance agreements between
the respective ventures and the same third party operator, GE. See "Existing
Venture and Plant Descriptions". Although as of the date of this Prospectus
such breakdowns or failures have not had a material adverse effect on the
operation of such plants or on the Company's results of operations, and
although the Company's existing plants contain certain redundancies and backup
mechanisms, there can be no assurance that any future breakdown or failure
would not prevent the affected plant from fully performing under its power or
steam sales agreements or being able to market electricity in sufficient
quantities and at favorable margins.
In addition, although insurance is maintained to protect against certain of
these operating risks, the proceeds of such insurance may not be adequate to
cover lost revenues or increased expenses. As a result, the venture owning the
plant may be unable to service principal and interest payments under its
financing obligations and may operate at a loss. Further, there can be no
assurance that the insurance currently maintained for the existing plants will
be available in the future for these or additional projects at commercially
reasonable costs or terms. Any such operating risks could lead to a default
under the venture's debt and other financing agreements, which could result in
the Company's losing its interest in the subject venture. In addition,
extended unavailability of capacity under any power purchase agreement or
steam sales agreement pursuant to which electricity or steam, as the case may
be, generated by the subject plant is sold, which could result from such
events, may entitle the purchaser thereunder to terminate the power purchase
agreement or steam sales agreement, as applicable.
PERMITTING RISKS
The Company is required to comply with numerous federal, state and local
statutory and regulatory standards and to maintain numerous permits and
approvals required for the construction, ownership and operation of its
plants. See "Government Regulation". Some of the permits and regulatory
approvals that have been issued with respect to the Company's existing plants
contain certain conditions, and future permits and approvals also are expected
to contain conditions. Failure to satisfy any such conditions or approvals
could prevent or limit the construction or operation of a plant or result in
additional costs or lower revenues. There can be no assurance that any plant
will continue to operate in accordance with the conditions established by the
permits or approvals or be able to renew such permits and approvals. Laws and
regulations affecting the Company and its ventures and other venture
participants can be expected to change in the future, and such changes could
adversely affect the Company and its ventures and such other venture
participants. For example, changes in laws or regulations (including but not
limited to tax and environmental laws and regulations) could (i) impose more
stringent or comprehensive requirements on the operation or maintenance of the
Company's plants, resulting in increased compliance costs, the need for
additional capital expenditures or the reduction of certain benefits currently
available to the plants, or (ii) expose the Company and its ventures to
liabilities for actions taken prior to the formation of the Company that were
in compliance with laws in effect at the time or for actions taken by or
conditions caused by third parties. Although the ventures operating the
Company's principal plants have obtained and maintained all material permits
and approvals required for the ownership and operation of their plants, there
can be no assurance that the requirements contained in such permits will not
change or that the Company's ventures will be able to renew or to maintain all
permits and approvals required for continued operation of their facilities.
Failure to renew or to maintain any required permit or the inability to
satisfy any requirement of any permit may result in limited or suspended
operation of the affected plant. In addition, the Company's plants generally
are located on premises leased from steam hosts and, therefore, the plants
could be adversely affected by the permit compliance of such steam hosts.
RISKS ARISING FROM UTILITY REGULATION AND DEREGULATION
The generation, transmission and distribution of electricity in the United
States historically have been highly regulated both at the federal and state
levels. Even though there have been deregulatory initiatives at the federal
14
<PAGE>
and state levels in recent years, the industry remains subject to significant
regulation in many respects. While the Company believes that its business is
operating in accordance with applicable laws, the Company remains subject to a
varied and complex body of laws and regulations that both public officials and
private individuals may seek to enforce. There can be no assurance that
existing laws and regulations will not be revised or that new laws and
regulations will not be adopted or become applicable to the Company that may
have a material adverse effect on the Company's business or results of
operations. See "Government Regulation".
The Company's operations are subject to the provisions of various energy
laws and regulations, including the Public Utility Regulatory Policies Act of
1978, as amended, and implementing regulations ("PURPA"), the Public Utility
Holding Company Act of 1935, as amended ("PUHCA"), and state and local
regulations. See "Government Regulation--Federal Energy Regulation". PUHCA
provides for the extensive regulation of public utility holding companies and
their subsidiaries. PURPA provides to qualifying facilities ("QFs") (as
defined under PURPA) and owners of QFs exemptions from certain federal and
state regulations, including rate and financial regulations.
Under present federal law, the Company is not subject to regulation as a
holding company under PUHCA, and will not be subject to such regulation as
long as the plants in which it has an interest qualify as QFs, are subject to
another exemption or waiver or qualify as an exempt wholesale generator
("EWG") under the Energy Policy Act of 1992. In order to be a QF, a facility
must be not more than 50% owned by an electric utility company or electric
utility holding company. In addition, a QF that is a cogeneration facility, as
are the plants in which the Company currently has interests, must produce not
only electricity, but also useful thermal energy for use in an industrial or
commercial process for heating and cooling applications in certain minimum
proportions to the QF's total energy output. The QF also must meet certain
minimum energy efficiency standards. Linden Venture currently sells the
majority of the Linden Plant's steam to Bayway Refining Company ("Bayway")
under an arrangement that is not evidenced by a written agreement. Although
Linden Venture and Bayway are negotiating the terms of a written steam sales
agreement, there can be no assurance that such agreement will be executed or,
in the event that it is executed, as to its terms. If Bayway were to cease
purchasing steam from Linden Venture, the QF status of the Linden Plant would
be in jeopardy. In addition, the two steam sales agreements to which NJ
Venture is a party renew on a year-to-year basis, subject to termination by
either party at the end of any year. If the purchasers under these agreements
were to terminate these steam sales agreements, the QF status of the Bayonne
Plant would be in jeopardy. (For further information in this regard as to the
status of the Linden Plant's steam sales, see "Existing Ventures and Plant
Descriptions--Linden Steam Sales Agreement" and, as to the status of the
Bayonne Plant's steam sales, "Existing Venture and Plant Descriptions--Bayonne
Steam Sales Agreements", respectively.) If any of the plants in which the
Company has an interest were to lose its QF status and not otherwise receive a
Federal Energy Regulatory Commission ("FERC") waiver, PUHCA exemption or
qualify as an EWG, or if amendments to PURPA were enacted that substantially
reduced the benefits currently afforded QFs, the subsidiary or venture in
which the Company has an interest could become a public utility company, which
could subject the Company to significant federal, state and local laws,
including rate regulation. This loss of QF status, which may be prospective or
retroactive, in turn, could cause all of the Company's other power plants to
lose QF status because, under FERC regulations, a QF cannot be owned by an
electric utility or electric utility holding company. In addition, a loss of
QF status could, depending on the particular power purchase agreement, allow
the power purchaser to cease taking and paying for electricity or to seek
refunds of past amounts paid and thus could cause the loss of some or all
contract revenues or otherwise impair the value of a project. See "Existing
Venture and Plant Descriptions--Linden Power Purchase Agreement" and "Existing
Venture and Plant Descriptions--Camden Power Purchase Arrangements". If a
power purchaser were to cease taking and paying for electricity or seek to
obtain refunds of past amounts paid, there can be no assurance that the costs
incurred in connection with the project could be recovered through sales to
other purchasers. Such events could adversely affect the ability of the
Company and its ventures to service their indebtedness, including the Senior
Notes, and the ability of the Company to pay dividends on the Common Stock.
See "Government Regulation--Federal Energy Regulation".
Currently, Congress is considering proposed legislation that would amend
PURPA by eliminating the requirement that utilities purchase electricity from
QFs at Avoided Costs. The effect of any such amendment cannot be predicted,
although any such amendment could have a material adverse effect on the
Company.
15
<PAGE>
FERC and many state utility commissions are currently studying a number of
proposals to restructure the electric utility industry in the United States.
Such restructuring could permit utility customers to choose their utility
generator supplier in a competitive electric energy market. FERC issued a
final rule in April 1996 which requires utilities to offer eligible wholesale
transmission customers non-discriminatory open access on utility transmission
lines on a comparable basis to the utilities' own use of the lines. The final
rule has been the subject of rehearing and now is undergoing judicial review.
The effect of any such restructuring cannot be predicted, although any such
restructuring could have a material adverse effect on the Company. As to
recent proposals by the Clinton Administration, see "Government Regulation--
Federal Energy Regulation--Proposed Deregulation".
ENVIRONMENTAL MATTERS
The Company's plants are and will be required to comply with a number of
federal, state and local statutes and regulations relating to protection of
the environment and to the safety and health of the public and of personnel
operating the plants. Such statutes and regulations, which are always subject
to change, include regulation of hazardous substances associated with each
plant, limitations on noise emissions from the plants, safety and health
standards, and practices and procedures and requirements relating to the
discharge of air and water pollutants. In addition, the Company could become
liable for the investigation and removal of any hazardous materials that may
be found on the plant sites regardless of the sources of such hazardous
materials. Failure to comply with any such statutes or regulations or any
change in the requirements of such statutes or regulations could result in
civil or criminal liability, imposition of cleanup liens and fines, large
expenditures to bring the facilities into compliance and cessation or
limitation of operations. See "Business--Government Regulation--Environmental
Regulations".
As of the date of this Prospectus, the Company has received no notice that
any required environmental regulatory approval has been revoked or that it is
in violation in any material respect as to any environmental law or regulation
applicable to its operations. There can be no assurance, however, that one or
more of such required regulatory approvals will not be revoked or that
environmental regulatory approvals required in the future will be obtained or
maintained or that notice of a violation will not be received.
CURTAILMENT BY POWER PURCHASERS
Each power purchase agreement to which an existing Company venture is a
party authorizes the purchasing utility to curtail purchases for reasons of
system emergency, safety and repair and restoration of service. The power
purchase agreement with Con Ed in respect of the Linden Plant also permits
certain additional curtailment rights at the purchaser's sole discretion,
although the Company's cash flow attributable to the Linden Plant will not be
affected by any such curtailment so long as the Linden Plant meets its
capacity obligations. Under certain circumstances, PURPA authorizes utilities
to limit or discontinue purchases from QFs due to "operational circumstances".
This right to curtail purchases of power from QFs in the circumstances set
forth under PURPA is expressly excluded from Linden Venture's power purchase
agreement, but is included in certain of the Company's other power purchase
agreements. Although the effect of such curtailments has not been material to
the Company to date, there can be no assurance that there will not be future
curtailments under existing or future power purchase agreements or that the
effect thereof will not be materially adverse to the Company.
ABOVE MARKET POWER PURCHASE AGREEMENTS
If the price to be paid by a power purchaser to one of the Company's QFs
under its power purchase agreement exceeds such power purchaser's actual
Avoided Cost for the electricity purchased, or if a power purchaser is
experiencing financial, regulatory or other pressures, such power purchaser
could attempt to amend or to terminate its power purchase agreement. See "--
Dependence Upon Third Parties". The Company understands that, currently, the
price to be paid by each of the purchasers of power from the existing ventures
in which the Company has an interest has been projected by such purchasers to
be above actual Avoided Cost for such purchasers of power for the remaining
term of each of the power purchase agreements. Although the provisions of the
power purchase agreements do not permit amendments or, absent a default by the
venture, early
16
<PAGE>
termination without the consent of the applicable venture and while the
provisions of the existing debt at the venture levels or the applicable
partnership agreements prohibit the giving of such consent without the consent
of venture lenders and other parties, it is possible that, following a change
in applicable legislation, case law or regulations, a court or regulatory
authority could order such an amendment or termination. Such amendment or
termination could materially and adversely affect the net revenues of the
applicable venture and, consequently, the cash flow available to the Company
for debt service and dividends on Common Stock. See "--Dependence on Third
Parties" and "--Risks Arising from Utility Regulation and Deregulation".
EXPIRATION OF CERTAIN POWER PURCHASE AGREEMENTS; MERCHANT SALES
Revenues of the Company's independent power ventures, and, therefore,
distributions to the Company, depend primarily upon payments to be made by the
purchasers of power from such ventures. While each of the Company's existing
power purchase agreements is a long term agreement--terms expire between 2008
and 2017--upon their expiration, renewals or replacement contracts may not
have comparably favorable terms, including terms as to price or duration,
especially since the existing power purchase agreements contain above-market
pricing provisions. Accordingly, upon any such expiration, the plant, assuming
legislation permits, may choose to continue to operate as a QF and sell
electricity at Avoided Cost rates under PURPA (and relevant regulations of
FERC and states implementing PURPA). So long as a plant is a QF, PURPA and the
implementing regulations currently in effect require electric utilities to
purchase the plant's electricity output in accordance with the current
requirements of PURPA and FERC's implementing and pricing regulations.
Alternatively, a plant may become a merchant plant, selling at market prices
dependent on the existence and decisions of merchant buyers, subject to
restrictions hereinafter noted, rather than under long-term contracts with the
current power purchasers. In addition, expanded capacity at existing plants or
new or acquired capacity may be sold as merchant power. If not a QF, for any
plant to operate as a merchant plant and to sell power at market-based rates,
the seller would require rate authorization from FERC. In granting a request
for market-based rate authority, FERC typically requires a showing that the
plant's owners and affiliates lack market power in the relevant generation and
transmission markets and in markets for related commerce such as fuel.
Obtaining FERC authority for market-based rates would also require a showing
by the seller that there is no opportunity for abusive affiliate transactions
involving any regulated affiliates of the Company that may exist at the time.
There can be no assurance that FERC market-based rate authority would be
obtained for any or all of the Company's existing or future plants to operate
as merchant plants. In addition, a merchant plant sells power based upon
market conditions at the time of sale, so that there can be no certainty at
present about the amount or timing of any revenues that may be received from
merchant power sales in the future or about the match between costs of
operations (in particular, fuel prices) and merchant power sales revenues.
DEPENDENCE ON THIRD PARTIES
The nature of the Company's existing principal power plants is such that
each at present generally (except for the Bayonne Plant, which has two
electrical power and two steam customers, and the Linden Plant, which has two
steam customers) relies on one power customer and one steam sales customer
responsible for a substantial portion, if not all, of such plant's revenue.
During 1997, approximately 62.1%, 22.1% and 15.8% of the NJ Partnerships'
electricity revenue was attributable to revenue received pursuant to power
sales agreements with Con Ed, PSE&G and JCP&L, respectively. The existing
power and steam sales agreements (other than with respect to the steam sale
agreements of NJ Venture) are generally long-term agreements covering the sale
of electricity or steam for initial terms of up to 25 years. The loss of any
one power or steam sales agreement with any of these customers, the
deterioration in such customer's financial condition or any material failure
by any customer to fulfill its obligations under a power or steam sales
agreement could, therefore, have a material adverse effect on the Company's
results of operations. The loss of a steam customer also could jeopardize the
QF status of a Company plant. See "--Risks Arising From Utility Regulation and
Deregulation".
Finally, each power plant depends on a single or limited number of entities
to supply and transport natural gas to such facility. The failure of any one
gas supplier or gas transporter to fulfill its contractual obligations could
have a material adverse effect on a particular venture and, consequently, on
the Company's business and results of operations.
17
<PAGE>
DEPENDENCE ON A SINGLE VENTURE
Initially, the Company's ownership interests in Linden Venture will
contribute a substantial portion of the Company's expected net income and cash
flow, accounting for approximately 70% of its equity in earnings of NJ
Partnerships on a pro forma combined basis for the year ended December 31,
1997. If Linden Venture's business were materially and adversely affected, the
Company's financial performance would be materially and adversely affected.
There can be no assurance that the Company's ownership interests in Linden
Venture will not continue to constitute the majority of the Company's assets
and to be the dominant source of income for the Company or that, from time to
time, another single asset or a small number of assets will not constitute the
majority of the Company's assets or the dominant source of its income.
FUEL RELATED RISKS
Historically, each of the existing ventures' fuel acquisition strategy has
included various combinations of short-, medium- and long-term gas supply
contracts. In its gas supply arrangements, the Company has and expects to
match the fuel cost with the fuel component included in the relevant venture's
power sales agreements in order to minimize exposure to fuel price risk. There
can be no assurance, however, that gas supplies will be available for the full
term of the plants' power sales agreements, or that gas prices will not
increase in a manner that is disproportionate with the fuel component
provisions of the existing and future power purchase agreements or market
revenues for merchant plants. If gas is not available, or if gas prices
increase above that allowed by the fuel component provisions of the plants'
power sales agreements, or disproportionately to market revenues (in the case
of merchant sales), there could be a material adverse impact on the Company's
business and results of operations. To the extent that the Company does not
have long-term gas contracts that are closely matched to the fuel component of
a power purchase agreement or, to the extent to which there is not a full fuel
cost pass-through in the plant's power purchase agreements, these risks may be
exacerbated. While a particular plant may be entitled, or have the ability,
for short periods of time to use alternative fuels, such as butane or
kerosene, in the event of a gas interruption such back-up fuel arrangements
are designed only for short-term circumstances and do not eliminate the
inherent risks of longer-term, or frequent, gas supply interruptions.
Environmental and other permitting and operational considerations also
restrict the use of alternative fuels and may be particularly onerous should
the Company in the future acquire or develop other plants fueled by non-clean
burning fuels such as coal.
PROJECT DEVELOPMENT AND EXPANSION RISKS
The development and expansion of power generation facilities are subject to
substantial risks. In connection with the development of a power generation
facility, the Company must obtain power sales agreements (or be prepared to
sell the plant's power without any such agreements as a merchant plant with
associated market risks) and, in the case of cogeneration QFs, steam sales
agreements, governmental permits and approvals, fuel supply and transportation
agreements, sufficient equity and debt financing, electrical transmission
service (if necessary), site agreements and construction contracts. In
addition, project development and expansion is subject to certain
environmental, engineering and construction risks related to cost-overruns,
delays and performance. Although the Company may attempt to minimize its
financial risks in the development or expansion of a project by obtaining
favorable long-term power sales agreements, entering into power marketing
transactions, obtaining all required governmental permits and approvals and
arranging adequate financing prior to the commencement of construction, the
development or expansion of a power project may require the Company to expend
significant sums for preliminary engineering, permitting, legal and other
expenses before it can be determined whether a project is feasible,
economically attractive or capable of being financed. In addition, in
connection with any expansion of an existing project, the Company would be
required to obtain the consents of parties to existing agreements, venture
lenders and partners. If the Company were unable to complete the development
or expansion of a facility, it generally would not be able to recover its
investment in such development or expansion efforts. The process for obtaining
initial environmental, siting and other governmental permits and approvals is
complicated and lengthy, often taking more than a year, and is subject to
significant uncertainties. Moreover, as a result of competition, it may be
difficult to sell power or steam at prices achieved in prior agreements or at
18
<PAGE>
acceptable rates in wholesale markets. There can be no assurance that the
Company will be successful in the development or expansion of power generation
facilities in the future. If a developmental or expansion effort is not
successful, the Company may be forced to abandon the development or expansion
efforts and, at the time of abandonment, to expense all capitalized
development costs incurred in connection therewith and to incur additional
losses associated with any contingent liabilities incurred as a result of such
activities.
Should the Company engage in the construction and operation of new power
generation plants in carrying out its strategy, many risks would be involved,
including start-up problems, the breakdown or failure of equipment or
processes and performance below expected levels of output or efficiency. New
plants have no operating history and may employ recently developed and
technologically complex equipment. Insurance is maintained to protect against
certain of these risks, warranties are generally obtained for limited periods
relating to the construction of a new plant and its equipment in varying
degrees and contractors and equipment suppliers are obligated to meet certain
performance levels. Such insurance, warranties and performance guarantees may,
however, not be adequate to cover lost revenues or increased expenses and, as
a result, a venture may be unable to fund principal and interest payments
under its financing obligations and may operate at a loss. A default under any
such financing obligations could result in the Company losing its interest in
any such new power generation facility developed by the Company and in other
adverse consequences to the Company.
ACQUISITION RISKS
The Company's strategy is based in part on making selective and
opportunistic acquisitions. In this regard, the Company has no history or
experience in making significant acquisitions. Moreover, although the domestic
power industry is undergoing consolidation and the Company believes that
significant acquisition opportunities may be available to it, the Company is
likely to confront significant competition for acquisition opportunities. See
"--Competition". In addition, there can be no assurance that the Company will
be able to identify attractive acquisition opportunities at economically
justifiable prices or, to the extent that any opportunities are identified,
that the Company will be able to obtain the necessary financing and take the
other actions that will be necessary to consummate any such acquisitions.
Further, any future acquisitions of power generation plants could be subject
to significant regulation, both as to ownership and operational
considerations. See "--Risks Arising From Utility Regulation and
Deregulation".
RISKS AS TO AVAILABILITY OF CAPITAL
Continued access to capital with acceptable terms is necessary to assure the
success of future ventures, acquisitions and expansions and, therefore, to
assure the success of the Company's strategy. The Company's ventures
historically have used project financing to fund the capital expenditures
associated with developing and constructing the power generation plants in
which they have an interest. Project financing borrowings are substantially
non-recourse to the Company and generally are secured by the physical assets,
partnership or other equity interests, venture contracts and cash flow of the
subject venture. In connection with future acquisitions or the development of
additional cogeneration plants, the Company intends to seek, where possible,
such non-recourse project financing. The Company's ability to carry out its
strategy of development and acquisition of additional ventures will be, in
part, dependent upon the Company's ability to generate cash flows or to obtain
its own debt or equity financing for its equity or subordinated loan
participations in, and provision of credit support with respect to, such
ventures. The Company's ability to arrange for financing on either a full
recourse or substantially non-recourse basis and the cost of such capital are
dependent upon general economic and capital market conditions, the
availability of bank and other credit, investor confidence in the Company, the
continued success of current ventures and provisions of tax and other laws
which are conducive or encouraging to the raising of capital for power
generation ventures. Should future access to capital not be available, the
Company may be required to abandon its strategy with respect to the
development and acquisition of additional projects. While any such effect
would not necessarily adversely affect the results of operations of the
Company with respect to its currently operating facilities, the inability of
the Company to expand currently owned plants, build new plants or acquire
existing facilities would significantly affect the future growth of the
Company.
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<PAGE>
If lenders were to require the Company to guarantee the indebtedness of a
subsidiary or venture in respect of any future plant, the Company's general
corporate funds could be vulnerable in the event of a default by such
subsidiary or venture, and if the Company were unable to incur indebtedness in
respect of such guarantees under the restrictions on indebtedness (including
guarantees) contained in the Indenture or the Bridge Loan (as defined herein)
or under other then existing debt agreements, the Company's ability to fund
new plants could be adversely affected.
LEVERAGE
Upon the consummation of the Common Stock Offering, the Debt Offering and
the other transactions contemplated thereby, including the Formation
Transactions, the Company will have substantial indebtedness. At March 31,
1998, after giving pro forma effect to the Common Stock Offering, the Debt
Offering and the transactions contemplated thereby, including the Formation
Transactions, the Company would have total indebtedness of approximately
$852.8 million. Such amount excludes indebtedness at the venture level. See
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources". The
ability of the Company to meet its debt service obligations and to repay
outstanding indebtedness according to its terms will be dependent primarily
upon the performance of the power plants in which the Companys' subsidiaries
have an interest.
The Indenture will contain certain restrictive covenants which initially
affect, and in many respects significantly limit or prohibit, (i) indebtedness
of the Company, other than (x) the Senior Notes, (y) up to $300.0 million in
senior secured bank indebtedness and (z) certain other parity indebtedness
(provided that the issuance of such parity indebtedness would not result in a
rating downgrade of the Senior Notes), (ii) additional indebtedness of the
ventures (except Selkirk Venture) in which the Company currently has an
interest, other than up to $100 million for plant improvements and expansion
and amounts required to satisfy the fiduciary responsibilities of each of the
ventures, and (iii) cash distributions to shareholders unless no default
exists under the Indenture and such distributions do not exceed 100% of Funds
From Operations (as defined in the Indenture) (as of the closing date of the
issuance of the Senior Notes) plus $50 million. Certain of such restrictive
covenants will be eliminated in the event (i) the Company owns and is expected
to continue to own equity interests in at least eight ventures with no single
venture contributing more than 25% or less than 5% of the aggregate Cash
Distributions (as defined in the Indenture) for a period of time defined in
the Indenture and (ii) the then current ratings of the Senior Notes are at
least Baa3/BBB -/BBB- by Moody's Investor Services, Inc., Standard & Poor
Rating Services and Duff & Phelps Credit Rating Co., respectively. There can
be no assurance that the Company will be able to satisfy the conditions
precedent to the operation of such a covenant-elimination provision. If the
Company is unable to satisfy such conditions precedent, the restrictive
covenants in the Indenture may continue indefinitely. See "Description of
Certain Indebtedness--Senior Notes". For a description of restrictions
pursuant to the debt financing arrangements applicable to the various ventures
in which the Company has ownership interests, see "Description of Certain
Indebtedness--Plant Project Financings".
The Company expects to seek a $300.0 million five-year revolving credit
facility which, if obtained, likely will contain certain restrictions that
limit or prohibit, among other things its ability to incur indebtedness, repay
certain indebtedness, pay dividends, make investments, create liens, sell
assets and engage in business combinations.
If the Company is unable to comply with the terms of its debt agreements and
fails to generate sufficient cash flow from operations in the future, the
Company may be required to refinance all or a portion of its existing debt or
to obtain additional financing. There can be no assurance that any such
refinancing would be possible or that any additional financing could be
obtained, particularly in view of the Company's expected levels of debt and
the debt incurrence restrictions under existing debt agreements. If cash flow
is insufficient and no such refinancing or additional financing is available,
the Company may be forced to default on its debt obligations. In the event of
a default under the terms of any of the indebtedness of the Company, subject
to the terms of such
20
<PAGE>
indebtedness, the obligees thereunder would be permitted to accelerate the
maturity of such obligations, which could cause defaults under other
obligations of the Company, and foreclose all applicable liens. See "--Risks
Related to Holding Company Structure" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
FLUCTUATIONS IN QUARTERLY PERFORMANCE
Historically, the Company's quarterly operating results have varied,
reflecting seasonal capacity payments received in the summer months, fuel
matters, dispatch and unscheduled maintenance by the plants in which the
Company has an interest. The highest demands for electricity in the geographic
areas which the Company currently serves are generally in the summer months,
when demand for electricity to generate cooling is the greatest. Fluctuations
in quarterly performance, and the extent to which fluctuations in quarterly
performance can affect year to year performance, can adversely affect the
market price of the Common Stock.
DEPENDENCE ON SENIOR MANAGEMENT
The Company's management and operations are dependent upon the efforts of
the Company's Chairman of the Board, President and Chief Executive Officer,
Robert C. McNair, and a small number of management and operating personnel.
The Company does not maintain key-man life insurance on any executive officer
or other key member of the management of the Company. The loss of the services
of Mr. McNair or of any other key member of management could have a material
adverse impact on the Company. See "Management".
CONTROL BY PRINCIPAL STOCKHOLDER
Upon completion of the Common Stock Offering, entities controlled directly
or indirectly by Robert C. McNair and members of his family will own in the
aggregate approximately % of the outstanding Common Stock ( % if the
underwriters' over-allotment option is exercised in full). Accordingly, Robert
C. McNair, through entities controlled by him and his family, will be able to
exercise substantial influence on the election of the directors of the Company
and to exercise substantial influence on the Company's management, operations
and affairs, all in addition to the influence that Mr. McNair will have on the
Company's affairs as Chairman of the Board, President and Chief Executive
Officer of the Company. See "Principal and Selling Stockholders". In addition,
the Company currently has, and will continue to have, a variety of contractual
relationships with affiliates of Robert C. McNair. See "Management" and
"Certain Transactions".
HISTORICAL ABSENCE OF PUBLIC MARKET
Prior to the Common Stock Offering, there has been no public market for the
Common Stock. Although the Company intends to apply for listing of the Common
Stock on the NYSE, there can be no assurance that such listing will be
obtained or that an active trading market will develop, or that if developed,
it will continue upon completion of the Common Stock Offering. If an active
market for the Common Stock does not develop or is not sustained, the trading
prices for the Common Stock could be materially adversely affected. The
initial public offering price of the Common Stock will be determined by
negotiations between the Company and the Underwriters and may not be
indicative of the market price of the Common Stock after the Common Stock
Offering. For a discussion of the factors to be considered in determining the
initial public offering price, see "Underwriters". The market price of the
Common Stock could be subject to significant fluctuations in response to
variations in quarterly and yearly operating results, the success of the
Company's business strategy, general trends in the independent power industry,
competition, technological obsolescence, changes in federal and state
regulations affecting the Company or affecting the power industry and other
factors. In addition, the stock market in recent years has from time to time
experienced extreme price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of affected
companies. These broad fluctuations may adversely affect the market price of
the Common Stock.
21
<PAGE>
POSSIBLE ADVERSE EFFECT ON MARKET PRICE OF ANTI-TAKEOVER PROVISIONS
Cogen's Certificate of Incorporation and Bylaws include a number of
provisions that may have the effect of encouraging persons considering
unsolicited tender offers or other unilateral takeover proposals to negotiate
with the Board of Directors rather than pursue non-negotiated takeover
attempts. These provisions may have the effect of delaying, deferring or
preventing a change in control of the Company whether or not such person
chooses to negotiate with the Board of Directors and may adversely affect the
market price of the Common Stock. The provisions include authorized "blank
check" preferred stock, the denial of the use of written consents, a
classified board of directors, restrictions on removal of directors and
advance notice requirements with respect to stockholder meetings as to
director nominations and stockholder proposals. See "Description of Capital
Stock".
POTENTIAL ADVERSE EFFECT ON MARKET PRICE OF SHARES ELIGIBLE FOR FUTURE SALE
Immediately following the Common Stock Offering, 44.9 million shares of
Common Stock will be outstanding. The shares of Common Stock
offered hereby, together with any shares offered upon exercise of the
Underwriters' over-allotment option or under the Company's stock plans, will
be eligible for resale in the public market without restrictions under the
Securities Act, except to the extent that those shares are acquired by
affiliates of the Company. All of the remaining outstanding shares of Common
Stock will be subject to resale in accordance with Rule 144 under the
Securities Act. In addition, the Selling Stockholders have agreed not to sell,
transfer or otherwise dispose of their shares of Common Stock not sold
pursuant to the Common Stock Offering for a period of 180 days beginning on
the date of this Prospectus. Sales of a substantial number of shares of Common
Stock may adversely affect the market price of the Common Stock. See "Shares
Eligible for Future Sale".
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<PAGE>
DEBT OFFERING
Concurrently with the Common Stock Offering, the Company is offering $625.0
million of Senior Notes to the public. The Indenture to be executed in
conjunction with the Debt Offering, will contain certain covenants, including
restrictive covenants that (i) limit indebtedness of the Company, other than
the Senior Notes, up to $300.0 million in senior secured bank indebtedness and
certain other parity indebtedness the issuance of which will not result in a
rating downgrade of the Senior Notes, (ii) limit additional indebtedness of
the ventures (except Selkirk Venture) in which the Company currently has an
interest, other than up to $100.0 million for plant improvements and expansion
and amounts required to satisfy the fiduciary responsibilities of each of the
ventures, and (iii) prohibit cash distributions to shareholders unless no
default exists under the Indenture and such distributions do not exceed 100%
of Funds From Operations (as of the closing date of the issuance of the Senior
Notes) plus $50.0 million. The closings of each of the Common Stock Offering
and the Debt Offering are conditioned upon the consummation of the other. In
conjunction with the Formation Transactions and immediately prior to the
closing of the Common Stock Offering, Morgan Stanley & Co. Incorporated will
loan (the "Bridge Loan") $331.1 million to Linden Ltd. pursuant to a loan
agreement (the "Bridge Loan Agreement"). The Company expects that it will
advance as a loan to Linden Ltd. a portion of the proceeds of the Debt
Offering necessary for Linden Ltd. to repay the Bridge Loan in full. See
"Description of Certain Indebtedness--Senior Notes".
DIVIDEND POLICY
As a newly formed entity, the Company has not paid any dividends. Because of
the nature of the Company's business, however, and the cash flow expected by
the Company from the operation of the independent power plants in which it has
interests, as described elsewhere in this Prospectus, the Company expects that
for the foreseeable future a substantial part of its earnings will be paid in
dividends to its stockholders. While there can be no assurance that earnings
will be available for distribution or that such dividends actually will be
distributed or that they will be continued at any particular level for any
particular period of time, the Company expects to pay annual dividends for the
foreseeable future on the Common Stock at the rate of $ per share per
quarter. The declaration of dividends is at the discretion of the Company's
Board of Directors and will be subject to the terms of the Company's debt
agreements, including the Indenture, concerning restricted payments. The
Company's dividend policy will be reviewed by the Board of Directors at such
future time as may be appropriate in light of relevant factors at that time.
During the initial years of the Company's operations, dividends with respect
to the Common Stock are expected to exceed the share of the current and
accumulated earnings and profits of the Company allocable to the holders of
the Common Stock (as determined for United States federal income tax
purposes). In such a case, such excess generally would be treated as a tax-
free return of capital up to a holder's basis in such holder's shares of
Common Stock and as capital gain thereafter. (To the extent a holder receives
dividends which constitute a return of capital to such holder, the holder's
basis in the shares upon which dividends are paid will be reduced. See
"Certain United States Federal Income Tax Consequences--U.S. Holders--Sale or
Other Disposition of Company Stock.") No assurance can be given, however, that
such distributions will in fact exceed the Company's current and accumulated
earnings and profits for such purposes or, if any such distributions are made,
regarding the amount of any such excess. See "Certain United States Federal
Income Tax Consequences--U.S. Holders--Dividends". The Company's ability to
pay dividends will, in any event, always be dependent upon cash flow received
from distributions to it by its subsidiaries, which are in turn dependent upon
distributions from the ventures. As described elsewhere in this Prospectus,
the ventures in which the Company has an interest and obtains its cash flow
are subject to restrictions with respect to distributions to their holders of
equity. See "Description of Certain Indebtedness--Plant Project Financings".
23
<PAGE>
CAPITALIZATION
The Company was formed in May 1998 and had no historical balance sheet or
capitalization data at March 31, 1998. The following table sets forth the pro
forma capitalization of the Company at March 31, 1998, based on the historical
capitalization of the Group at March 31, 1998, as adjusted to reflect the
capitalization of the Company giving effect to consummation of the Common
Stock Offering, the Debt Offering and the Formation Transactions and the
application of a portion of the proceeds of the Debt Offering to retire the
Bridge Loan, as if all such transactions had occurred on March 31, 1998. This
table should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations", the combined financial
statements of the Group and the unaudited pro forma condensed balance sheet of
the Company, including the notes thereto, included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------
(IN MILLIONS)
AS ADJUSTED
--------------
<S> <C>
Cash and cash equivalents........................................ $ 66.1
======
Current portion of long-term debt(1)
Camden GPLP Term Loan.......................................... 0.5
Linden Ltd. Term Loan(2)....................................... 12.8
------
13.3
------
Long-term debt, less current portion(1)..........................
Camden GPLP Term Loan.......................................... 12.2
Linden Ltd. Term Loan(2)....................................... 202.3
Senior Notes................................................... 625.0
------
839.5
------
Stockholders' equity............................................. (4.3)
------
Total capitalization......................................... $848.5
======
</TABLE>
- --------
(1) The Group's interest in NJ Venture and Camden Cogen are accounted for on
the equity method; accordingly, the amounts reflected do not include the
long-term debt of NJ Venture of $71.0 million and Camden Cogen of $88.9
million. In addition, the limited partners of Camden Cogen and Linden
Venture are entitled to receive distributions on a preferential basis to
the interests of Camden GPLP and Linden Ltd., respectively.
(2) The Company has set aside, on a contractually irrevocable basis, an amount
invested in Treasury securities sufficient to repay the principal and
interest on the current and long-term portion of the Linden Ltd. term
loan.
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UNAUDITED PRO FORMA CONDENSED
FINANCIAL STATEMENTS
The Company was formed in May 1998 and had no historical balance sheet as of
March 31, 1998 and no historical statement of income for the three-month
period ended March 31, 1998 or any prior period. No pro forma adjustments
relating to the formation of the Company are shown because the amounts are de
minimis. The following unaudited pro forma condensed financial statements give
effect to (i) the Formation Transactions, (ii) the Common Stock Offering and
(iii) the issuance of the Senior Notes and the application of a portion of the
proceeds thereof to repay the Bridge Loan and to pay certain expenses, based
on the historical combined financial statements of the Group, under the
assumptions and adjustments set forth in the footnotes accompanying the
unaudited pro forma condensed financial statements. The unaudited pro forma
condensed statements of income for the three months ended March 31, 1998 and
the year ended December 31, 1997 assume such transactions were consummated on
January 1, 1997. The unaudited pro forma condensed balance sheet at March 31,
1998 assumes such transactions were consummated on March 31, 1998. The
adjustments contained in the unaudited pro forma condensed statements of
income do not give effect to any nonrecurring costs directly associated with
such transactions that might be incurred within the next twelve months and do
not give effect to any potential cost savings and synergies that could result
from such transactions. The unaudited pro forma condensed financial statements
have been prepared for informational purposes only and are not necessarily
indicative of the actual or future results of operations or financial
condition that would have been achieved had the transaction occurred at the
dates assumed. The unaudited pro forma condensed financial statements should
be read in conjunction with the historical combined financial statements of
the Group and the related notes thereto included elsewhere in this Prospectus.
25
<PAGE>
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN MILLIONS OF DOLLARS, EXCEPT AS NOTED)
<TABLE>
<CAPTION>
GROUP PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA(1)
---------- ----------- ------------
<S> <C> <C> <C>
Revenues
Equity in earnings of affiliates
Linden Venture........................ $17.4 $ -- $17.4
Camden Cogen.......................... 4.7 -- 4.7
NJ Venture............................ 15.2 (0.4)(2) 14.8
Selkirk Cogen......................... 0.2 -- 0.2
Other................................... 0.5 -- 0.5
----- ----- -----
38.0 (0.4) 37.6
----- ----- -----
Costs and Expenses;
Operating overhead...................... 10.0 0.4 (3) 3.0
(7.4)(4)
0.8 (3)
General and administrative.............. 4.9 (1.1)(5) 4.6
Depreciation and amortization........... 0.1 -- 0.1
----- ----- -----
15.0 (7.3) 7.7
----- ----- -----
Income from Operations.................... 23.0 6.9 29.9
Other Income (Expense)
Interest and other income............... 3.4 3.6 (6) 7.0
Interest expense........................ (4.9) (10.9)(7) (15.9)
(0.1)(8)
----- ----- -----
Income Before Income Taxes................ 21.5 (0.5) 21.0
(3.4)(9)
Income Taxes.............................. (4.8) 0.2 (10) (8.0)
----- ----- -----
Net Income................................ $16.7 $(3.7) $13.0
===== ===== =====
Earnings per Share (in dollars)........... $0.29
=====
Average Shares Outstanding (millions)..... 44.9 (11) 44.9
===== =====
</TABLE>
- --------
(1) Does not reflect approximately $6.2 million in nonrecurring costs which
will be borne by the Company in association with the Common Stock Offering
as such costs will be included in the results of operations of the Company
within the twelve-month period following the consummation of such
transaction.
(2) Reflects the amortization of excess cost related to the purchase of 10.5%
of the outstanding common stock of MESC.
(3) Reflects the estimated incremental operating overhead and general and
administrative expenses associated with the operations of the Company as
a publicly-held entity. Such expenses include incremental salaries and
benefits, office space and services, computer hardware and software,
telecommunications and the estimated costs of investor reporting and
communications.
(4) Reflects the reversal of certain nonrecurring development bonus "buyouts"
made in contemplation of the Common Stock Offering. The individuals to
whom such payments were made either will not be employed by the Company
or have compensation arrangements which are reflected in the estimated
costs discussed in Note 3 to this table.
(5) Reflects the reversal of costs and expenses associated with corporate
aircraft, net of the estimated cost of alternative transportation. Such
aircraft is owned by an affiliate of the Group and will not be acquired
by the Company in the Formation Transactions. If used by the Company, the
cost will be limited to the amount included in the estimate of the cost
of alternate transportation.
26
<PAGE>
(6) Reflects estimated interest income, at an assumed interest rate of 5.7%,
related to $232.1 million in U.S. Treasury securities purchased with a
portion of the proceeds from the issuance of the Senior Notes.
(7) Reflects interest expense associated with the Senior Notes assuming
interest rates as follows: $200.0 million at 6.72%, $200.0 million at
6.89% and $225.0 million at 7.33%.
(8) Reflects the amortization of deferred costs and expenses related to the
issuance of the Senior Notes.
(9) Reflects the effect of income taxes on the Group's historical results
since the Company will be a taxable entity.
(10) Reflects the income tax effect of the pro forma adjustments.
(11) Reflects the issuance of 44.9 million shares of common stock in the
Formation Transactions.
27
<PAGE>
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN MILLIONS OF DOLLARS, EXCEPT AS NOTED)
<TABLE>
<CAPTION>
COMPANY
GROUP PRO FORMA PRO
HISTORICAL ADJUSTMENTS FORMA(1)
---------- ----------- --------
<S> <C> <C> <C>
Revenues
Equity in earnings of affiliates
Linden Venture........................... $ 73.8 $ -- $ 73.8
Camden Cogen............................. 14.5 -- 14.5
NJ Venture............................... 17.6 (1.7)(2) 15.9
Selkirk Cogen............................ 0.8 -- 0.8
Other...................................... 2.2 -- 2.2
------ ------ ------
108.9 (1.7) 107.2
------ ------ ------
Costs and Expenses:
Operating overhead......................... 13.4 1.7 (3) 15.1
3.0 (3)
General and administrative................. 19.8 (7.5)(4) 15.3
Depreciation and amortization.............. 0.2 -- 0.2
------ ------ ------
33.4 (2.8) 30.6
------ ------ ------
Income from Operations....................... 75.5 1.1 76.6
Other Income (Expense)
Interest and other income.................. 16.0 13.0 (5) 29.0
(43.7)(6)
Interest expense........................... (21.7) (0.6)(7) (66.0)
Allowance for long-term receivable......... 10.3 -- 10.3
------ ------ ------
Income Before Income Taxes................... 80.1 (30.2) 49.9
(25.9)(8)
Income Taxes................................. (5.1) 11.7 (9) (19.3)
------ ------ ------
Net Income................................... $ 75.0 $(44.4) $ 30.6
====== ====== ======
Earnings per Share (in dollars).............. $ 0.68
======
Average Shares Outstanding (millions)........ 44.9 (10) 44.9
====== ======
</TABLE>
- --------
(1) Does not reflect approximately $6.2 million in nonrecurring costs which
will be borne by the Company in association with the Common Stock Offering
as such costs will be included in the results of operations of the Company
within the twelve-month period following the consummation of such
transaction.
(2) Reflects the amortization of excess cost related to the purchase of 10.5%
of the outstanding common stock of MESC.
(3) Reflects the estimated incremental operating overhead and general and
administrative expenses associated with the operations of the Company as a
publicly-held entity. Such expenses include incremental salaries and
benefits, office space and services, computer hardware and software,
telecommunications and the estimated costs of investor reporting and
communications.
(4) Reflects the reversal of costs and expenses associated with corporate
aircraft, net of the estimated cost of alternative transportation. Such
aircraft is owned by an affiliate of the Group and will not be acquired by
the Company in the Formation Transactions. If used by the Company, the
cost will be limited to the amount included in the estimate of the cost of
alternate transportation.
28
<PAGE>
(5) Reflects estimated interest income, at an assumed interest rate of 5.7%,
related to $232.1 million in U.S. Treasury securities purchased with a
portion of the proceeds from the issuance of the Senior Notes.
(6) Reflects interest expense associated with the Senior Notes assuming
interest rates as follows: $200.0 million at 6.72%, $200.0 million at
6.89% and $225.0 million at 7.33%.
(7) Reflects the amortization of deferred costs and expenses related to the
issuance of the Senior Notes.
(8) Reflects the effect of income taxes on the Group's historical results
since the Company will be a taxable entity.
(9) Reflects the income tax effect of the pro forma adjustments.
(10) Reflects the issuance of 44.9 million shares of common stock in the
Formation Transactions.
29
<PAGE>
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AT MARCH 31, 1998
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
GROUP PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
ASSETS
<S> <C> <C> <C>
Current Assets
$ (1.0)(1)
61.8 (6)
Cash and cash equivalents................... $ 18.8 (12.5)(7) $ 66.1
Other current assets........................ 5.2 -- 5.2
------ ------ ------
23.0 48.3 71.3
------ ------ ------
Investments in Affiliates
Linden Venture.............................. 59.2 -- 59.2
Selkirk Cogen............................... 24.3 -- 24.3
Camden Cogen................................ 12.6 -- 12.6
NJ Venture.................................. 2.4 34.1 (4) 36.5
------ ------ ------
98.5 34.1 132.6
------ ------ ------
Other Assets
Accounts receivable, affiliates............. 159.4 (159.4)(2) --
439.1 (3)
(9.2)(4)
Deferred income taxes....................... -- (6.0)(5) 423.9
U.S. Treasury securities.................... -- 232.1 (6) 232.1
Other....................................... 1.7 6.3 (7) 8.0
------ ------ ------
161.1 502.9 664.0
------ ------ ------
$282.6 $585.3 $867.9
====== ====== ======
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
Current Liabilities
Accounts payable, affiliates................ $ 8.3 $ -- $ 8.3
331.1 (2)
Note payable................................ -- (331.1)(6) --
Current maturities on long-term debt........ 13.3 -- 13.3
Interest payable............................ 1.9 -- 1.9
Income taxes payable........................ 3.3 (2.5)(7) 0.8
Other current liabilities................... 0.1 -- 0.1
------ ------ ------
26.9 (2.5) 24.4
------ ------ ------
Long-Term Debt................................ 214.5 625.0 (6) 839.5
------ ------ ------
Other Long-Term Liabilities................... 8.3 -- 8.3
------ ------ ------
Deferred Income Taxes......................... 6.0 (6.0)(5) --
------ ------ ------
(22.5)(1)
(6.2)(2)
Owner's Equity................................ 26.9 1.8 (4) --
------ ------ ------
21.5 (1)
(484.3)(2)
439.1 (3)
23.1 (4)
Shareholders' Equity.......................... -- (3.7)(7) (4.3)
------ ------ ------
$282.6 $585.3 $867.9
====== ====== ======
</TABLE>
30
<PAGE>
- --------
(1) To reflect the issuance of (i) an aggregate of 33.9 million shares of
Common Stock to the McNair Interests and the Minority Interests in
exchange for 49.9% of the limited and general partnership interests in
Linden Ltd., 100% of the outstanding common stock of Camden Inc., Selkirk
GP Inc. and CT Global, and 100% of the limited and general partnership
interests in Selkirk LP; and (ii) an aggregate of 9.8 million shares of
common stock to the McNair Interests and certain of the Minority Interests
in exchange for 89.5% of the outstanding common stock of MESC. Such
transactions are being accounted for at historical cost as a
reorganization of entities under common control because the composition of
the ownership by the McNair Interests and certain of the Minority
Interests is identical among all such entities.
(2) To reflect the Bridge Loan and the redemption by Linden Ltd. of the
remaining outstanding general and limited partnership interests (which
are held by the McNair Interests and the Minority Interests) in exchange
for a $159.4 million account receivable and a $331.1 million in cash.
(3) To reflect the deferred income taxes related to the acquisition of 49.9%
of the limited and general partnership interests in Linden Ltd., the
subsequent redemption by Linden Ltd. of the remaining limited and general
partnership interests and the acquisition of 100% of the outstanding
stock of Camden Inc., Selkirk GP Inc. and CT Global and 100% of the
limited and general partnership interests in Selkirk LP.
(4) To reflect the issuance of 1.2 million shares of Common Stock in exchange
for 10.5% of the outstanding common stock of MESC which is held by
certain of the Minority Interests. Such transaction is accounted for as a
purchase because the ownership with respect to such interest is different
from that discussed in Note 1 to this table.
(5) To reclassify historical deferred income tax liabilities.
(6) To reflect the issuance of $625.0 million of Senior Notes and the
subsequent purchase of $232.1 million of Treasury securities and the
retirement of the $331.1 million Bridge Loan by Linden Ltd.
(7) To reflect the payment for costs and expenses related to the Common Stock
Offering ($6.2 million) and the issuance of the Senior Notes ($6.3
million).
31
<PAGE>
SELECTED HISTORICAL COMBINED FINANCIAL DATA
The following table sets forth, for the periods indicated, summary
historical financial data for the Group and the NJ Partnerships and summary
pro forma financial data for the Company. The summary historical balance sheet
data as of December 31, 1997 and 1996 and the summary income statement and
cash flow data for each of the three years in the period ended December 31,
1997 for the Group and the NJ Partnerships are derived from combined financial
statements which have been audited by Arthur Andersen LLP and are included
elsewhere in this Prospectus. The summary historical balance sheet data as of
December 31, 1995, 1994 and 1993 and the summary income statement and cash
flow data for the two years in the period ended December 31, 1994 are derived
from combined financial statements which have been audited by Arthur Andersen
LLP and are not included in this Prospectus. The summary historical balance
sheet data as of March 31, 1998 and 1997 and the summary income statement and
cash flow data for the three months ended March 31, 1998 and 1997 are derived
from unaudited combined financial statements which include, in the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial data for such periods. The summary
pro forma financial data for the Company are based on numerous assumptions and
include adjustments as explained in the unaudited pro forma financial
statements of the Company and the notes thereto. All of the summary historical
and pro forma financial data should be read in conjunction with the audited
Combined Financial Statements of the Group and the NJ Partnerships and the
unaudited pro forma financial statements of the Company, included elsewhere in
this Prospectus. The following information should not be deemed indicative of
the future operating results of the Company. See also "Management's Discussion
and Analysis of Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
PRO FORMA(1)
THE COMPANY THE GROUP
--------------------------- ------------------------------------------------------
THREE MONTHS
ENDED MARCH
THREE MONTHS YEAR ENDED 31, YEAR ENDED DECEMBER 31,
ENDED DECEMBER 31, -------------- --------------------------------------
MARCH 31, 1998 1997 1998 1997 1997 1996 1995 1994 1993
-------------- ------------ ------ ------ ------ ------ ------ ------ ------
(MILLIONS OF DOLLARS, EXCEPT AS NOTED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
FOR THE PERIOD ENDED:
Revenues:
Equity in earnings of
affiliates............ $ 37.1 $105.0 $ 37.5 $ 26.7 $106.7 $111.6 $ 99.5 $ 93.4 $104.6
Other revenues......... 0.5 2.2 0.5 0.6 2.2 2.3 0.8 -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
37.6 107.2 38.0 27.3 108.9 113.9 100.3 93.4 104.6
------ ------ ------ ------ ------ ------ ------ ------ ------
Costs and Expenses:
Operating overhead..... 3.0 15.1 10.0 3.5 13.4 14.4 10.8 7.2 --(2)
General and
administrative........ 4.6 15.3 4.9 5.1 19.8 10.9 10.4 12.2 6.2
Depreciation and
amortization.......... 0.1 0.2 0.1 0.1 0.2 0.2 0.2 0.2 0.6
Non-competition
payment(3)............ -- -- -- -- -- -- -- -- 14.8
------ ------ ------ ------ ------ ------ ------ ------ ------
7.7 30.6 15.0 8.7 33.4 25.5 21.4 19.6 21.6
------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Operations: 29.9 76.6 23.0 18.6 75.5 88.4 78.9 73.8 83.0
Other Income (Expense)
Interest and other
income................ 7.0 29.0 3.4 4.1 16.0 17.0 17.8 14.1 10.7
Interest expense....... (15.9) (66.0) (4.9) (5.7) (21.7) (23.2) (26.3) (25.8) (26.1)
Allowance for long-term
receivable............ -- 10.3 -- (1.8) 10.3 (10.3) 6.5 (6.5) --
------ ------ ------ ------ ------ ------ ------ ------ ------
Income Before Income
Taxes: 21.0 49.9 21.5 15.2 80.1 71.9 76.9 55.6 67.6
Income taxes(4)........ (8.0) (19.3) (4.8) (1.0) (5.1) (4.0) (7.6) (2.9) (4.1)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net Income.............. $ 13.0 $ 30.6 $ 16.7 $ 14.2 $ 75.0 $ 67.9 $ 69.3 $ 52.7 $ 63.5
====== ====== ====== ====== ====== ====== ====== ====== ======
Pro forma net income per
share (in dollars)..... $ 0.29 $ 0.68 N/A N/A N/A N/A N/A N/A N/A
Pro forma weighted
average shares
outstanding
(in millions).......... 44.9 44.9 N/A N/A N/A N/A N/A N/A N/A
STATEMENT OF CASH FLOWS
DATA FOR THE PERIOD
ENDED:
Net cash provided by
operating activities... N/A N/A $ 11.8 $ 20.1 $ 67.4 $ 87.6 $ 67.1 $ 66.3 $ 49.8
Net cash provided by
(used in) investing
activities............. N/A N/A 1.4 (7.8) 7.8 17.2 12.6 (59.1) 10.1
Net cash used in
financing activities... N/A N/A 13.3 12.2 74.2 101.4 77.2 12.9 55.0
Distributions received
from affiliates........ N/A N/A 32.7 28.5 105.6 127.7 117.9 93.7 102.3
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
THE COMPANY THE GROUP
---------------------------- ------------------------------------------------
THREE MONTHS
ENDED
THREE MONTHS YEAR ENDED MARCH 31, THREE MONTHS ENDED DECEMBER 31,
ENDED MARCH 31, DECEMBER 31, ------------- ----------------------------------
1998 1997 1998 1997 1997 1996 1995 1994 1993
--------------- ------------ ------ ------ ------ ------ ------ ------ ------
(MILLIONS OF DOLLARS, EXCEPT AS NOTED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA AT
END OF PERIOD:
Investment in
Affiliates............. $132.6 N/A $ 98.5 $ 96.0 $ 99.8 $ 98.4 $108.4 $123.5 $ 74.2
Total Assets............ 867.9 N/A 282.6 287.4 284.8 284.4 319.8 334.1 305.5
Long-Term Debt.......... 839.5 N/A 214.5 227.9 218.0 230.9 247.0 262.1 276.2
Owner's Equity
(Deficit).............. (4.3) N/A 26.9 9.5 20.4 3.6 21.8 15.7 (31.4)
OTHER FINANCIAL DATA:
Ratio of earnings to
fixed charges.......... 1.8(5) 1.6(5) 3.1 2.8 3.2 3.3 3.3 2.3 2.5
</TABLE>
<TABLE>
<CAPTION>
THE NJ PARTNERSHIPS
-----------------------------------------------------------
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------- -------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------ ------ ------- ------- ------- ------- -------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
FOR THE PERIOD ENDED:
Revenues
Electricity............ $118.5 $118.4 $ 456.5 $ 458.0 $ 407.6 $ 407.6 $ 403.8
Steam.................. 4.5 5.9 19.2 20.0 12.0 13.9 14.8
Costs and Expenses
Fuel................... (50.2) (60.7) (220.5) (222.2) (167.1) (182.6) (184.0)
Operating and
maintenance........... (9.1) (10.5) (44.2) (39.2) (46.7) (45.0) (34.7)
Depreciation and
amortization.......... (5.5) (9.0) (36.1) (35.9) (36.0) (35.3) (33.9)
General and
administrative........ (4.3) (4.2) (16.9) (16.1) (14.0) (13.9) (13.3)
Taxes other than
income................ (0.6) (0.8) (1.7) (2.8) (3.1) (2.9) (2.3)
------ ------ ------- ------- ------- ------- -------
Income from Operations.. 53.3 39.1 156.3 161.8 152.7 141.8 150.4
Interest expense........ (3.8) (3.9) (15.8) (16.8) (17.3) (17.9) (17.8)
Other income (Expense).. 0.9 0.2 1.6 1.1 1.3 3.8 0.7
------ ------ ------- ------- ------- ------- -------
Net income.............. $ 50.4 $ 35.4 $ 142.1 $ 146.1 $ 136.7 $ 127.7 $ 133.3
====== ====== ======= ======= ======= ======= =======
STATEMENT OF CASH FLOWS
DATA FOR THE PERIOD
ENDED:
Net cash provided by
operating activities... $ 43.4 $ 41.5 $ 183.0 $ 182.3 $ 174.4 $ 156.9 $ 152.0
Net cash used in
investing activities... 0.1 0.7 4.8 2.4 2.4 5.5 15.9
Net cash used in
financing activities... 49.7 42.9 168.3 182.6 171.9 154.8 132.6
BALANCE SHEET DATA AT
END OF PERIOD:
Property and equipment,
net.................... $602.9 $631.3 $ 608.3 $ 639.6 $ 673.1 $ 704.5 $ 734.3
Total assets............ 703.9 717.2 716.7 743.0 766.6 798.6 825.8
Long-Term Debt.......... 150.2 159.9 152.6 162.0 170.2 177.5 184.2
Partners' Capital....... 501.4 529.5 498.6 516.7 545.8 574.4 595.8
</TABLE>
- -------
(1) As adjusted to give effect to the Formation Transactions, the Common Stock
Offering, the Debt Offering and the application of the proceeds thereof as
if such transactions had occurred on January 1, 1997 with respect to the
income statement data and March 31, 1998 with respect to the balance sheet
data.
(2) In 1994 Cogen Technologies Capital Company, L.P. began charging Linden
Ltd. and Camden GPLP for overhead costs that benefit the revenue producing
activities of such entities. Such overhead charges were not charged to
Linden Ltd. and Camden GPLP prior to 1994.
(3) Relates to payment made by Camden GPLP to another company under the terms
of an agreement which provided, among other things, that the other company
and its affiliates would not, in consideration for such payment, own or
acquire an interest in any facility producing electricity or thermal
energy for sale in Camden, New Jersey through December 31, 1993.
(4) Camden Inc. and Selkirk GP Inc. are S corporations and Linden Ltd. and
Selkirk LP are partnerships, and income taxes are recognized by the
individual partners or shareholders (with the exception of New Jersey
state income taxes which are recognized by Camden Inc.). Accordingly, such
income taxes are not recognized in the combined financial statements. MESC
and CT Global account for all income taxes and Camden Inc. accounts for
New Jersey state income taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes".
Deferred tax assets and liabilities are recognized based on anticipated
future tax consequences attributable to differences between the financial
statement carrying amounts of assets and liabilities and their respective
tax bases.
(5) Fixed charge ratio reflects increased interest income and increased expense
associated with an economic defeasance of the Linden Ltd. term loan pursuant
to which the Company has set aside, on a contractually irrevocable basis, an
amount invested in Treasury securities sufficient to repay the principal and
interest on the Linden Ltd. term loan.
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the combined
financial statements of the Group and the NJ Partnerships and the notes
thereto included elsewhere herein. Certain information contained herein,
including information with respect to the Company's plans and strategy for its
business, are forward-looking statements. Prospective investors should
consider carefully the factors set forth under the caption "Risk Factors" for
a discussion of important factors that could cause actual results to differ
materially from any forward-looking statements contained in this Prospectus.
GENERAL
Cogen was formed in May 1998 and as a result of the Formation Transactions
acquired control of a group of affiliated entities engaged in the ownership
and operation of power generation plants in the Northeastern United States.
The Company has interests in four power plants having an aggregate capacity of
1,382 megawatts. The Company's interests in three of such plants are held by
the Group. In addition, the Company owns an equity investment in the Selkirk
Plant.
The Company is a participant in the highly competitive power generation
industry, which represents the third largest industry in the United States,
with an estimated end-user market of over $200 billion of electricity sales
and 3,300 gigawatt hours of production in 1997. New regulatory initiatives
have been and are currently being adopted or considered at the federal level
and in approximately 45 states to increase competition in the domestic power
generation industry. In April 1996, FERC adopted Order No. 888, opening
wholesale power sales to competition and providing for open and fair electric
transmission services by public utilities. At the state level, industry
restructuring is well advanced in various states including California,
Massachusetts, New York, New Jersey and Pennsylvania. This restructuring
includes deregulation of electric utilities and the introduction of customer
choice. The regulatory initiatives are expected to lead to the transformation
of the existing market, which is largely characterized by electric utility
monopolies, having old, inefficient, high-cost generating facilities, selling
to a captive customer base, to a more competitive market where end users may
purchase electricity from a variety of suppliers, including non-utility
generators, power marketers, public utilities and others.
The Company believes that these market trends will present substantial
opportunities for industry participants that are efficient and low-cost power
producers and are able to offer competitive rates to customers. The Company
believes that an additional opportunity is presented by the significant
deregulation and consolidation now affecting the power industry, which has
resulted in substantial divestitures of generation assets by traditional power
utilities and by certain independent power producers currently owning
relatively few plants. For example, as a result of regulatory initiatives,
approximately 12,000 megawatts of New York generating capacity has been sold
or offered for sale by utilities. Similar regulatory initiatives in New Jersey
and Pennsylvania are expected to cause utilities in those states to pursue
similar divestiture plans. At the same time, a number of industrial companies
have also announced plans to sell self-generation facilities and to re-deploy
the capital in their core businesses. These trends, which the Company believes
are likely to continue, should provide significant acquisition opportunities
for the Company.
The Company also believes that attractive opportunities for development of
new generation assets will arise in the next few years, principally due to a
projected increase in baseload demand in the Northeast and Mid-Atlantic
regions and the retirement of a significant number of existing power
generation facilities which are thirty or more years old.
The Company's strategy is to maximize cash flow associated with its existing
plants and to grow through the expansion of the Company's existing operations
and through the acquisition and development of existing or
34
<PAGE>
new power generation and related facilities. The Company intends to make
capital investments to assure the ongoing efficiency of its existing plants
and will pursue contractual and operating changes which benefit such
operations. In addition, the Company believes that all three of the plants in
which it has a substantial economic interest are capable of being expanded,
not only through additions to its existing plants but also through the
development and construction of new facilities at the existing sites. The
Company also believes the ongoing changes in the industry will present ample
opportunities for the acquisition or development of new assets.
As a part of the Formation Transactions, certain existing management
services and gas management agreements will be terminated. Linden Venture and
Camden Cogen will terminate management services agreements with Linden Ltd.
and Camden GPLP, respectively, and Linden Venture, Camden Cogen, Selkirk GP
Inc. and Selkirk LP will terminate gas management services agreements with an
individual who is one of the Minority Interests in consideration of a
termination fee to such individual. Linden Ltd., Camden GPLP, Selkirk GP, Inc.
and Selkirk LP will terminate management services agreements with RCM
Management Services L.P. ("RCM"), a Delaware limited partnership that is
indirectly owned and controlled by Robert C. McNair. In consideration for the
termination of these agreements a termination fee will be paid to RCM. In
addition, payments will be made to "buy out" development bonuses which certain
employees are eligible to receive in subsequent periods. Such payments will be
reflected in earnings in the period in which the payments are made.
35
<PAGE>
RESULTS OF OPERATIONS
The following tables set forth the combined results of operations of the
Group and of the NJ Partnerships for the three months ended March 31, 1998 and
1997 and the years ended December 31, 1997, 1996 and 1995:
THE GROUP
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED MARCH YEAR ENDED DECEMBER
31, 31,
------------ ---------------------
1998 1997 1997 1996 1995
----- ----- ------ ------ -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Revenues
Equity in earnings of affiliates......... $37.5 $26.7 $106.7 $111.6 $99.5
Other.................................... 0.5 0.6 2.2 2.3 0.8
Costs and Expenses
Operating overhead....................... (10.0) (3.5) (13.4) (14.4) (10.8)
General and administrative............... (4.9) (5.1) (19.8) (10.9) (10.4)
Depreciation and amortization............ (0.1) (0.1) (0.2) (0.2) (0.2)
----- ----- ------ ------ -----
Income from Operations..................... 23.0 18.6 75.5 88.4 78.9
Interest and other income................ 3.4 4.1 16.0 17.0 17.8
Interest expense......................... (4.9) (5.7) (21.7) (23.2) (26.3)
Allowance for long-term receivable....... -- (1.8) 10.3 (10.3) 6.5
Income taxes............................. (4.8) (1.0) (5.1) (4.0) (7.6)
----- ----- ------ ------ -----
Net income................................. $16.7 $14.2 $ 75.0 $ 67.9 $69.3
===== ===== ====== ====== =====
</TABLE>
THE NJ PARTNERSHIPS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------------------------------------
TOTAL
NJ
NJ VENTURE CAMDEN COGEN LINDEN VENTURE PARTNERSHIPS
------------ -------------- ---------------- --------------
1998 1997 1998 1997 1998 1997 1998 1997
----- ----- ------ ------ ------- ------- ------ ------
(MILLIONS OF DOLLARS, EXCEPT AS NOTED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Electricity............ $32.3 $22.4 $ 19.9 $ 21.9 $ 66.3 $ 74.1 $118.5 $118.4
Steam.................. 1.2 1.3 -- -- 3.3 4.6 4.5 5.9
Cost of Fuel............ (10.3) (12.2) (8.9) (10.9) (31.0) (37.6) (50.2) (60.7)
----- ----- ------ ------ ------- ------- ------ ------
Gross Margin............ 23.2 11.5 11.0 11.0 38.6 41.1 72.8 63.6
Operating & Maintenance. (2.6) (3.6) (1.6) (1.2) (4.9) (5.7) (9.1) (10.5)
Other Costs & Expenses.. (1.8) (2.6) (1.5) (2.5) (7.1) (8.9) (10.4) (14.0)
----- ----- ------ ------ ------- ------- ------ ------
Income from Operations.. 18.8 5.3 7.9 7.3 26.6 26.5 53.3 39.1
Interest Expense........ (1.9) (2.0) (1.9) (1.9) -- -- (3.8) (3.9)
Other Income ........... 0.6 -- 0.1 0.1 0.2 0.1 0.9 0.2
----- ----- ------ ------ ------- ------- ------ ------
Net income.............. $17.5 $ 3.3 $ 6.1 $ 5.5 $ 26.8 $ 26.6 $ 50.4 $ 35.4
===== ===== ====== ====== ======= ======= ====== ======
The Group's Share of:
Net income............. $15.2 $ 2.9 $ 4.7 $ 5.0 $ 17.3 $ 18.5 $ 37.2 $ 26.4
Percent of net income.. 86.5% 86.5% 77.5% 91.7% 64.7% 69.8% 73.8% 74.7%
Cash distributions..... $ 9.2 $ 2.3 $ 4.8 $ 1.5 $ 18.7 $ 24.8 $ 32.7 $ 28.6
Percent of cash
distributions......... 86.5% 86.5% 88.8% 71.6% 59.0% 65.4% 68.5% 67.0%
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
NJ VENTURE CAMDEN COGEN
---------------------- -------------------------
1997 1996 1995 1997 1996 1995
------ ------ ------ ------- ------- -------
(MILLIONS OF DOLLARS, EXCEPT AS NOTED)
<S> <C> <C> <C> <C> <C> <C>
The NJ Partnerships
Revenues
Electricity............... $ 92.8 $ 90.4 $ 93.2 $ 80.2 $ 77.2 $ 67.5
Steam..................... 3.7 4.9 3.3 0.0 0.0 0.0
Cost of Fuel................ (43.2) (45.2) (33.4) (39.2) (38.4) (28.9)
------ ------ ------ ------- ------- -------
Gross Margin................ 53.3 50.1 63.1 41.0 38.8 38.6
Operating & Maintenance..... (14.4) (10.2) (11.4) (7.7) (6.4) (7.2)
Other Costs & Expenses...... (10.3) (10.2) (10.0) (10.1) (10.0) (9.6)
------ ------ ------ ------- ------- -------
Income from Operations...... 28.6 29.7 41.7 23.2 22.4 21.8
Interest Expense............ (8.1) (8.5) (8.8) (7.7) (8.2) (8.4)
Other Income................ 0.1 0.1 0.1 0.4 0.4 0.4
------ ------ ------ ------- ------- -------
Net income.................. $ 20.6 $ 21.3 $ 33.0 $ 15.9 $ 14.6 $ 13.8
====== ====== ====== ======= ======= =======
The Group's Share of:
Net income................ $ 17.6 $ 18.2 $ 28.4 $ 14.5 $ 13.7 $ 13.4
Percent of net income..... 86.5% 86.5% 86.5% 90.7% 94.0% 97.4%
Cash distributions........ $ 18.1 $ 24.5 $ 31.9 $ 8.6 $ 14.5 $ 15.0
Percent of cash
distributions............ 86.5% 86.5% 86.5% 73.3% 82.8% 83.9%
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
LINDEN VENTURE TOTAL NJ PARTNERSHIPS
---------------------- -------------------------
1997 1996 1995 1997 1996 1995
------ ------ ------ ------- ------- -------
(MILLIONS OF DOLLARS, EXCEPT AS NOTED)
<S> <C> <C> <C> <C> <C> <C>
The NJ Partnerships
Revenues
Electricity............... $283.5 $290.4 $246.9 $ 456.5 $ 458.0 $ 407.6
Steam..................... 15.5 15.1 8.7 19.2 20.0 12.0
Cost of Fuel................ (138.1) (138.6) (104.8) (220.5) (222.2) (167.1)
------ ------ ------ ------- ------- -------
Gross Margin................ 160.9 166.9 150.8 255.2 255.8 252.5
Operating & Maintenance..... (22.1) (22.6) (28.1) (44.2) (39.2) (46.7)
Other Costs & Expenses...... (34.3) (34.6) (33.5) (54.7) (54.8) (53.1)
------ ------ ------ ------- ------- -------
Income from Operations...... 104.5 109.7 89.2 156.3 161.8 152.7
Interest Expense............ 0.0 (0.1) (0.1) (15.8) (16.8) (17.3)
Other Income................ 1.1 0.6 0.8 1.6 1.1 1.3
------ ------ ------ ------- ------- -------
Net income.................. $105.6 $110.2 $ 89.9 $ 142.1 $ 146.1 $ 136.7
====== ====== ====== ======= ======= =======
The Group's Share of:
Net income................ $ 73.8 $ 78.7 $ 59.0 $ 105.9 $ 110.6 $ 100.8
Percent of net income..... 69.9% 71.4% 65.6% 74.7% 75.9% 73.9%
Cash distributions........ $ 75.6 $ 77.7 $ 59.4 $ 102.3 $ 116.7 $ 106.3
Percent of cash
distributions............ 59.3% 60.1% 53.7% 63.9% 66.6% 64.2%
</TABLE>
37
<PAGE>
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997
The Group's equity in the earnings of affiliates increased $10.8 million,
from $26.7 million in the first quarter of 1997 to $37.5 million in the first
quarter of 1998. The increase was attributable to a $12.3 million increase in
the Group's equity in the earnings of NJ Venture partially offset by decreases
in its equity in the earnings of Camden Cogen and Linden Venture of $0.3
million and $1.2 million, respectively.
NJ Venture's earnings increased $14.2 million primarily reflecting a $9.9
million increase in electricity revenues due to a $6.4 million fuel component
adjustment related to 1997 and 1996 operations and a higher rate for the
current quarter principally due to a higher fuel component. NJ Venture's cost
of fuel was down $1.9 million compared to the first quarter of 1997 and
operating and maintenance costs were down $1.0 million primarily reflecting
certain unplanned outage support costs in the first quarter of 1997.
Depreciation expense was down $0.9 million reflecting the change in the
estimated useful life of the facilities which is discussed in Note 1 to the
combined financial statements of the NJ Partnerships for the first quarter of
1998, which are included elsewhere in the Prospectus. Interest income
increased $0.6 million reflecting interest on the previously discussed fuel
component adjustment.
Camden Cogen's earnings increased $0.6 million, primarily reflecting a $0.8
million decrease in depreciation expense for the reason previously discussed.
Camden Cogen's electricity revenues were up $2.0 million but such increase was
offset by a corresponding $2.0 million increase in fuel costs. The Group's
allocation of Camden Cogen's earnings decreased by 14.2% compared to the first
quarter of 1997. The method of allocation of the Partnership's earnings to the
Group is discussed in Note 3 to the combined financial statements of the Group
included elsewhere in this Prospectus.
Linden Venture's earnings increased $0.2 million as a $9.1 million decrease
in revenues was offset by a $9.2 million decrease in costs and a $0.1 million
increase in interest income. Electricity revenues were lower primarily due to
a lower fuel price component and a limitation on the pass-through of fuel
costs in the determination of electricity sales prices. The method for
determining the various components of the electricity price received by the NJ
Partnerships is discussed in "Existing Venture and Plant Descriptions". Steam
revenues were lower primarily reflecting a lower fuel price component. Fuel
costs decreased $6.6 million reflecting lower prices and depreciation expense
was down $1.8 million for the reason previously discussed.
Operating overhead increased from $3.5 million in the first quarter of 1997
to $10.0 million in the first quarter of 1998. Operating overhead in the first
quarter of 1998 includes $7.4 million to "buy out" development bonuses which
certain employees were eligible to receive in subsequent periods. The Company
expects similar buy out transactions prior to the Common Stock Offering. See
"--General".
Earnings for the first quarter of 1997 include a $1.8 million increase in a
valuation allowance with respect to the realization of the receivable held by
Linden Ltd. from an affiliate, reflecting a decrease in the value of the
investments held by such affiliate which comprise the primary resource of the
affiliate to settle its related payable.
Income taxes increased $3.8 million in the first quarter of 1998 primarily
reflecting the increase in earnings of NJ Venture.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
The Group's equity in the earnings of affiliates decreased $4.9 million,
from $111.6 million in 1996 to $106.7 million in 1997. The decrease was
primarily attributable to the impact of higher fuel costs at Linden Venture,
an overhaul at NJ Venture and a $4.5 million buyout of the prior contracts for
operation and maintenance services at all three plants. The Group's equity in
the earnings of Linden Venture, NJ Venture and Selkirk Cogen decreased $4.9
million, $0.6 million and $0.2 million, respectively, and the Group's equity
in the earnings of Camden Cogen increased $0.8 million.
NJ Venture's earnings decreased $0.7 million in 1997. Revenues increased
slightly primarily reflecting pass-through of a higher fuel cost factor;
however, costs and expenses included charges for $1.2 million to terminate
38
<PAGE>
its operating and maintenance services agreement upon the change of
contractors and $2.5 million related to an overhaul of one of the plant's gas
turbines.
Camden Cogen's earnings increased $1.3 million in 1997. Revenues increased
$3.0 million primarily reflecting a higher capacity factor; however, costs and
expenses included charges for $1.4 million to terminate its operating and
maintenance services agreement to consolidate with one supplier. The
allocation of Camden Cogen's net income to the Group decreased by 3.3% in
1997.
Linden Venture's earnings decreased $4.6 million, primarily reflecting lower
electricity revenues which were down $6.9 million due to the effect of a
limitation under the power purchase agreement on the pass-through of fuel
costs in the determination of electricity sales prices. Linden Venture's 1997
costs and expenses included a charge for $1.9 million to terminate its
operating and maintenance services agreement upon the change of contractors.
Taxes other than income taxes were down $1.1 million primarily reflecting
adjustments to amounts accrued in prior periods. The allocation of Linden
Venture's earnings to the Group was 1.5% lower than in 1996 as a result of
these factors.
General and administrative costs of the Group increased $8.9 million from
$10.9 million in 1996 to $19.8 million in 1997, principally reflecting charges
for the use of corporate aircraft for a full year in 1997 ($6.1 million) and
an increased allocation of corporate overhead from an affiliate (see Note 5 to
the combined financial statements of the Group included elsewhere herein).
Additional overhead costs were allocated to the Group due to increased
management focus on the Group's operations in 1997.
Interest and other income relates primarily to advances made by Linden Ltd.
to an affiliate which totaled $160.8 million at December 31, 1997. Interest
income related to such advances totaled $14.6 million in 1997 compared to
$15.6 million in 1996. This advance will be eliminated in the Formation
Transactions.
Interest expense declined from $23.2 million in 1996 to $21.7 million in
1997, primarily reflecting lower outstanding long-term debt and fluctuations
in interest rates.
Earnings for 1997 include a $10.3 million reduction in a valuation allowance
with respect to the realization of the receivable held by Linden Ltd. from an
affiliate, reflecting an increase in the value of the investments held by such
affiliate which comprise the primary resource of the affiliate to settle its
related payable. Earnings for 1996 included a $10.3 million charge to increase
the valuation allowance with respect to the receivable.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
The Group's equity in the earnings of affiliates increased $12.1 million,
from $99.5 million in 1995 to $111.6 million in 1996. The Group's equity in
the earnings of Linden Venture increased $19.7 million which more than offset
the $10.2 million decrease in the Group's equity in the earnings of NJ
Venture. The Group's equity in the earnings of Camden Cogen was up slightly in
1996.
NJ Venture's earnings decreased $11.7 million primarily reflecting an $11.8
million increase in fuel costs. Although fuel costs are a component in the
determination of NJ Venture's electricity sales prices, the costs which can be
passed through to the purchaser are limited by the purchaser's overall average
cost of fuel in a prior twelve-month period. In 1996 the amount of fuel costs
which NJ Venture was allowed to pass through was limited by this ceiling.
Camden Cogen's earnings increased $0.8 million in 1996 reflecting slightly
higher gross margins and lower interest expense resulting from a lower loan
principal balance.
Linden Venture's earnings increased $20.3 million due to higher operating
margins (gross margin less operating and maintenance) (up $21.6 million)
reflecting $6.4 million higher steam sales and lower operating and maintenance
costs due to a turbine overhaul in 1995. The allocation of Linden Venture's
net income to the Group was 5.8% higher in 1996 than in 1995.
39
<PAGE>
Other revenues increased from $0.8 million in 1995 to $2.3 million in 1996
reflecting an increase in the net premiums earned by CT Global.
Operating overhead increased from $10.8 million in 1995 to $14.4 million in
1996 primarily reflecting a $2.5 million increase in net underwriting losses
incurred by CT Global.
Interest income on Linden Ltd.'s advances to an affiliate totaled $15.6
million in 1996 compared to $16.8 million in 1995. Such advances totaled
$168.6 million at December 31, 1996.
Interest expense declined from $26.3 million in 1995 to $23.2 million in
1996, primarily reflecting lower outstanding long-term debt and fluctuations
in interest rates.
Earnings for 1996 include a $10.3 million increase in a valuation allowance
with respect to the realization of the receivable held by Linden Ltd. from an
affiliate, reflecting a decrease in the value of the investments held by such
affiliate which comprise the primary resource of the affiliate to settle its
related payable. Earnings for 1995 included a $6.5 million credit to decrease
the valuation allowance with respect to the receivable.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
The Group's equity in the earnings of affiliates increased $6.1 million,
from $93.4 million in 1994 to $99.5 million in 1995. Increases in the Group's
equity in the earnings of NJ Venture and Camden Cogen of $11.0 million and
$1.6 million, respectively, were partially offset by a decrease in the Group's
equity in the earnings of Linden Venture of $5.2 million. The Company's equity
in Selkirk Cogen was a $1.3 million loss in 1995.
NJ Venture's earnings increased $12.6 million with higher electricity
revenues (up $10.6 million) accounting for the majority of the increase, NJ
Venture's higher revenues primarily result from increased capacity in 1995
reflecting downtime in 1994 for major overhauls of all three gas turbines and
the steam turbine.
Camden Cogen's earnings increased $1.8 million, primarily reflecting $1.3
million higher operating margins.
Linden Venture's earnings decreased $5.4 million reflecting (i) lower
operating margins (down $2.6 million), and (ii) a $3.4 million business
interruption insurance settlement related to the 1993 failure of an electric
transformer which was included in 1994. The allocation to the Group of Linden
Venture's net income was 1.8% lower in 1995 than in 1994.
Interest income on Linden Ltd.'s advances to an affiliate totaled $16.8
million in 1995 compared to $13.7 million in 1994. Such advances totaled
$185.8 million at December 31, 1995.
Interest expense increased from $25.8 million in 1994 to $26.3 million in
1995, primarily reflecting fluctuations in interest rates partially offset by
lower outstanding long-term debt.
Earnings for 1995 include a $6.5 million reduction in a valuation allowance
with respect to the realization of the receivable held by Linden Ltd. from an
affiliate, reflecting an increase in the value of the investments held by such
affiliate which comprise the primary resource of the affiliate to settle its
related payable. Earnings for 1994 included a $6.5 million charge to increase
the valuation allowance with respect to the receivable.
LIQUIDITY AND CAPITAL RESOURCES
To date the NJ Partnerships and the Group have obtained cash from their
operations, from nonrecourse project financing and from contributions from
limited and general partners and shareholders. This cash has been utilized to
develop and construct the cogeneration facilities, service debt, fund
operations and fund distributions to partners.
40
<PAGE>
The Company's long-term strategy is based in part on the expansion of
existing plants, development of new power plants and making selective
acquisitions. Continued access to capital with acceptable terms is necessary
to assure the success of this strategy. Project financing borrowings are
substantially non-recourse to the Company and are generally secured by the
physical assets, contracts and cash flows of the venture being financed.
Depending upon market conditions, the unique characteristics of the venture
and investor confidence in the Company, such funding may not be available or
the Company's traditional providers of project financing may seek higher
interest rates and increased equity participation. In addition to any project
financing loans, the Company would be required to provide a portion, if not
all, of the remaining long-term financing required to fund such expansions,
developments or acquisitions. Investments by the Company would likely take the
form of equity investments or loans which would be subordinated to any project
financing loans. The funds for such investments would have to be provided by
operating cash flow or long-term borrowings or through the issuance of
additional equity securities.
The following table reflects sources and uses of cash for the NJ
Partnerships and the Group for the three months ended March 31, 1998 and 1997
and the years ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED YEAR ENDED DECEMBER
MARCH 31 31,
------------ ----------------------
1998 1997 1997 1996 1995
----- ----- ------ ------ ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
The Group
Net cash provided (used) by operating ac-
tivities
Cash distributions from affiliates....... $32.7 $28.5 $105.6 $127.7 $117.9
Other.................................... (20.9) (8.4) (38.2) (40.1) (50.8)
Net cash provided (used) by investing ac-
tivities................................ 1.4 (7.8) 7.8 17.2 12.6
Principal payments on long-term
borrowings.............................. (3.1) (3.9) (16.0) (15.3) (14.0)
Other.................................... -- -- 0.2 3.2 0.2
Total cash generated..................... 10.1 8.4 59.4 92.7 65.9
The NJ Partnerships
Net cash provided by operating activi-
ties.................................... $43.4 $41.5 $183.0 $182.3 $174.4
Capital expenditures..................... (0.1) (0.7) (4.8) (2.4) (2.4)
Net change in borrowings................. (2.1) (0.3) (8.1) (7.4) (6.6)
Cash available for distributions......... 41.2 40.5 170.1 172.5 165.4
Cash distributions paid.................. 47.6 42.6 160.2 175.2 165.3
</TABLE>
All of the Company's power purchase agreements are with large utilities
which presently have investment grade senior debt ratings. The Company's
principal power plants historically have provided a consistent and substantial
cash flow to equity holders due to the fixed payment components of the power
purchase contracts which have provided favorable margins over the ventures'
fixed operating and financing costs. Moreover, the variable energy payment
components of such agreements, which provide the second major component of
pricing under such agreements, have historically been well correlated to fuel
costs at the Bayonne and Camden Plants and have reflected a partial pass-
through mechanism for fuel expenses at the Linden Plant.
41
<PAGE>
The NJ Partnerships' sales of electricity are made under the terms of long-
term PPAs, as follows:
<TABLE>
<CAPTION>
PERCENT OF COMBINED
ELECTRICITY REVENUES
YEAR ENDED
DECEMBER 31,
--------------------
PURCHASER 1997 1996 1995 EXPIRATION DATE
- ------------------------------------------ ------ ------ ------ ---------------
<S> <C> <C> <C> <C>
NJ VENTURE
Jersey Central Power & Light Company...... 15.8 15.2 18.2 2008
Public Service Electric & Gas Company..... 4.5 4.5 4.7 2008
CAMDEN COGEN
Public Service Electric & Gas Company..... 17.6 16.9 16.5 2013
LINDEN VENTURE
The Consolidated Edison Company of New
York..................................... 62.1 63.4 60.6 2017
</TABLE>
NJ Venture has contracted to sell approximately 76% of its electrical
capacity to Jersey Central Power & Light Company ("JCP&L") pursuant to a 20-
year power purchase agreement which expires in 2008, with a ten-year renewal
period subject to the approval of both parties. The agreement establishes the
sales price of the electricity based on a fixed rate component plus factors
for inflation and JCP&L's cost of natural gas and retail sales prices. The
remainder of NJ Venture's output is sold to PSE&G pursuant to a 20-year power
purchase agreement which expires in 2008, with two five-year renewal periods
subject to the approval of both parties. The agreement provides for payments
to NJ Venture consisting of a capacity payment plus an energy payment which
includes a fixed component plus factors for inflation and fuel costs.
Camden Cogen's electrical capacity is sold to PSE&G pursuant to a 20-year
power purchase agreement which expires in March 2013, with two five-year
renewal periods subject to the approval of both parties. The agreement
provides for payments to Camden Cogen consisting of a capacity payment plus an
energy payment which includes a fixed component plus factors for inflation and
fuel costs.
Linden Venture sells its electrical capacity to ConEd pursuant to a 25-year
power purchase agreement which expires in May 2017, with two five-year renewal
periods subject to the approval of both parties. The agreement establishes a
sales price of the electricity based primarily on capacity, fuel costs and
operating and maintenance costs.
42
<PAGE>
The following table summarizes the outstanding long-term indebtedness of the
Group and of the NJ Partnerships at March 31, 1998 (in millions of dollars):
<TABLE>
<CAPTION>
BALANCE AT MARCH 31,
1998
------------------------
CURRENT LONG-TERM TOTAL MATURITY
------- --------- ------ --------
<S> <C> <C> <C> <C>
Camden GPLP................................... $ 0.5 $ 12.2 $ 12.7 2010
----- ------ ------
Linden Ltd.
Fixed rate.................................. 6.1 92.2 98.3 2007
Floating rate............................... 6.7 100.1 106.8 2007
Working capital............................. -- 10.0 10.0 2007
----- ------ ------
12.8 202.3 215.1
----- ------ ------
Total Group............................... $13.3 $214.5 $227.8
===== ====== ======
NJ Venture
Term loan................................... $ 3.6 $ 67.0 $ 70.6 2008
Equipment loan.............................. 0.4 -- 0.4 1998
----- ------ ------
$ 4.0 $ 67.0 $ 71.0
----- ------ ------
Camden Cogen
Term loan--Camden Tranche A Loan............ $ 4.7 $ 60.3 $ 65.0 2007
Term loan--Camden Tranche B Loan............ 1.0 22.9 23.9 2009
----- ------ ------
5.7 83.2 88.9
----- ------ ------
Total NJ Partnerships..................... $ 9.7 $150.2 $159.9
===== ====== ======
</TABLE>
In February 1992, Camden GPLP entered into a $36.5 million Term Loan
Agreement (the "Camden GP Term Loan Agreement") with General Electric Capital
Corporation ("GECC") which matures in May 2010. Borrowings under the Camden GP
Term Loan Agreement, which totaled $14.8 million, bear interest at the London
Interbank Offering Rate ("LIBOR") plus 4.25% and are secured by Camden GPLP's
general partnership interest in Camden Cogen, Camden GPLP's general partner's
general partnership interest in Camden GPLP and certain reserve accounts
funded by revenues of Camden Venture. Principal payments are determined on a
quarterly basis and, together with interest, are payable monthly at varying
amounts in accordance with the terms of the Camden GP Term Loan Agreement. As
of March 31, 1998, the outstanding principal balance under the Camden GP Term
Loan Agreement was $12.7 million.
In September 1992, Linden Ltd. entered into a $250.0 million Amended and
Restated Term Loan Agreement (the "Linden GP Term Loan Agreement") with State
Street Bank and Trust Company, as Trustee, which matures in September 2007 and
comprises a fixed rate portion, a floating rate portion and a working capital
portion. Under the terms of the Linden GP Term Loan Agreement the fixed rate
portion bears interest at 8.8%, the floating rate portion bears interest at
LIBOR plus 1.65% and the working capital portion bears interest at the one
month, financial commercial paper rate (as reported in Federal Statistical
Release H.15 (519) or successor publication) plus 0.55%. Borrowings under the
Linden GP Term Loan Agreement are secured by Linden Ltd.'s interest in Linden
Venture and certain reserve accounts funded with revenues of Linden Venture.
Principal and interest payments are made quarterly at varying amounts in
accordance with the terms of the Linden GP Term Loan Agreement. As of March
31, 1998, the outstanding principal balance under the Linden GP Term Loan
Agreement was $215.1 million.
Under the terms of a 1987 term loan agreement (the "Prudential Loan
Agreement") with The Prudential Insurance Company of America ("Prudential"),
NJ Venture had an outstanding principal balance of $70.6 million at March 31,
1998. The principal balance bears interest at 10.85% per annum and principal
and interest are payable quarterly through October 1, 2008, the maturity date
of the facility. All of NJ Venture's property, rights and interests are
pledged as collateral under the terms of the Prudential Loan Agreement.
43
<PAGE>
Under the terms of a 1986 loan agreement (the "Equipment Loan Agreement")
with Bayonne Industries, Inc. ("Bayonne Equipment Lender"), NJ Venture has an
outstanding principal balance of $0.2 million at March 31, 1998 (with accrued
interest thereon in the additional amount of $0.2 million). The principal
balance and accrued interest are payable at the later of May 22, 1998 or the
expiration of the IMTT Steam Sales Agreement (as hereinafter defined). The
principal balance bears interest at the prime rate of First National Bank of
Chicago plus 1%. The obligations under the Equipment Loan Agreement are
secured by the equipment purchased by NJ Venture in connection with such
agreement, and the payment of the interest that has accrued and continues to
accrue on the remaining principal balance is non-recourse to NJ Venture.
NJ Venture has a $5.0 million revolving credit agreement with a bank to
satisfy short-term working capital requirements. No amounts were outstanding
at March 31, 1998 under such agreement, which expires in December 1998.
Principal amounts from time to time outstanding under the revolving credit
agreement accrue interest at 0.5% below the bank's prime rate and, together
with all other amounts from time to time owing under the agreement, are
secured by NJ Venture's rights to payment under its power purchase agreements.
In addition, NJ Venture also has an outstanding letter of credit to secure
certain obligations to Public Service Electric & Gas Company ("PSE&G"). The
letter of credit was procured for NJ Venture by Cogen Technologies Financial
Services L.P. ("Financial Services"), an entity owned by the McNair Interests
and the Minority Interests that is not part of the Company. Financial Services
pays a quarterly fee on such letter of credit calculated at 0.25% per annum on
the face amount of the letter of credit to the issuer thereof and has the
reimbursement obligations to such issuer in the event any drawing is made on
the letter of credit. Pursuant to agreement between NJ Venture and Financial
Services, NJ Venture agrees to reimburse Financial Services for all fees and
reimbursement obligations incurred by Financial Services under the letter of
credit, which obligations of NJ Venture are unsecured. As of March 31, 1998
the outstanding amount of such letter of credit was $4.4 million. The letter
of credit expires in May 1999, and its reimbursement obligation is secured by
the assets of an affiliate.
In April 1993, Camden Cogen entered into a $119.0 million Amendment and
Restatement of Construction and Term Loan Agreement (the "Camden Cogen Term
Loan Agreement") with GECC, to obtain term financing for the loans incurred by
Camden Cogen to develop and construct the Camden Plant. The Camden Cogen Term
Loan Agreement initially provided for a senior tranche A loan (the "Camden
Tranche A Loan") and two subordinated tranche loans: a tranche B subordinated
loan (the "Camden Tranche B Loan") and a tranche C subordinated loan (the
"Camden Tranche C Loan"). The Camden Tranche A Loan is with a group of banks
and bears interest at rates which increase over the term of the agreement from
1.0% to 1.625% above the three-month LIBOR rate (1.25% for the period November
3, 1998 to November 1, 2001). Principal and interest are payable quarterly
through May 1, 2007, the maturity date of the Camden Tranche A Loan. Camden
Cogen has entered into an interest rate swap agreement with GECC which
effectively fixes Camden Cogen's LIBOR rate on the Camden Tranche A Loan at
5.945%. The swap agreement has a notional amount equal at all times to the
outstanding principal balance of the Camden Tranche A Loan. The effect of the
swap on Camden Cogen's interest expense for the three months ended March 31,
1997 and the years ended December 31, 1997, 1996 and 1995 was to increase
(decrease) such expense by $0.1 million, $0.2 million, $0.3 million and $(0.1)
million, respectively. The swap had no effect on Camden Cogen's interest
expense for the three months ended March 31, 1998. The "fair value" of the
swap, $0.6 million at December 31, 1997, is discussed in Note 6 to the
Combined Financial Statements of the NJ Partnerships, included elsewhere
herein. The Camden Tranche B Loan is with GECC and bears interest at 11.4%
with principal and interest payable quarterly through May 1, 2009, the
maturity date of the Camden Tranche B Loan. The Camden Tranche C Loan has been
repaid in full with the proceeds of an equity contribution by its holder,
GECC, in an amount equal to the amount outstanding under such loan.
GECC provides a letter of credit for Camden Cogen to secure certain
obligations under the Camden Tranche A Loan, for which it pays no fees. As of
March 31, 1998 such letter of credit was in the outstanding amount of $4.8
million. The letter of credit expires in May 2007, and its reimbursement
obligation is secured by the Camden Plant and other assets and revenues of
Camden Cogen.
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GECC provides two standby letters of credit for Linden Venture in an
aggregate amount not to exceed $57.2 million to secure various obligations
with certain of its purchasers, for which it pays a fee equal to 0.75% per
annum on the aggregate outstanding face amounts. At March 31, 1998, the
outstanding amounts of the constituent letters of credit were $47.2 million
and $10.0 million, respectively. The outstanding $47.2 million letter of
credit expires in June 1998 and will not be required to be renewed. The $10.0
million letter of credit expires in August 1998, and in accordance with its
terms, is expected to be renewed on an annual basis in the amount of $10.0
million. The reimbursement obligations under the letters of credit are
unsecured.
The security and reserve accounts established by the above term and credit
facilities effectively provide the respective debt holders a mechanism for
repayment (scheduled, accelerated or otherwise), prior to funds from any
Venture becoming available for distribution to the Company. Similarly, each of
the Linden Venture and Camden Cogen partnership agreements provides for a
predetermined monthly amount of distributable cash from Linden Venture and
Camden Cogen revenues, respectively, to be set aside for preferential
distributions to the respective limited partners of Linden Venture and Camden
Cogen, in each case prior to distributions to the respective general partners
of Linden Venture and Camden Cogen, each of which is a wholly-owned subsidiary
of the Company. In the case of Linden Venture, the predetermined monthly
amount is capped at 99% of varying amounts ranging from approximately $4.3
million per month through September 1998, approximately $3.0 million per month
from October 1998 through September 2001, and approximately $4.3 million to
$4.8 million per month thereafter. In the case of Camden Cogen, the
predetermined monthly amount is equal to 99% of the Camden Cogen Distributable
Cash (as defined herein) up to a monthly capped amount (such capped amount
being approximately $0.3 million to $0.4 million through May 2007 and varying
amounts thereafter).
DIVIDENDS
As a newly formed entity, the Company has not paid any dividends. Because of
the nature of the Company's business, however, and the cash flow expected by
the Company from the operation of independent power plants in which it has
interests, as described elsewhere in this Prospectus, the Company expects that
for the foreseeable future a substantial part of its earnings will be paid in
dividends to its stockholders. While there can be no assurance that earnings
will be available for distribution or that such dividends actually will be
distributed or that they will be continued at any particular level for any
particular period of time, the Company expects to pay annual dividends for the
foreseeable future on the Common Stock at the rate of $ per share per
quarter. The declaration of dividends is at the discretion of the Company's
Board of Directors and will be subject to the terms of the Company's debt
agreements, including the Indenture, concerning restricted payments. The
Company's dividend policy will be reviewed by the Board of Directors at such
future time as may be appropriate in light of relevant factors at that time.
During the initial years of the Company's operations, dividends with respect
to the Common Stock are expected to exceed the share of the current and
accumulated earnings and profits of the Company allocable to the holders of
the Common Stock (as determined for United States federal income tax
purposes). In such a case, such excess generally would be treated as a tax-
free return of capital up to a holder's basis in such holder's share of Common
Stock and as capital gain thereafter. No assurance can be given, however, that
such distributions will in fact exceed the Company's current and accumulated
earnings and profits for such purposes or, if any such distributions are made,
regarding the amount of any such excess. See "Certain United States Federal
Income Tax Consequences--U.S. Holders--Dividends". The Company's ability to
pay dividends will, in any event, always be dependent upon cash flow received
from distributions to it by its subsidiaries, which are in turn dependent upon
distributions from the ventures. As described elsewhere in this Prospectus,
the ventures in which the Company has an interest and obtains its cash flow
are subject to restrictions with respect to distributions to their holders of
equity. See "Description of Certain Indebtedness--Plant Project Financings".
YEAR 2000 COMPLIANCE
To ensure that the Company's computer systems are Year 2000 compliant, the
Company has been reviewing each of its financial and operating systems to
identify those that contain two-digit year codes.
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All of the Company's financial and business systems have been reviewed and all
necessary equipment and software upgrades have been identified and are
expected to be in place by mid-1999.
At the plants operated by the NJ Partnerships, GE, the operations and
maintenance contractor, is coordinating all Year 2000 issues with plant
equipment manufacturers and software suppliers. The NJ Partnerships have
contacted the owners of the plant interconnects (electric, gas and water) and
the electric power purchasers, requesting the status of their Year 2000
programs. To date there have been no significant items identified and all
investigations are expected to be complete by the end of 1998 with all
compliance issues resolved by mid-1999.
Based upon current information, the Company does not anticipate costs
associated with the Year 2000 issue to have a material financial impact.
However, there can be no assurances that there will not be interruptions or
other limitations of financial and operating systems functionality or that the
Company will not incur significant costs to avoid such interruptions or
limitations. The costs incurred relating to the Year 2000 issue will be
expensed during the period in which they are incurred. The Company's
expectations about future costs associated with the Year 2000 issue are
subject to uncertainties that could cause actual results to have a greater
financial impact than currently anticipated. Factors that could influence the
amount and timing of future costs include the success of the Company in
identifying systems and programs that contain two-digit year codes, the nature
and amount of programming required to upgrade or replace each of the affected
programs and the rate and magnitude of related labor and consulting costs.
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BUSINESS
The Company is engaged in the development, ownership, operation, acquisition
and financing of power generation facilities and the sale of electricity and
steam in the United States. The Company currently has interests in four power
plants having an aggregate nameplate capacity of 1,382 megawatts. In 1997,
these plants produced an aggregate 7,637 megawatt hours of electricity and
7,665 million pounds of steam.
The Company's principal assets consist of its substantial economic interests
in the 715 megawatt capacity Linden Plant, which sells its electric output to
Con Ed under a contract having an initial term expiring in 2017, the 176
megawatt capacity Bayonne Plant, which sells its electric output to JCP&L and
PSE&G under contracts having initial terms expiring in 2008, and the 146
megawatt capacity Camden Plant, which sells its electric output to PSE&G under
a contract having an initial term expiring in 2013. The Company has operating
and maintenance responsibility for the three principal plants and has
contracted for the day-to-day operation and maintenance of the plants with GE.
In addition, the Company has an equity investment in the Selkirk Plant.
INDUSTRY
The Company is a participant in the highly competitive power generation
industry, which represents the third largest industry in the United States,
with an estimated end-user market of over $200 billion of electricity sales
and 3,300 gigawatt hours of production in 1997. New regulatory initiatives
have been or are currently being adopted or considered at the federal level
and in approximately 45 states to increase competition in the domestic power
generation industry. In April 1996, FERC adopted Order No. 888, opening
wholesale power sales to competition and providing for open and fair electric
transmission services by public utilities. At the state level, industry
restructuring is well advanced in various states including California,
Massachusetts, New York, New Jersey and Pennsylvania. This restructuring
includes deregulation of electric utilities and the introduction of customer
choice. The regulatory initiatives are expected to lead to the transformation
of the existing market, which is largely characterized by electric utility
monopolies, having old, inefficient, high-cost generating facilities, selling
to a captive customer base, to a more competitive market where end users may
purchase electricity from a variety of suppliers, including non-utility
generators, power marketers, public utilities and others.
The Company believes that these market trends will present substantial
opportunities for industry participants that are efficient and low-cost power
producers and are able to offer competitive rates to customers. The Company
believes that an additional opportunity is presented by the significant
deregulation and consolidation now affecting the power industry, which has
resulted in substantial divestitures of generation assets by traditional power
utilities and by certain independent power producers currently owning
relatively few plants. For example, as a result of regulatory initiatives,
approximately 12,000 MW of New York generating capacity has been sold or
offered for sale by utilities. Similar regulatory initiatives in New Jersey
and Pennsylvania are expected to cause utilities in those states to pursue
similar divestiture plans. At the same time, a number of industrial companies
have also announced plans to sell self-generation facilities and to re-deploy
the capital in their core businesses. These trends, which the Company believes
are likely to continue, should provide significant acquisition opportunities
for the Company.
The Company also believes that attractive opportunities for development of
new generation assets will arise in the next few years, principally due to a
projected increase in baseload demand in the Northeast and Mid-Atlantic
regions and the retirement of a significant number of existing power
generation facilities in those regions which are thirty or more years old.
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STRATEGY
The Company's strategy is to maximize cashflow associated with its power
plants, and to grow through expansion of the Company's existing operations and
through the acquisition and development of existing or new power generation
and related facilities. Specific aspects of this strategy are set-forth below:
. Maximize the Value of Existing Assets. The Company's high quality plant and
equipment and long duration power sales agreements have provided it with
stable long-term cashflow. In order to maintain the quality of these
assets, and to further increase margins, the Company's core strategy
includes continuous capital investment in current facilities to assure
ongoing efficiency consistent with high rates of return on capital. In
keeping with these objectives, the Company has systematically pursued
technological upgrades and retrofits to existing plants which increase
output or operating efficiency. As an example, the capacity of each of the
nine gas turbines at the Linden, Camden and Bayonne Plants has been
increased by approximately 2.5 megawatts per gas turbine. At the Camden
Plant, an inlet chiller system recently was installed which increases the
generation capacity of the plant by 32,000 megawatt hours per year. In
addition to these improvements, the Company currently is considering a
number of technology investments, some of which, if implemented, the
Company expects will (i) reduce fuel costs at the Bayonne Plant, (ii)
reduce water usage and associated expenses at the Camden Plant, (iii)
generate additional steam sales and electrical output through modest
expansion and the addition of equipment at the Camden Plant, (iv) reduce
water costs at the Linden plant and (v) increase electrical output through
the use of chilled water equipment improvements at the Linden Plant. The
Company will continue to seek to add value to its existing projects and its
customers through mutually negotiated contractual and operating changes
such as those changes successfully negotiated to Linden Venture's power
purchase agreement with Con Ed in September 1990 and December 1993. The
Company will continue to monitor, revise and replace its fuel supply
arrangements to obtain a balance between immediate savings in gas and
transportation costs and the need to maintain regular and secure
relationships with various gas producers and transporters of gas.
. Expand Existing Plants. The Company believes that all three of the plants
in which it has a substantial economic interest are capable of being
expanded not only through additions to existing plants but also through the
development and construction of new power plant facilities at the existing
sites. In this regard, the Company has permit applications pending and
presently is engaged in advanced strategic design work with respect to the
addition of a new 250 MW unit at the Linden Plant with a view to utilizing
such plant's direct interconnect with Con Ed in New York City. With respect
to the Bayonne Plant, the Company is considering the installation of a new
power facility at that location.
. Pursue Domestic Electricity Generation Acquisitions and Other
Opportunities. The Company believes that it will have ample opportunities
to grow its operations through acquisitions, development of new assets and
through other means, whether on its own or through partnerships with
companies that have complementary skills. This strategy is based on the
Company's view that baseload demand for power will increase over the next
few years, and that retirement of a significant number of existing plants
will further spur the need for additional capacity. In addition, a number
of utilities in the Northeastern United States have announced plans to
divest power generating assets, including Con Ed, General Public Utilities,
New York State Electric and Gas, and Niagara Mohawk Power Company. This
development, together with expected further consolidation in the
independent power industry, may offer the Company a number of opportunities
to grow its business by making strategically significant acquisitions, with
an initial focus in the Northeast. Longer term, the Company intends to
continue to consider opportunities for new developments of power generation
facilities in the Northeast and elsewhere in the United States. The Company
has no plans for expansion into the international arena.
The Company believes that the following competitive strengths will aid in
the successful implementation of its strategy:
. Efficient and Reliable Power Projects. The Company's three principal plants
have well-established and consistent records of service to their customers.
The average availability for all of these plants has exceeded 92% since
placed in operation. This record of service is principally the result of
the highly reliable
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combined-cycle technology, which generally is significantly more efficient
than that of a majority of the existing utility generating facilities in
the region, together with the operations and maintenance practices of the
Company.
. Favorable Contracts and Stable Cashflow. The Company's utility power
purchase contracts relating to its three principal plants have long-term
remaining lives, with expirations ranging from 2008 to 2017. For example,
the Linden Plant has nameplate electric capacity of 715 MW and represents
approximately 70% of the Company's power generating assets. Linden Venture
has a power purchase agreement which expires in the year 2017. In addition,
all of the Company's existing power purchase agreements are with large
utilities which presently have investment grade senior debt ratings. The
Company's principal power plants historically have provided a consistent
and substantial cash flow to equity holders due to the fixed payment
components of the power purchase contracts which have provided favorable
margins over the ventures' fixed operating and financing costs. Moreover,
the variable energy payment components of such agreements, which provide
the second major component of pricing under such agreements, have
historically been well correlated to fuel costs at the Bayonne and Camden
Plants and have reflected a partial pass-through mechanism for fuel
expenses at the Linden Plant.
. Environmental Considerations. The Company's existing plants principally
burn natural gas, which is a clean burning fuel, and they employ advanced
environmental technology which makes them among the cleanest in the
industry. The existing plants are also operated in strict compliance with
applicable state and federal regulation.
. Regional Expertise in Northeast Power Markets. As a result of the location
of its existing assets and its active involvement in industry
restructuring, the Company has developed significant expertise in
Northeastern power markets. This expertise will provide the Company with a
competitive advantage in pursuing additional opportunities within the
region.
. Experienced Management. The Company's senior management team, led by the
founder of the Company's predecessor companies, Robert C. McNair, has an
aggregate of over 117 years of experience in the energy industry. The
Company currently operates plant and equipment that is widely viewed to be
among the safest and most environmentally advanced in the industry. The
Company's philosophy is to maintain a small, well qualified management team
with expertise in all aspects of the independent power business, to
actively participate in a broad range of regulatory affairs governing the
industry and to retain additional experts in connection with the
construction, maintenance and operation of its plants.
. Disciplined Management Approach. The Company's management team has a
demonstrated track record in developing innovative financial structures for
its investments and has well established criteria which govern its approach
to both development of new plants and acquisitions.
. Strong Financial Position. The Company believes that its high quality
assets, its federal income tax position and its long duration power supply
contracts provide it with the financial strength to access the capital
markets to obtain the capital needed to fund execution of its strategic
plan.
FORMATION
Cogen was incorporated in May 1998 to acquire operating control of three
entities operating independent power plants in New Jersey, together with an
indirect equity interest in a fourth plant operating in New York. Prior to the
consummation of the Formation Transactions, the Cogen ownership interests in
the plants were 82% beneficially owned by the McNair Interests. The remaining
18% of such interests was beneficially held by the Minority Interests. Upon
the consummation of the Formation Transactions, Cogen will own the interests
in the subsidiaries held by the McNair Interests and the Minority Interests.
See "Certain Transactions--Formation Transactions".
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INSURANCE
The Company maintains, or causes the ventures which own its principal plants
to maintain, insurance which it believes is adequate to cover the risks
attendant to the business of such plants. In addition, the Company owns a
captive insurance subsidiary which insures the first levels (up to $1.0
million) of casualty and property coverage on the principal plants and which
may provide similar coverage for any future plants operated by the Company.
See "Risk Factors--General Operating Risks", "Risk Factors--Project
Development and Expansion Risks" and "Certain Transactions".
EMPLOYEES
At May 15, 1998, Cogen had no employees and the Group had 55 employees. None
of the Company's employees are represented by a union. The Company considers
its employee relations to be satisfactory.
COMPETITION AND OTHER MATTERS
The power generation industry is characterized by numerous strong and
capable competitors, including utilities, industrial companies and other power
producers. Many of these competitors have extensive and diversified
developmental or operating experience and financial resources equal to or
greater than those of the Company. Further, in recent years the power
production industry has been characterized by strong and increasing
competition with respect to both obtaining power sales agreements and
acquiring existing power generation assets. This competition has generally
resulted in reductions in prices paid for electricity, including reductions in
prices in new power sales agreements where available, and reduced operating
margins for merchant power plants which sell their power into the wholesale
market without long-term contracts. Similarly, such competition has caused
higher acquisition prices in some instances for existing assets through
competitive bidding practices. The evolution of competitive electricity
markets and the development of highly efficient gas-fired power plants have
also caused, or are anticipated to cause, downward price pressure in power
markets. Further, there is increasing competition among electric utilities
which, in response to state regulatory initiatives that are designed to give
all electric customers the ability to choose between competing suppliers of
electricity, effectively are being required to lower their costs, including
the cost of purchased electricity. Changes in law also could encourage greater
competition in electricity markets, which could result in both a decline in
the number of long-term power purchase contracts and the rates paid by
electric utilities and other purchasers of electricity. Increasing competition
in the future likely will increase this pressure. Although purchase prices for
electricity under the power purchase agreements to which the Company's
ventures are party contain fixed price formulas, a decline in long-term rates
to be paid by electric utilities generally could indirectly adversely affect
the Company's profits in connection with any future merchant sales to power
purchasers. This competition has put pressure on electric utilities to lower
their costs, including the cost of purchased electricity, and increasing
competition in the future will increase this pressure. See "Risk Factors--
Above Market Power Purchase Agreements" and "Risk Factors--Risks Arising from
Utility Regulation and Deregulation". Because the Company's plants at present
have long-term power purchase agreements, the Company believes that the
greatest immediate risks of such competitive factors will relate to its
ability to grow through development or undertake acquisition of additional
power generating businesses which will provide attractive rates of return on
invested capital.
The Company is not dependent in any material respect on intellectual
property, patents, trademarks or trade secrets.
LEGAL PROCEEDINGS
The Company from time to time is a party to certain legal and regulatory
proceedings that result from the ordinary conduct of its business. Taking into
account insurance coverage and other factors, the Company believes that none
of these proceedings is expected to have a material adverse effect on the
Company.
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EXISTING VENTURE AND PLANT DESCRIPTIONS
The Company's Linden Plant is a 715-megawatt dispatchable, gas-fired,
combined-cycle cogeneration facility located inside the Bayway refinery
facility in Linden, New Jersey. The Linden Plant commenced commercial
operations in May 1992 and currently sells 645 megawatts of its electric
capacity and energy to Con Ed under an original term, 25-year power purchase
agreement. Linden Venture sells the Linden Plant's steam to Bayway and Exxon
Corporation. See "--Linden Steam Sales Agreement". The Bayonne Plant is a 176-
megawatt base load, gas-fired, combined-cycle cogeneration facility located
inside the IMTT facility in Bayonne, New Jersey. The Bayonne Plant commenced
commercial operations in October 1988 and sells approximately 76% of its
electric capacity and energy to JCP&L and approximately 24% of its electric
capacity and energy to PSE&G under separate original term 20-year power
purchase agreements. Bayonne sells its steam to IMTT-Bayonne and IMTT-BX under
two separate year-to-year steam supply agreements. The Camden Plant is a 146-
megawatt base load, gas-fired, combined-cycle cogeneration facility located in
Camden, New Jersey. The Camden Plant commenced commercial operations in March
1993 and sells all of its electric capacity and energy to PSE&G under an
original term 20-year power purchase agreement. Camden sells its steam to
Camden Paperboard Company under an original term 20-year steam supply
agreement.
The following information summarizes certain important information with
respect to the Company's principal ventures and plants.
<TABLE>
<CAPTION>
LINDEN BAYONNE CAMDEN
------------------------- --------------------- --------------------------
<S> <C> <C> <C>
Location................ Linden, NJ Bayonne, NJ Camden, NJ
Ownership Interest...... Various(1) 86.5% Various(1)
Operating GECC, Bank of Tokyo,
Partnerships/Financing Toronto Dominion, 17 yrs.
Parties, Team.......... GECC, 22.5 yrs. Prudential, 20 yrs.
Equipment Type.......... 5 GE Frame 7EA 3 GE Frame 6B 1 GE Frame 7EA
gas turbines gas turbines gas turbine
3 GE condensing 1 GE SAEC 1 GE condensing
steam turbines steam turbine steam turbine
Nameplate Electric
Capacity............... 715 MW 176 MW 146 MW
Power Purchase
Agreement/Term
(Expiration)........... Con Ed/25 yrs (2017) JCP&L/20 yrs (75.8%) PSE&G/20 yrs (2013)
PSE&G/20 yrs (24.2%)
(2008)
Commercial Operations... May 1992 October 1988 March 1993
Average Heat Rate
(1997)(2).............. 9,850 BTU/Kwh 9,280 BTU/Kwh 8,760 BTU/Kwh
Average Availability
(1993-1997)(3)......... 93% 95% 95%
Average Capacity Factor
(1993-1997)(4)......... 93% 92% 95%
Plant Dispatch.......... Dispatchable (restricted) Base load Base load
PPA Fixed Price
Component.............. 1.8553c/kwh 2.80c/kwh (JCP&L)
2.00c/kwh (PSE&G) 2.00c/kwh
Plant Design Steam Sales
Capacity............... 582,000 lbs/hr 125,000 lbs/hr 35,000 lbs/hr
Steam Sales............. Bayway Refining (84%)(5) IMTT/Year-to-Year Camden Paperboard/
Exxon (16%) 20 yrs (2013)
Payment Tracking
Accounts projected at
July 1, 1998........... -- $46 million $54 million
Plant Operator.......... GE GE GE
Fuel Type............... Natural Gas, Butane Natural Gas, Kerosene Natural Gas, Kerosene,
Jet-A or L.S. Diesel Jet-A or L.S. Diesel
Approximate Daily
Average Fuel
Requirements........... 110,000 MMBtu 36,000 MMBtu 30,000 MMBtu
Fuel Supply............. Indexed to spot(5) PSE&G--CIG Tariff Indexed to spot(6)
Gas Transportation/Term. PSE&G/Elizabethtown/ PSE&G--CIG Tariff PSE&G/20 yrs
25 yrs
</TABLE>
- --------
(1) General Electric Credit Corporation ("GECC") and Dana hold varying
interests in cash distributions from Linden Venture, and GECC holds a
varying interest in the cash distributions from Camden Cogen.
(2) Heat rates do not take credit for steam production.
(3) Average Equivalent Availability for Linden Venture.
(4) Average equivalent capacity factor for Linden Venture.
(5) For additional information as to current status and changes regarding
Linden Venture's steam sale arrangements, see "--Linden Steam Sales
Agreement".
(6) Short term firm contracts indexed to spot.
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LINDEN OVERVIEW
The Linden Plant is a 715-MW gas-fired, combined-cycle cogeneration
dispatchable facility developed by an affiliate of the Company and owned by
Linden Venture (while the subject is a highly technical one, combined-cycle
technology is believed by the Company to be the most advanced technically
available for fossil fuel fired power plants because it maximizes the use of
all energy produced from the combustion of the fuel). The Linden Plant is
located in Linden, New Jersey, on the site of the Bayway Refinery facility,
which is owned by Bayway, and adjacent to a chemical plant complex and
technology center owned by Exxon just south of Newark Airport. Electricity
generated by the Linden Plant is sold to Con Ed, and steam is sold to Exxon
and Bayway.
The Linden Plant was constructed by Ebasco Constructors, Inc. and achieved
commercial operations in May 1992. While maintaining 100% steam availability
to meet the steam customers' demands, the Linden Plant's overall equivalent
capacity factor for electrical production has been in excess of 93% for each
full operating year since it entered service, with the exception of 1993 when
the equivalent capacity factor fell to 86% due to a main transformer failure
in April of that year. The Linden Plant's average equivalent capacity factor
for the period from the commercial operations date to December 1997 has been
93%. For 1997, its equivalent capacity factor was 96%.
The Linden Plant comprises five GE Frame 7EA gas turbine generators and
three GE condensing steam turbine generators. Natural gas is burned directly
in the gas turbine generators to produce electricity and high temperature
exhaust gases. The exhaust gases from the gas turbines are channeled into five
Nooter Eriksen Heat Recovery Steam Generators ("HRSG") to produce high
pressure steam for the steam turbine generators. The steam turbine generators
produce additional electricity and process steam which is sold to Exxon and
Bayway.
The steam turbines, in turn, exhaust into a multi-cell air cooled condenser
to return condensate to the plant's water cycle. The condensate produced by
the air cooled condenser reduces the plant's water consumption by roughly 66%.
Condensate from process steam sold to Bayway and Exxon is not returned to the
cycle. All raw makeup water is purchased from Elizabethtown Water Company.
The 13.8 kilovolt ("KV") electrical power produced by the generators is
stepped up to 345 KV. The SF6 gas insulated switch gear then delivers the
electricity to an underground, parallel connected pair of oil-filled cable
ducts, which provide the outgoing power connection directly to Con Ed,
allowing the plant to be treated as an "in-city" facility, which the Company
believes generally adds value to its capacity from a reliability standpoint.
This electric interconnection terminates with Con Ed's Goethals Station on
Staten Island, New York, after passing through a cable tunnel bored through
bedrock under the Bayway Refinery and the Arthur Kill waterway. The total
interconnection distance to Con Ed is approximately 1.6 miles. Each cable has
transmission capacity of 650 MW with the addition of heat exchangers, which if
engaged, would provide enough capacity to handle the entire output of the
plant, thereby providing more than full backup transmission capacity for the
Linden Plant or possible additional transmission capacity to support an
expansion at the facility if one were to be undertaken.
The Linden Plant has been designed, and is being maintained and operated, to
meet the strict environmental standards of the State of New Jersey. The Linden
Plant uses Best Available Control Technology ("BACT"), and is being operated
and maintained, to reduce gas turbine, water and noise emissions to the levels
required and permitted by federal and state regulators. Nitrogen oxide ("NOx")
emissions levels are controlled through steam injection into the turbine
combustion chambers and selective catalytic reduction ("SCR") in the HRSGs.
Carbon monoxide ("CO") emissions are controlled by the design of the
combustion turbines.
The thermal cycle and plant design have been designed to operate 8,760 hours
per year at 93% availability, with design net delivered capacity of 645 MW and
export steam generation volume of 582,000 lbs/hour.
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<PAGE>
LINDEN POWER PURCHASE AGREEMENT
Linden Venture sells 645 MW of the Linden Plant's electrical capacity to Con
Ed pursuant to a 25-year power purchase agreement, dated April 14, 1989 and
amended September 17, 1990 and December 22, 1993 (the "Linden PPA"). The
Linden PPA has been structured to minimize the impact of adverse changes in
fuel costs or operating levels and the loss of QF status on project economics.
Certain provisions of the Linden PPA are summarized below.
Term: Base term of 25 years from the date of commercial operations, May
1992, with two automatic five-year renewal periods but with the option of
either party to give to the other party notice of non-renewal.
Regulatory Approval: Subject only to initial approval by the New York Public
Service Commission ("NYPSC"). Provisional NYPSC authorization occurred
September 1989, allowing Con Ed full recovery of all payments for the purchase
of electricity under the Linden PPA through its fuel adjustment clause. Final
NYPSC approval occurred in 1991.
Base Term Pricing--Capacity: Con Ed is required to pay a fixed capacity rate
of 1.8553c per KWh "delivered", where "delivered" means actual or available,
subject to a cap of 85% of the Linden Plant's dependable maximum net
capability. KWh "delivered" in excess of the 85% cap during the 12 months
preceding any off-peak months can be credited to any off-peak month in which
the 85% cap is not reached.
Base Term Pricing--Fuel: Con Ed is obligated under the Linden PPA to pay
actual fuel costs, including steam commodity, transportation and storage
costs. The fuel component is subject to an annual cap of 2.634c per Kwh
purchased, adjusted for changes in Con Ed's annual weighted average cost of
gas since 1989. Actual fuel costs below the annual cap entitle the Linden
Plant to an incentive payment of 50% of the difference. Actual fuel costs
above the annual cap must be absorbed 100% by Linden Venture.
Base Term Pricing--O&M: Con Ed is required to pay an escalating operating
and maintenance ("O&M") rate of 0.9c per KWh at contract inception (1.23c per
KWh in March 1998), increasing by a local CPI inflation factor on a monthly
basis. This rate is paid for KWh "delivered", subject to a cap of 90% of the
Linden Plant's dependable maximum net capability. A credit mechanism similar
to capacity payments exists pursuant to which KWh "delivered" in excess of the
90% cap during the 12 months preceding any off-peak months can be credited to
any off-peak month in which the 90% cap is not reached.
Security: The tracking account under the Linden PPA tracks the difference
between payments Con Ed has made to Linden Venture under the Linden PPA to
estimated Con Ed long run Avoided Costs at the time the Linden PPA was signed.
Such tracking account reached a maximum of $111 million in July 1996 and
declines to zero in July 1998 pursuant to the terms of the Linden PPA. If
Linden Venture were determined to be in default under certain provisions of
the Linden PPA, the balance in the tracking account at the time would be used
in determining liquidated damages owed by Linden Venture to Con-Ed in
accordance with the provisions of the Linden PPA. Linden Venture has provided
a letter of credit ($47.2 million at December 31, 1997) to secure its
contingent obligation with respect to the security provisions of the Linden
PPA.
Operation--Curtailment: Con Ed is permitted to reduce the dispatch of the
plant by various amounts in certain periods for the first 15 years of the
Linden PPA. Upon four hours notice, Con Ed may reduce actual deliveries to 82%
of dependable maximum net capability. Upon 12 hours notice, Con Ed may reduce
actual deliveries to the 82% limit less 150 MW for 8 hours on weekday nights a
maximum of 100 times a year. Upon 24 hour notice, Con Ed may reduce actual
deliveries to 47% of dependable maximum net capability on weekends and certain
holidays. In the last 10 years of the base term Con Ed has the right, upon 24
hours notice, to reduce the dispatch of the plant to 47% on a continuous basis
with limited rights to cycle the plants to higher loads. Con Ed's obligations
to pay capacity and O&M charges are unaltered by curtailment and,
consequently, the Linden Plant's financial performance is largely unaffected
by curtailment by Con Ed.
Operation--Voltage: The Linden Plant will supply voltage support within a
specified range as requested by Con Ed, via direct interconnection at Con Ed's
Goethals substation on Staten Island, New York.
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<PAGE>
Qualifying Facility Status: During any period in which the Linden Plant
ceases, temporarily or permanently, to be a QF, Con Ed's rates will be reduced
10%.
Breach of Contract: Among other events, failure by the Linden Plant to use
good faith efforts to resume deliveries after an outage of 120 days
constitutes a breach under the Linden PPA. Failure to perform for reasons of
force majeure is not deemed a breach.
Insurance: Under the Linden PPA, Linden Venture is required to maintain
customary insurance coverages.
Assignment: The Linden PPA may not be assigned or transferred by either
party without prior written consent of the other party except that Linden
Venture may assign to an affiliate or a lender and may also assign under
certain conditions, such as a sale of the facility.
Force Majeure: Either party to the Linden PPA may suspend performance
(except for any obligation to make payments) thereunder due to the occurrence
of force majeure so long as the non-performing party provides notice to the
other party within 14 days of becoming aware of the force majeure event and
endeavors to remedy its inability to perform.
LINDEN STEAM SALES AGREEMENT
Linden Venture sells steam to both Exxon and Bayway. On August 1, 1990,
Linden Venture entered into a steam sale agreement with Exxon (the "Exxon
Steam Sale Agreement") pursuant to which Linden Venture was to sell steam to
Exxon for use at Exxon's Bayway refinery and at certain other facilities owned
by Exxon in the area of the Bayway refinery. In 1993, Exxon sold its Bayway
refinery to Bayway, but retained the other facilities that continued to use
some of the steam originally covered by the Exxon Steam Sale Agreement. The
Exxon Steam Sale Agreement provided that Bayway, as the purchaser of the
refinery, would enter into a new steam sale agreement with Linden Venture
covering the sale of steam to Bayway by Linden Venture (the "Bayway Steam Sale
Agreement"), and that Exxon would enter into an amendment to the Exxon Steam
Sale Agreement to reflect the reduction in steam purchases by Exxon (the
"Amended Exxon Steam Sale Agreement" and, together with the Bayway Steam Sale
Agreement, the "New Steam Sale Agreements"). Although the parties have been
negotiating the New Steam Sale Agreements, as of the date of this Prospectus,
the New Steam Sale Agreements have not been signed. Drafts of the New Steam
Sale Agreements were presented to the limited partner of Linden Venture for
approval and the limited partner, in turn, presented them to its lenders for
approval, where the matter now pends. The parties, in effect, have been
operating as if the New Steam Sale Agreements were in force, with Linden
Venture selling steam to each of Bayway and Exxon, and getting paid therefor
by Bayway and Exxon, respectively, pursuant to the terms of the unexecuted
agreements. Although Linden Venture is hopeful that these matters can be
concluded soon and that the New Steam Sale Agreements will be executed by the
respective parties there can be no assurances in that regard.
At the present, Linden Venture believes that any risk relating to the status
of its steam sale arrangements is remote, because, among other things, it is
the only steam supplier to the area of the Exxon and Bayway facilities, and
both Exxon and Bayway require steam for their facilities.
LINDEN GAS SERVICE AGREEMENTS
Linden Venture entered into a gas service agreement in July 1990 with PSE&G
and Elizabethtown Gas (the "suppliers"), providing for transportation and
partial supply being furnished jointly, with PSE&G supplying 80% and
Elizabethtown Gas the balance. Linden Venture currently has short-term gas
supply agreements with Anadarko Energy Services Company, Columbia Energy
Services Corp., Engage Energy U.S. L.P., Sonat Marketing Company, Vastar Gas
Marketing, Inc. and Texaco Natural Gas Inc. Certain provisions of the Gas
Service Agreement are summarized below.
Term: Base term of 25 years. Sales service may be terminated after 15 years,
but if not renewed, will be replaced by a transportation resale service.
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<PAGE>
Quantities: The minimum quantity of gas under the agreement is 73,000
decatherms/day ("Dth/day"). The maximum quantity is 143,500 Dth/day. The base
amount of 85,000 Dth/day is subject to full interruption up to a maximum
number of days per year during certain peak days (defined by temperature).
Beyond the maximum number of days interruption limit, gas can be curtailed to
the 73,000 Dth/day minimum. Butane storage and deliverability are sized to
supply the minimum fuel requirements during gas supply interruptions but
during such interruptions, the plant can be operated on Butane at an output
level of only 300 MW due to butane deliverability restrictions.
Obligations: Linden Venture must contract for a year-round supply of natural
gas of 85,000 Dth/day plus line loss and compressor fuel. Such supply will be
firm from December through March, and will be contractually committed for by
the preceding June 1. The Linden Plant must purchase and make available to the
suppliers 100,000 bbls of butane storage and up to 300,000 bbls of butane
product for use by the suppliers on peak days during the period November
through March. The suppliers must obtain at least 15 years firm transportation
capacity and obtain interruptible transportation as necessary.
Services: Under resale service, Linden Venture will purchase gas supply in
the U.S. Gulf Coast production areas from which the suppliers have pipeline
transportation capacity. Linden Venture will deliver to the pipeline receipt
points of the suppliers in the production area 85,000 Dth/day, plus line loss
and compressor fuel, selling such amount to the suppliers at those locations.
Suppliers will then resell these amounts, less line loss and compressor fuel,
to Linden Venture at the plant's interconnections with the suppliers'
facilities. Resale service volumes will be at least the minimum quantity. FERC
Order 636, issued April 1992, prohibits new contracts for such resale
transportation services. This contract is allowed under the grandfather
provision of Order 636, but it cannot be extended or renewed. Subject to
nominations by Linden Venture, the suppliers sell Linden Venture gas from
their system supply in an amount that can range from zero to 58,500 Dth/day.
Butane also is purchased by Linden Venture from the Bayway Refinery for use as
back-up fuel if the suppliers fail to deliver natural gas.
Pricing: Resale service is priced in three components: (i) a component based
on the plant's commodity price as initially sold to the suppliers at their
receipt points; (ii) a component based on transportation costs; and (iii) a
component based on a specified service fee which can escalate. Sales service
is priced separately for peak and off-peak service. Off-peak supply is priced
in three components: (i) a component based on a cost formula; (ii) a component
allowing for shrinkage and line loss; and (iii) a component based on a
specified service fee which can escalate with the suppliers' base rates. Peak
sales service during the months of December through March above a specified
level includes a price component based on storage costs.
Force Majeure: The Gas Service Agreement may be terminated by the suppliers
for lack of performance by Linden Venture due to occurrence of force majeure
if the inability to perform extends for 18 consecutive months. This 18 month
period can be extended to 36 months if certain fees are paid to the suppliers
by Linden Venture. The Gas Service Agreement may be terminated by Linden
Venture if the suppliers experience a force majeure event that extends for six
consecutive months.
LINDEN OPERATION AND MAINTENANCE ARRANGEMENTS
Linden Venture has entered into an Operation and Maintenance Agreement dated
effective as of June 6, 1997 (the "Linden O&M Agreement"), with GE, replacing
an operation and maintenance agreement with another party in order to achieve
economies of scale by having a single operator for all three plants and to
make more consistent the operation and maintenance of the Company's three
operated plants. The initial term of the Linden O&M Agreement is 12 project
years, with Linden Venture having the right to terminate upon payment of a
specified amount at the end of each of the fourth, seventh and tenth project
years and to extend for an additional two years. Thereafter, the Linden O&M
Agreement is extended automatically each year, unless either Linden Venture or
GE gives 12 months' notice of termination. The Linden O&M Agreement is a "cost
reimbursable" contract with a monthly operator's fee and with performance
bonuses payable to GE and liquidated damages assessed against GE based on a
series of performance criteria. In 1997, Linden Venture paid performance
bonuses of $0.1 million but no operator's fees. Pursuant to the terms of the
Linden O&M Agreement, the Company expects that operator fees will be paid in
future years. Under the Linden O&M
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<PAGE>
Agreement, Linden Venture is obligated to buy all parts and services needed at
the Linden Plant from GE at certain discount prices, and GE is obligated to
furnish such parts and services to the Linden Plant; provided that if GE is
unable to provide such parts or services in a timely or cost effective manner,
Linden Venture may obtain such parts and services from alternative sources.
LINDEN INSURANCE ARRANGEMENTS
Linden Venture carries insurance consisting of:
. ""All Risk" property insurance for direct damage from non-excluded perils
including but not limited to fire and extended coverage, vandalism, theft,
collapse, flood, and earthquake. Such coverage is required to be written on
a replacement cost basis.
. Comprehensive boiler and machinery insurance for sudden or accidental
breakdown of mechanical or electrical equipment.
. ""Single Interest Excess of Loss Policy" insurance is maintained above the
coverage of property and boiler machinery policies.
. Business interruption insurance covering loss of net profits and continuing
expenses resulting from physical loss or damage at the Linden Plant subject
to a 30-day deductible.
. General liability insurance and excess liability insurance.
. Workers' compensation and employers' liability insurance.
LINDEN ENVIRONMENTAL MATTERS
Linden Venture has established, and incorporates, environmental awareness
and resource conservation standards in its day-to-day activities. These
standards are guiding principles for Linden Venture, its employees and the
operation of the Linden Plant, reflecting a commitment to environmentally
sound engineering and long-term values.
Waste water, consisting primarily of boiler blowdown and demineralized rinse
water, is processed with temperature and acidity ("pH") monitored and
controlled prior to discharge into the Linden Roselle Sewer Authority.
Sanitary waste is also discharged into the Linden Roselle Sewer Authority.
Site runoff water is collected and monitored for pH prior to being discharged
to the Arthur Kill waterway. Air emissions from the facility are controlled
and reduced through steam injection, Selective Catalytic Reduction ("SCR") and
turbine design, with all emissions well below permitted limits. Noise
emissions are significantly lower than required standards. The Company has
solid waste disposal arrangements with contractors it believes to be legally
and financially responsible.
LINDEN SITE LEASE AGREEMENT
Linden Venture and Exxon entered into a ground lease agreement dated as of
August 1, 1990 (the "Site Lease") with respect to the Linden Plant site within
Exxon's industrial complex (the "Site"). When Exxon sold its refinery to
Bayway, it assigned to Bayway the ground lease agreement. There are various
default provisions in the Site Lease that are triggered by the default
provisions of the Exxon Steam Sale Agreement. Bayway, as a successor to Exxon
under the Site Lease, is entitled to terminate the Site Lease in the event
Linden Venture defaults under the Exxon Steam Sale Agreement (subject to
various protections in favor of Linden Venture) but is not entitled to
terminate the Site Lease if Bayway is in default under the Exxon Steam Sale
Agreement. The Site Lease provides Linden Venture with both a leasehold estate
in the Site and non-exclusive easements over other portions of Bayway's
property for various interconnections to the Linden Plant.
The term of the Site Lease is 25 years from initial commercial operations of
the Linden Plant, followed by two 5-year renewal terms and additional
extensions if desired by the parties. Base rent is $383,000/year, adjusted by
CPI.
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<PAGE>
LINDEN OWNERSHIP STRUCTURE
The Linden Plant is owned by Linden Venture, a limited partnership. The
general partner of Linden Venture, Linden Ltd., is a limited partnership owned
and controlled indirectly by the Company. The limited partner in Linden
Venture is an owner trust (the "Owner Trust"), a trust created for the benefit
of GECC and its co-investors. See "--Security Structure". The beneficial owner
of the Owner Trust is a general partnership (the "Owner Partnership") whose
partners are special purpose corporations wholly owned by GECC and [DANA],
respectively.
LINDEN FINANCING STRUCTURE
The development and construction of the Linden Plant were financed through
September 1992 equity contributions of $25.0 million from Linden Ltd. and
$500.0 million from the Owner Trust. In return for its $500.0 million equity
capital contribution, the Owner Trust received a limited partnership interest
in Linden Venture. The proceeds of the equity contributions were used by
Linden Venture to repay its construction loan. As a result of its equity
contribution, the Owner Trust receives distributions from Linden Venture on a
preferential basis. See "--Linden Cash Distributions" and "Description of
Certain Indebtedness--Plant Project Financings".
LINDEN GENERAL PARTNER TERM LOAN
Pursuant to the Linden GP Term Loan Agreement, the Owner Trust also made a
$250.0 million term loan facility available to Linden Ltd. (the "Linden GP
Term Loan"). The Linden GP Term Loan is secured by Linden Ltd.'s general
partnership interest in Linden Venture and certain reserve accounts funded
with revenues of Linden Venture. See "--Linden Cash Distributions". Linden
Ltd. must use $10.0 million of the proceeds of the Linden GP Term Loan as
working capital for Linden Venture. An amount of $25.0 million of the Linden
GP Term Loan was used to fund Linden Ltd.'s equity contributions in Linden
Venture. The balance of the proceeds of the Linden GP Term Loan was loaned by
Linden Ltd. to Financial Services. See "Formation Transactions". No further
borrowings may be made by Linden Ltd. under the Linden GP Term Loan, and at
December 31, 1997, its outstanding principal balance was $218.0 million. The
Linden GP Term Loan matures in September, 2007. See "Description of Certain
Indebtedness--Plant Project Financings--Linden Venture".
LINDEN CASH DISTRIBUTIONS
The cash remaining after payment of taxes, operating expenses and
maintenance of required reserve funds ("Linden Venture Distributable Cash") is
distributed monthly by Linden Venture to the partners of Linden Venture. In
addition, distributions of Linden Venture Distributable Cash to Linden Ltd.
are to be made (i) net of monthly (a) principal and interest debt service
requirements under the Linden GP Term Loan Agreement and (b) amounts required
to maintain ratios (the "Required Payment Ratios"), for specified periods,
based upon (y) total Linden Venture Distributable Cash, together with the
amount of earnings on the working capital fund and interest paid by Linden
Venture on working capital loans from Linden Ltd., for such period to (z)
Linden Venture Distributable Cash made to Linden Ltd. under Tranche 1 (as such
term is hereinafter defined), together with debt service payments of Linden
Ltd. on the Linden GP Term Loans, for the same period, and (ii) in the absence
of a default under the Linden GP Term Loan Agreement. The Required Payment
Ratios are calculated with respect to quarterly periods and, in certain
instances, annual periods, with such quarterly-calculated ratios ranging from
1.1 to 1.0 and 1.2 to 1.1, and such annual-calculated ratios being either 1.1
to 1.0 or 1.2 to 1.0.
Under the terms of the partnership agreement relating to such venture, the
Owner Trust, as the limited partner in Linden Venture, receives the first 99%
of Linden Venture Distributable Cash up to a capped amount equal to
approximately $4.3 million per month through September 1998, approximately
$3.0 million per month from October 1998 through September 2001 and between
$4.3 million and $4.8 million per month thereafter ("Tranche 1"). Tranche 1
distributions are set at a level that, over a period of 22.5 years, will repay
the Owner Trust an amount equal to its initial equity investment plus an
agreed return thereon.
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The amount of Tranche 1 payments determines the amount of two other
tranches, which collectively cover all Linden Venture Distributable Cash.
Tranche 2 is the Linden Venture Distributable Cash remaining after the Tranche
1 payment, up to an amount equal to twice the amount of Tranche 1. Tranche 2
is distributed 99% to Linden Ltd. and 1% to the Owner Trust. Tranche 3 is the
remaining Linden Venture Distributable Cash in excess of Tranches 1 and 2 and
is distributed 10% to the Owner Trust and 90% to Linden Ltd. Payments under
each tranche must be made in full before any payments on the next tranche may
be made. The distribution of cash according to the terms summarized above will
be in effect until the date (the "Flip Date") which is the earlier of 22.5
years or the date upon which the Owner Trust has achieved a specified after-
tax return (the "Minimum Return"). On the Flip Date, distribution of cash
according to the above mechanism ends, and all Linden Venture Distributable
Cash will be distributed initially 30% to the Owner Trust and 70% to Linden
Ltd. until the Minimum Return has been achieved, if it was not achieved by
year 22.5. Thereafter, the Owner Trust's distribution percentage will be
reduced to 20% and then finally to 10% upon the achievement of certain
specified after-tax target rates of return.
<TABLE>
<CAPTION>
SUMMARY OF LINDEN VENTURE DISTRIBUTABLE CASH PRIOR TO THE FLIP
DATE (AS A PERCENTAGE OF EACH TRANCHE'S LINDEN VENTURE
DISTRIBUTABLE CASH)
---------------------------------------------------------------------
LINDEN LTD. OWNER TRUST
-----------------------------------
<S> <C> <C>
Tranche 1.............................. 1% 99%
Tranche 2.............................. 99% 1%
Tranche 3.............................. 90% 10%
</TABLE>
Historical annual distributions from Linden Venture are set out in the table
below:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Linden Venture Distributable Cash
Distributions to Owner Trust
--Tranche 1........................ $ 51.0 $ 50.8 $ 50.7 $ 50.5 $ 52.0
--Tranche 2........................ 0.8 0.8 0.6 0.7 0.7
--Tranche 3........................ 0.1 -- -- -- --
Distributions to Linden Ltd.
--Tranche 1........................ 0.5 0.5 0.5 0.5 0.5
--Tranche 2........................ 74.1 77.2 58.9 70.8 67.9
--Tranche 3........................ 1.0 -- -- 0.3 0.3
------ ------ ------ ------ ------
Total Distributions.................. $127.5 $129.3 $110.7 $122.8 $121.4
====== ====== ====== ====== ======
</TABLE>
SECURITY STRUCTURE
The Company understands that the assets of the Owner Trust consist of its
limited partnership interest in Linden Venture and the Linden GP Term Loan.
The indebtedness of Linden Ltd. to the Owner Trust, as lender under the Linden
GP Term Loan, is secured by a pledge of Linden Ltd.'s general partnership
interest in Linden Venture and certain reserve accounts funded with the
revenue of Linden Venture. See "--Linden Cash Distributions". Because of its
equity financing structure, Linden Venture has no long-term debt on its
balance sheet and is unencumbered by any liens on its assets. While there is
no indebtedness on Linden Venture's balance sheet, Linden Venture's
partnership agreement contains certain provisions that effectively restrict
Linden Venture from, among other things, entering into certain agreements or
commitments, selling or otherwise transferring assets, incurring indebtedness
(other than defined permitted indebtedness), creating or allowing any lien on
its property (other than defined permitted liens) and amending or modifying
project documents without the consent of the limited partner of Linden
Venture, which is the Owner Trust.
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BAYONNE OVERVIEW
The Bayonne Plant is a 176-MW gas-fired, combined-cycle cogeneration
facility developed by a subsidiary of the Company that owns NJ Venture. The
Bayonne Plant is located on the site of the IMTT facility in Bayonne, New
Jersey. Power generated by the Bayonne Plant is sold 75.8% to JCP&L and 24.2%
to PSE&G, with steam sold to IMTT--Bayonne and IMTT-BX.
The Bayonne Plant was constructed by GE and achieved commercial operations
in October 1988. The Bayonne Plant is a base load facility with a rated net
capacity of 165 MW. The Bayonne Plant's availability and capacity factors have
been in excess of 91% and 88%, respectively, for each full operating year
since the plant entered service (except in 1994 when the capacity factor was
85% due to the performance of major overhauls on all of the gas turbines). The
Bayonne Plant's average availability and capacity factors for the period from
the commercial operations date to December 1997 were 92% and 90%,
respectively. For 1997, the Bayonne Plant's availability and capacity factors
were 94% and 92%, respectively.
The Bayonne Plant comprises three GE Frame 6B gas turbine generators and one
GE Single Admission/Extraction Condensing ("SAEC") steam turbine generator.
Natural gas is burned directly in a combustion turbine generator to produce
electricity and high temperature exhaust gases. The exhaust gases from the gas
turbines are channeled into three Henry Vogt HRSGs to produce high pressure
steam for a steam turbine driven electric generator, providing additional
electricity as well as extracting quality process steam for sale to
IMTT,Bayonne and IMTT-BX. The steam turbine exhausts into a water cooled
surface condenser to return condensate to the Bayonne Plant's water cycle. All
raw makeup water is purchased from the City of Bayonne pursuant to an
agreement that provides for the City of Bayonne to supply to the Bayonne Plant
1.5 million gallons per day of potable water. The agreement expires June 1,
2118.
The 13.8 KV electrical power produced by the generators is stepped up to 138
KV and delivered by SF6 switchgear to an underground cable which provides the
outgoing power connection to PSE&G. This cable interconnects with PSE&G's
Bayonne Substation in Bayonne, New Jersey, over an interconnection distance of
approximately three miles.
The Bayonne Plant has been designed, and is being maintained and operated,
to meet the strict environmental standards of the State of New Jersey and uses
BACT to reduce gas turbine, water and noise emissions to the levels required
and permitted by federal and state regulators. NOx emissions levels are
controlled by water injection into the gas turbine combustion chambers and by
SCR in the waste heat recovery boilers. CO emissions are controlled by design
of the combustion turbines.
The plant has been designed based on a thermal cycle power output of 165 MW
net and average export steam generation of 125,000 lbs/hour.
NJ VENTURE POWER PURCHASE AGREEMENT--JCP&L
NJ Venture sells 75.8% of the Bayonne Plant's net electrical output (up to
an average annual maximum of 125 MW) to JCP&L, under a power purchase
agreement (the "JCP&L PPA"), dated October 29, 1985, as amended September 5,
1986 and August 1, 1988. Certain provisions of the JCP&L PPA are summarized
below.
Term: Base term of 20 years with a 10-year automatic renewal period subject
to the agreement of both parties.
Regulatory Approval: Approval of the JCP&L PPA by the New Jersey Board of
Public Utilities ("NJBPU"), which was required for the JCP&L PPA to be
effective, was received December 16, 1985, and approval of the contract
amendment, which required NJBPU approval, was obtained on December 8, 1986.
Base Term Pricing--Applicable Rate: The Applicable Rate is the sum of the
Fixed, Gas, GNP Deflator and Retail Rate components (as defined below). The
JCP&L PPA requires that JCP&L pay 120% of the Applicable Rate for all
electricity delivered during on-peak periods and 88.9% of the Applicable Rate
for off-peak periods. Peak period is 8:00 am to 8:00 pm, Monday through
Friday, 52 weeks per year.
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Base Term Pricing--Fixed: JCP&L is required to pay a fixed component of
2.80c/kwh for electricity delivered to receipt points up to a maximum
aggregate of 125 MW/hour on the average annual basis.
Base Term Pricing--Gas: JCP&L pays a gas component which is indexed against
changes in JCP&L's weighted average cost of gas. The gas component is
3.12c/KWh as of March 31, 1998 for power delivered to receipt points up to a
maximum aggregate of 125 MW/hour on the average annual basis.
Base Term Pricing--GNP Deflator: JCP&L is required to pay a general price
change component, which reflects inflation adjustments and was as of December
31, 1997 approximately 0.943c/KWh, for power delivered to receipt points up to
a maximum aggregate of 125 MW/hour on the average annual basis.
Base Term Pricing--Retail Rate: JCP&L is required to pay a local price
change component which reflects changes in JCP&L's retail rates and was as of
March 31, 1998 approximately 0.833c/KWh., for power delivered to receipt
points up to a maximum aggregate of 125 MW/hour on the average annual basis.
Curtailment: JCP&L may curtail purchases only in the event of force majeure
and other excusable conditions including: (i) an emergency involving the
wheeling system and (ii) interruptions, curtailments and reductions required
by prudent electrical practices. It is not anticipated that these limited
curtailment provisions will have a material effect on NJ Venture's revenues
under the JCP&L PPA. JCP&L has not curtailed power purchases to date.
Breach of Contract: Among other events, failure of the Bayonne Plant to
deliver electricity for 365 consecutive days, for reasons other than force
majeure, constitutes a breach.
Assignment: The JCP&L PPA may not be assigned or transferred by either party
without written consent.
Force Majeure: Either party to the JCP&L PPA may suspend performance (except
for any obligation to make payments) thereunder due to the occurrence of force
majeure so long as the non-performing party provides prompt notice to the
other party of the force majeure event and expeditiously takes action to
continue performance, remedy the event excusing performance and mitigate
resulting damages to the other party.
NJ VENTURE POWER PURCHASE AGREEMENT--PSE&G
The remaining 24.2% of electrical output (approximately 40 MW) of the
Bayonne Plant is sold to PSE&G pursuant to an extendible Power Purchase and
Operations Coordination Agreement ("PSE&G PPA"), dated June 5, 1989. The PSE&G
PPA provides for the sale of energy and capacity from the Bayonne Plant to
PSE&G. Under the PSE&G PPA, PSE&G makes seasonal capacity payments and base
monthly energy payments consisting of a fixed component, a fuel component and
an inflation component. Certain provisions of this agreement are summarized
below.
Term: Base term of 20 years with two five-year renewal options, subject to
mutual agreement of both parties.
Regulatory Approval: Requires approval of the NJBPU, which must find the
contract reasonable and prudent throughout its term, and which must allow
PSE&G full and timely recovery of contract costs through the utility's energy
clause. NJBPU authorization occurred June 1989.
Base Term Pricing--Capacity: PSE&G is required to pay a monthly seasonal
capacity payment for power delivered to PSE&G's receipt point. The payment is
$8.76/KW per month, from January 1, 1988, escalated at 4.9% per annum; the
rate as of March 31, 1998 was $13.469 per KW. Payments during certain periods
will not exceed established capacity levels as follows: during summer peak
months of June through September, the Bayonne Plant has a nominated capacity
of 36 MW, and during the winter peak months of December through February, the
plant has a nominated capacity of 43 MW. NJ Venture has the right to adjust
these seasonal capacity levels within a range of plus or minus 10% every year.
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PSE&G is obligated to pay an energy charge which has three components:
fixed, energy fuel and energy inflation, each as described below:
Base Term Pricing--Fixed: The fixed energy component is 2.0c/KWh for power
delivered to PSE&G's receipt point and remains unchanged for twenty years.
Base Term Pricing--Energy Fuel: The fuel energy component was initially
1.88c/KWh for power delivered to PSE&G's receipt point escalating monthly at
PSE&G's Cogeneration Interruptible Gas Rate Schedule ("CIG") as approved by
NJBPU. The CIG rate is based on PSE&G's average cost of gas and also includes
an additional component representing transportation through the local
distribution system. The fuel energy component rate was 2.26c/KWh as of March
31, 1998.
Base Term Pricing--Energy Inflation: On December 1, 1988, the inflation
component was 0.72c/KWh for power delivered to PSE&G's receipt point. The
inflation component escalates based on a Gross Domestic Product ("GDP") index
on January 1st of each succeeding year beginning on January 1, 1990. This
component tracks closely with a portion of the plant's pipeline charges and
variable O&M payments, which tend to increase with inflation. The inflation
component was 0.91c/KWh as of March 31, 1998.
Security: There is a tracking account which tracks the difference between
payments PSE&G has made to NJ Venture under the PSE&G PPA to estimated future
capacity and energy rates of the Pennsylvania, New Jersey and Maryland
Interchange ("PJM"), a close power pool consisting of certain utilities
located in the Mid-American States. These estimates are fixed and set out in
the PSE&G PPA. The tracking account will reach a maximum of $46 million during
1998 and will decline to zero by 2005. If a breach by PSE&G were to result in
a termination of the PSE&G PPA, NJ Venture would be required to pay to PSE&G
the amount, if any, by which the balance in the tracking account exceeds the
liquidated damages due the Bayonne Plant as a result of such breach. NJ
Venture has provided a letter of credit to PSE&G for 10% of the tracking
account ($4.4 million at December 31, 1997) to secure its contingent
obligation with respect to the security provisions of the PSE&G PPA.
Operation Curtailment: PSE&G is obligated to accept up to a maximum of 24.2%
of the Bayonne Plant's net electrical output unless: (i) the plant fails to
comply with safety requirements, (ii) such acceptance would jeopardize the
integrity or transmission facilities of the PSE&G or PJM systems, (iii) during
system emergencies or planned maintenance of the transmission or
interconnection facilities, or (iv) during light load periods, if due to
operational circumstances, PSE&G would incur costs greater than those that it
would have incurred if it had not made such purchases. PSE&G has not invoked
any of the provisions set out in clauses (i), (ii) and (iii) above through
1997, but has curtailed the Bayonne Plant pursuant to the "light load"
provisions.
Qualifying Facility Status: The Bayonne Plant must meet FERC's operating and
efficiency standards to maintain its QF status under PURPA. If sections 201
and 210 of PURPA are no longer in effect or the Bayonne Plant ceases to
qualify as a QF for reasons not within its control, including, a reduction or
cessation in thermal energy use, the PSE&G PPA will nevertheless continue in
effect, provided (i) the NJBPU does not bar PSE&G from passing the rates
through to its customers, (ii) federal, state or local laws are not violated,
and (iii) NJ Venture or its owners are not subject to unreasonable burdensome
regulation under PUHCA. See "Government Regulation--Federal Energy
Regulation". If one of the above events does occur, NJ Venture and PSE&G must
negotiate in good faith for an arrangement with substantially similar economic
benefits to each party under the PSE&G PPA. In addition, if one of the above
PURPA events occurs, and the NJBPU denies rate pass-through of PSE&G's
obligations under the PSE&G PPA, NJ Venture and PSE&G must negotiate in good
faith to provide a rate with substantially similar economic benefits to each
party, and which the NJBPU will permit PSE&G to recover from its ratepayers.
If a final non-appealable order is issued that the Bayonne Plant is not a QF,
then either party may terminate the PSE&G PPA, unless the Bayonne Plant is
attempting to restore its QF status.
Breach of Contract: Failure by NJ Venture to perform its obligations under
the contract constitutes a breach unless within 30 days after notice from
PSE&G such venture cures the breach or commences and diligently pursues a
cure.
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Insurance: NJ Venture is required to maintain customary insurance coverages.
Assignment: The PSE&G PPA may not be assigned or transferred by either party
without prior written consent of the other party except NJ Venture may assign
it to an affiliate or lender.
Force Majeure: Either party to the PSE&G PPA may suspend performance (except
for any obligation to make payments) thereunder due to the occurrence of force
majeure so long as the non-performing party provides prompt notice to the
other party of the force majeure event and expeditiously takes action to
remedy the event excusing performance.
BAYONNE TRANSMISSION SERVICE AND INTERCONNECTION AGREEMENT
NJ Venture and PSE&G entered into a revised transmission service and
interconnection agreement (the "Transmission and Interconnection Agreement")
on April 27, 1987, under which PSE&G agreed to design, construct, own and
operate a 138,000 volt underground transmission cable circuit and associated
terminal facilities (jointly the "Interconnection") to connect the Bayonne
Plant with PSE&G's Public Service System at PSE&G's Bayonne Switching Station.
The electric power transmission facilities of PSE&G are interconnected with
those of JCP&L, and both PSE&G and JCP&L are members of the Pennsylvania--New
Jersey--Maryland Interconnection. The initial term of the agreement is 20
years. Upon the expiration of the initial term, the Transmission and
Interconnection Agreement shall automatically be extended for a succeeding
term of 10 years, unless either party elects, upon three years' notice, to
terminate the Transmission and Interconnection Agreement at the close of the
initial term.
BAYONNE AGREEMENT FOR THE SALE OF STEAM AND ELECTRICITY TO IMTT--BAYONNE
NJ Venture entered into an agreement for the sale of steam and electricity
(as amended, the "IMTT Steam Sale Agreement") with IMTT--Bayonne on June 13,
1985, which was amended on May 22, 1986. The IMTT Steam Sale Agreement
provides for the sale to IMTT--Bayonne of 100% of its steam needs at its tank
terminal facility, and at the venture's option, the sale of electricity. NJ
Venture has no current plans to offer IMTT--Bayonne electricity under the IMTT
Steam Sale Agreement. The IMTT Steam Sale Agreement has a base term of 10
years, which has expired, with automatic renewal thereafter for each following
year unless either party elects to terminate the agreement at the end of a
renewal year upon 60 days notice. IMTT--Bayonne agrees to purchase from NJ
Venture all of the thermal energy requirements of its tank terminal facility
up to the deemed maximum steam production of 57,000 lbs/hour according to a
pricing formula based on IMTT--Bayonne's avoided cost of steam.
BAYONNE AGREEMENT FOR THE SALE OF STEAM TO IMTT-BX (FORMERLY EXXON)
NJ Venture and Exxon entered into an Agreement for the Sale of Steam (the
"Exxon Steam Sale Agreement") on February 27, 1987, which was amended on
August 21, 1988. Under the terms of the Exxon Steam Sale Agreement, Exxon
agreed to purchase from the Bayonne Plant an average of 50,000 lbs/hour of
steam on an annualized basis. The Exxon Steam Sale Agreement provides for an
initial term of five years (now expired). Thereafter, the Exxon Steam Sale
Agreement continues on a year to year basis unless either party exercises its
rights to terminate as provided in the Exxon Steam Sale Agreement. Beginning
in the fifth year of the agreement, either party is entitled to serve written
notice on the other of its intent to terminate the agreement. The Exxon Steam
Sale Agreement would then terminate one year after the notice or at an earlier
date upon which the parties mutually agree. Exxon used the steam at its
adjacent terminal facility (the "Exxon Terminal Facility") for industrial
purposes.
Exxon sold its terminal facility in Bayonne to IMTT-BX on April 1, 1993. As
a result, IMTT-BX assumed Exxon's rights and obligations under the Exxon Steam
Sale Agreement and is currently performing under the agreement (hereafter
referred to as the "IMTT-BX Steam Sale Agreement"). IMTT-BX renamed the Exxon
Terminal Facility IMTT-BX.
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BAYONNE GAS SUPPLY ARRANGEMENTS
NJ Venture currently purchases its natural gas requirements from PSE&G
pursuant to provisions of a CIG. The Bayonne Plant requires approximately
13,140,000 MMBtu/year (an average of 36,000 MMBtu/day). Certain provisions of
the agreement are summarized below.
Term: Base term of one year with automatic renewals subject to termination
upon five days notice.
Quantities: NJ Venture will purchase up to a maximum of 3,000 Dth/hour and
up to a maximum of 17,600,000 Dth/year.
Obligations: The Bayonne Plant shall maintain QF status.
Service: Interruptible service shall be provided by PSE&G under certain
conditions that include (i) PSE&G's continuing ability to provide the service,
and (ii) the Bayonne Plant's continuing status as a QF. The Bayonne Plant's
supply is subject to 100% interruption on eight hours notice.
Pricing: NJ Venture is required to pay a monthly charge per MMBtu of gas
equal to the sum of
. PSE&G's estimated average commodity cost of gas,
. PSE&G's interstate pipeline commodity charges,
. 50% of PSE&G's interstate pipeline demand charges, and
. PSE&G's local distribution charge.
The average price of gas under CIG in 1997 was $3.496 per MMBtu.
In the event that PSE&G does interrupt service, the Bayonne Plant could
utilize kerosene, which is stored at the site in a day tank with a capacity of
250,000 gallons. In addition, the Bayonne Plant has approximately 60,000
barrels (equivalent to approximately 10 days' supply at full output) of
storage under lease from IMTT--Bayonne adjacent to the site with direct
pipeline transfer capability to the Bayonne Plant's day tank. Additional fuel
is stored routinely by fuel suppliers at the IMTT--Bayonne terminal facility.
Over the last four winters, the Bayonne Plant's gas supply has been
interrupted a total of ten days. During those periods of interruption, the
plant continued to operate on kerosene.
BAYONNE OPERATION AND MAINTENANCE ARRANGEMENTS
GE operates and maintains the Bayonne Plant pursuant to an operations and
maintenance agreement dated effective as of June 6, 1997 (the "Bayonne O&M
Agreement"). The initial term of the Bayonne O&M Agreement expires on November
1, 2008. NJ Venture has a right to terminate the Bayonne O&M Agreement upon
the payment of specified amounts at the end of each of the fourth, seventh and
tenth project years. The Bayonne O&M Agreement is a "cost reimbursable"
contract with a monthly operator's fee and with performance bonuses payable to
GE and liquidated damages assessed against GE based on a series of performance
criteria. In 1997, Bayonne paid performance bonuses to GE of $0.1 million and
paid no operator's fees. Pursuant to the terms of the Linden O&M Agreement,
the Company expects that operator fees will be paid in future years. Under the
Bayonne O&M Agreement, the Bayonne Plant is obligated to buy all parts and
services needed at the Bayonne Plant from GE at certain discount prices, and
GE is obligated to furnish such parts and services to the plant; provided that
if GE is unable to provide such parts or services in a timely or cost
effective manner, the venture may obtain such parts and services from
alternative sources.
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BAYONNE INSURANCE ARRANGEMENTS
NJ Venture carries insurance consisting of:
. ""All Risk" property insurance for direct damage from non-excluded perils
including but not limited to fire and extended coverage, vandalism, theft,
collapse, flood, and earthquake. Such coverage is required to be written on
a replacement cost basis.
. Comprehensive boiler and machinery insurance for sudden or accidental
breakdown of mechanical or electrical equipment.
. Business interruption insurance covering loss of net profits and continuing
expenses, including debt service, resulting from physical loss or damage at
the Bayonne Plant subject to a 30-day deductible.
. General liability insurance and excess liability insurance.
. Workers' compensation and employers' liability insurance.
BAYONNE ENVIRONMENTAL
Waste water, consisting primarily of boiler and cooling tower blowdown,
storm water, demineralizer rinse water and site runoff water, is processed and
the temperature and pH are monitored and controlled prior to discharge into
the Kill Van Kull. Sanitary waste is discharged to the Bayonne Municipal sewer
authority. Air emissions from the facility are controlled and reduced through
water injection into the turbine combustion chambers, SCR and turbine design,
with all emissions below permitted limits. Noise emissions are lower than
required standards. The Company has solid waste disposal arrangements with
contractors it believes to be legally and financially responsible.
BAYONNE SITE LEASE AGREEMENT
NJ Venture, IMTT-Bayonne and Bayonne Industries, Inc. ("Bayonne Industries")
entered into a ground lease agreement dated as of May 26, 1986 (the "Bayonne
Site Lease") with respect to the Bayonne Plant site within the IMTT--Bayonne
facility (the "Bayonne Site"). The Bayonne Site Lease provides NJ Venture with
both a leasehold estate in the Bayonne Site and non-exclusive easements over
other portions of Bayonne Industries' property for various interconnections to
the Bayonne Plant.
The initial term of the Bayonne Site Lease is 20 years from the date of the
Bayonne Site Lease. The Bayonne Site Lease will automatically renew after
expiration of the initial term, for two succeeding terms, the first for two
years and the second for 10 years, unless NJ Venture elects to terminate the
lease. Base rent for the Bayonne Plant is pre-paid for 20 years.
BAYONNE OWNERSHIP STRUCTURE
The Bayonne Plant is owned by NJ Venture, a general partnership. The
managing general partner of NJ Venture is NJ Inc., a subsidiary of the
Company, which owns 86.5% of the interests in NJ Venture. The other general
partners of NJ Venture are parties unrelated to the Company.
BAYONNE FINANCING STRUCTURE
Pursuant to the Prudential Loan Agreement, the development and construction
of the Bayonne Plant was financed through a $90.0 million term loan (the
"Prudential Term Loan") provided by Prudential and approximately $30.0 million
in equity contributed by the partners of NJ Venture. The Prudential Term Loan
is non-recourse to the partners of NJ Venture (except in certain limited
circumstances), is secured by all revenues and assets of NJ Venture and
matures in October 2008. At March 31, 1998, the outstanding principal balance
of the Prudential Term Loan was $70.6 million. See "Description of Certain
Indebtedness--Plant Project Financings--NJ Venture".
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In addition, under the terms of the Equipment Loan Agreement with the
Bayonne Industries, Inc., and as of December 31, 1997, NJ Venture is indebted
to the Bayonne Equipment Lender for the principal amount of $0.2 million and
an additional amount for accrued interest of $0.2 million. Such outstanding
principal amount and accrued interest thereon is due at the later of May 22,
1998 and the expiration of the IMTT Steam Sale Agreement. The obligations
under the Equipment Loan Agreement are secured by the equipment purchased by
NJ Venture in connection with such agreement, and the payment of the interest
that has accrued and continues to accrue on the remaining principal balance is
non recourse to NJ Venture, it being limited to the security for the loan.
Pursuant to a Revolving Credit Loan Agreement (the "Revolving Facility")
with Southwest Bank of Texas, N.A. ("SBT"), NJ Venture established a working
capital revolving facility in the maximum available amount of $5.0 million,
which facility is secured by revenues of NJ Venture and expires December 18,
1998. In addition, NJ Venture has an outstanding letter of credit issued by
the Union Bank of Switzerland ("UBS") to secure certain obligations to PSE&G
(the "PSE&G L/C"), which expires in May 1999 and is not required to be
renewed. The letter of credit was procured for NJ Venture by Financial
Services. Financial Services pays a quarterly fee on such letter of credit
calculated at 0.3% per annum on the face amount of the letter of credit to the
issuer thereof and has the reimbursement obligations to such issuer in the
event any drawing is made on the letter of credit. Pursuant to agreement
between NJ Venture and Financial Services, NJ Venture agrees to reimburse
Financial Services for all fees and reimbursement obligations incurred by
Financial Services under the letter of credit, which obligations of NJ Venture
are unsecured. At March 31, 1998, no amounts were outstanding under the
Revolving Facility, and the outstanding amount of the PSE&G L/C was $4.4
million. See "Description of Certain Indebtedness--Plant Project Financings--
NJ Venture".
NJ VENTURE CASH DISTRIBUTIONS
The cash remaining after payment of operating expenses, debt service and
maintenance of required reserve funds ("NJ Venture Distributable Cash") is
distributed monthly by NJ Venture to each of the partners of NJ Venture
according to each partner's respective ownership percentages in NJ Venture.
Under the Prudential Term Loan Agreement, NJ Venture is prohibited from making
distributions to its partners except in accordance with an approved operating
budget, and no distributions may be made if there is a default under the
Prudential Term Loan Agreement. In addition, the Prudential Term Loan
Agreement requires NJ Venture to create a debt service reserve fund from net
cash flow if NJ Venture's annual debt service ratio, calculated each quarter
using the previous twelve months financial information, falls below 1.50x. NJ
Venture must increase the reserve until funds held in such reserve plus the
funds available for debt service equals 1.50x the previous twelve months debt
service. Any funds held in such reserve may be released as cash to the extent
that the balance of funds retained in such reserve (if any) together with NJ
Venture's net cash flow cause NJ Venture's coverage ratio to exceed 1.50x.
There are similar restraints on distributions in the Revolving Facility.
Historical distributions of NJ Venture are set forth in the table below.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----- ----- ----- ----- -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
NJ VENTURE DISTRIBUTABLE CASH
NJ Inc. .................................... $18.1 $24.5 $31.9 $16.4 $25.5
Minority General Partners................... 2.8 3.8 4.9 2.5 4.0
----- ----- ----- ----- -----
Total....................................... $20.9 $28.3 $36.8 $18.9 $29.5
===== ===== ===== ===== =====
</TABLE>
CAMDEN OVERVIEW
The Camden Plant is a 146-MW gas-fired, combined-cycle cogeneration facility
developed by one of the Company's subsidiaries and is owned by Camden Cogen.
The Camden Plant is located on a three acre plot of land at the corner of
Broadway and Chelton Avenue in Camden, New Jersey (the "Camden Site"). Power
generated by the Camden Plant is sold to PSE&G, and steam is sold to Camden
Paperboard, a subsidiary of
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Caraustar Industries, Inc. Steam produced by the Camden Plant is used by
Camden Paperboard in its waste paperboard recycling process. FERC has
certified the Camden Plant as a QF under PURPA.
The Camden Plant was constructed by Ebasco Constructors, Inc. and achieved
commercial operations in March 1993. The Camden Plant is a base load facility
with a nominated summer capacity of 148.5 MW and a nominated winter capacity
of 159.5MW. The Camden Plant's overall availability and capacity factors have
each been in excess of 92% for each full operating year since it entered
service. The Camden Plant's average availability and capacity factors for the
period from the commercial operations date to December 1997 were 95% and 94%,
respectively. For 1997, the plant's availability and capacity factors were 96%
and 96%, respectively.
The Camden Plant comprises one GE Frame 7EA gas turbine generator and one GE
extractional condensing steam turbine generator. Natural gas is burned
directly in a combustion turbine generator to produce electricity and high
temperature exhaust gases. These exhaust gases are channeled to a Deltak HRSG
to produce high pressure steam for a steam turbine driven electric generator,
providing additional electricity as well as quality process steam for sale to
Camden Paperboard. The steam turbine exhausts into a water cooled surface
condenser to return condensate to the Camden Plant's water cycle. All raw
makeup water is purchased from the City of Camden and treated for use by the
plant's state-of-the-art demineralizer system.
The 13.8 KV electrical power produced by the generators is stepped up to 230
KV and delivered to a gas insulated breaker and outdoor switchgear for
distribution and transmission into the electric grid. An underground
dielectric fluid-cooled cable provides the outgoing power connection to PSE&G.
This cable interconnects with the PSE&G Gloucester Sub-station in Gloucester,
New Jersey, over an interconnection distance of approximately four miles.
The Camden Plant has been designed to meet the stringent environmental
standards of the State of New Jersey. The plant uses BACT to reduce gas
turbine emissions to the level required and permitted by federal and state
regulators. The Camden Plant incorporates an SCR system to reduce CO and NOx
emissions. NOx and CO emissions levels are further controlled through steam
injection into the turbine combustion chamber and by the design of the
combustion turbine.
The plant design has been optimized based on thermal cycle power output of
140 MW net and average export steam generation to Camden Paperboard of 35,000
lbs/hour.
CAMDEN POWER PURCHASE ARRANGEMENTS
The electrical capacity of the Camden Plant is sold to PSE&G pursuant to a
Purchase and Interconnection Agreement (the "Camden PPA"). This agreement
provides for the sale of energy and capacity from the Camden Plant to PSE&G
and for installation of the interconnection with PSE&G that was designed,
constructed and installed by PSE&G. Certain provisions of the Camden PPA are
summarized below.
Term: Base term of 20 years from the date of commercial operation, March
1993, with an option for two five-year renewal periods subject to mutual
agreement of the parties.
Regulatory Approval: Requires approval of the NJBPU, which must find the
contract reasonable and prudent throughout its term, and which must allow
PSE&G full and timely recovery of contract costs through the utility's energy
clause. NJBPU authorization occurred June 1989.
Base Term Pricing--Capacity: PSE&G is required to pay a monthly seasonal
capacity payment for power delivered to PSE&G's receipt point. The payment is
$8.57/KW/month, from January 1, 1988, escalated at 5% per annum; the rate as
of March 31, 1998 was $13.96/KW/month. Payments during certain periods will
not exceed established capacity levels as follows: During the summer peak
months of June through September, the Camden Plant has a nominated capacity of
148.5 MW, and the plant has a nominated capacity of 159.5 MW during the winter
peak months of December through February. The Camden Plant has the right to
adjust these seasonal capacity levels 10% of the original capacity every three
years with a cumulative maximum of 10%. Adjustments to date have resulted in
the cumulative maximum being achieved.
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Base Term Pricing--Energy Fixed: PSE&G will pay an energy charge which has
three components. The fixed energy component is 2.0c/KWh for power delivered
to PSE&G's receipt point, and remains unchanged for 20 years.
Base Term Pricing--Energy Fuel: The fuel energy component, as of January
1988, was 1.73c/KWh for power delivered to PSE&G's receipt point and is
escalated monthly based upon PSE&G's average cost of gas ("ACOG"). The ACOG
equals PSE&G's average gas commodity cost plus a transportation component
equal to PSE&G's interstate pipeline usage charges and one-half of PSE&G's
interstate pipeline reservation charges. The fuel energy component was
2.056c/KWh as of March 31, 1998.
Base Term Pricing--Energy Inflation: The inflation component, in January
1988, was 0.93c/KWh for power delivered to PSE&G's receipt point and escalates
based on a GDP index. This component tracks closely with a portion of the
pipeline charges and with the Camden Plant's variable O&M costs, which tend to
increase with inflation. The inflation component was 1.217c/KWh as of March
31, 1998.
Security: There is a tracking account which relates payments PSE&G has made
to Camden Cogen under the Camden PPA to estimated future PJM capacity and
energy rates. These estimates are fixed and set out in the Camden PPA. The
tracking account will reach a maximum of $54 million during 1998 and decline
to zero by year 2001. If a breach by PSE&G were to result in a termination of
the Camden PPA, Camden Cogen would be required to pay to PSE&G the amount, if
any, by which the balance in the tracking account exceeds the liquidated
damages due Camden Cogen as a result of such breach. PSE&G has been granted a
second lien on the Camden Plant to secure its rights with respect to the
security provisions of the Camden PPA.
Operation--Curtailment: PSE&G is obligated to accept all of the Camden
Plant's net electrical output unless: (i) the Camden Plant fails to comply
with safety requirements, (ii) such acceptance would jeopardize the integrity
or transmission facilities of the PSE&G or PJM systems, (iii) during system
emergencies or planned maintenance of the transmission or interconnection
facilities, or (iv) during light load periods, if due to operational
circumstances, PSE&G would incur costs greater than those that it would have
incurred if it had not made such purchases. As of the date of this Prospectus,
PSE&G has never curtailed deliveries pursuant to these provisions other than
minimum general system emergencies and other than during "light load" periods
which have occurred every year.
Qualifying Facility Status: The Camden Plant must meet FERC's operating and
efficiency standards to maintain its QF status under PURPA. If sections 201
and 210 of PURPA are no longer in effect or the Camden Plant ceases to qualify
as a QF for reasons not within its control, including, a reduction or
cessation in thermal energy use, the Camden PPA will nevertheless continue in
effect provided (i) the NJBPU does not bar PSE&G from passing the rates
through to its customers, (ii) federal, state or local laws are not violated,
and (iii) Camden Cogen or its owners are not subject to unreasonably
burdensome regulation under PUHCA. See "Government Regulation--Federal Energy
Regulation". If one of the above events does occur, Camden Cogen and PSE&G
must negotiate in good faith for an arrangement with substantially similar
economic benefits to each party as are provided to each party under the Camden
PPA. In addition, if one of the above PURPA events occurs, and the NJBPU
denies rate pass-through of PSE&G's obligations under the PSE&G PPA, Camden
Cogen and PSE&G must negotiate in good faith to provide a rate with
substantially similar economic benefits to each party, and which the NJBPU
will permit PSE&G to recover from its ratepayers. If a final non-appealable
order is issued that the Camden Plant is not a QF, then either party may
terminate the Camden PPA, unless the Camden Plant is attempting to restore its
QF status.
Breach of Contract: Among other events, the failure by Camden Cogen to
perform its obligations under the Camden PPA constitutes a breach unless,
within 30 days after notice from PSE&G, Camden Cogen cures the breach or
commences and diligently pursues a cure. For any reason other than force
majeure or curtailment, failure to deliver electric power for 240 out of 365
days constitutes a breach. Such occurrences will be deemed events of default
which, if not remedied in 30 days, may be submitted to a regulatory body with
appropriate jurisdiction or arbitration for resolution.
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Insurance: Camden Cogen is required to maintain customary insurance
coverages.
Assignment: The Camden PPA may not be assigned or transferred by either
party without prior written consent except that Camden Cogen may assign to an
affiliate or a lender.
Force Majeure: Either party to the Camden PPA may suspend performance
(except for any obligation to make payments) thereunder due to the occurrence
of force majeure so long as the non-performing party provides prompt notice to
the other party of the force majeure event and expeditiously takes action to
remedy the event excusing performance.
CAMDEN STEAM SALES AGREEMENT
Camden Cogen sells steam pursuant to an agreement, dated December 18, 1989,
with Camden Paperboard. Certain provisions of this agreement are summarized
below. Camden Paperboard operates a low-tech industrial plant designed to
recycle waste paperboard for use in folding boxboard and gypsum wallboard
facing paper. Camden Paperboard has been in business since 1911 and is a
wholly-owned subsidiary of Caraustar Industries, Inc.
Term: The agreement provides for a base period of 20 years with an option
for two five-year renewal periods subject to mutual agreement of both parties.
Purchase and Delivery: Camden Cogen will sell and deliver steam up to a
maximum quantity of 60,000 lbs/hour. Camden Paperboard has agreed to accept
and utilize a minimum quantity of steam sufficient to preserve the Camden
Plant's QF status under PURPA. Camden Paperboard's obligation is deemed
satisfied if it purchases an amount averaging 23,000 lbs/hour from Camden
Cogen. Camden Paperboard is required to return steam condensate in specified
quantities and qualities.
Pricing: Steam is priced in two increments. Camden Paperboard will receive
the first 35,000 lbs/hour at no cost and thereafter pay one-half the avoided
boiler fuel cost per 1,000 lbs/hour in excess of such amount on a monthly
basis.
Suspension of Obligation: Camden Paperboard's obligation to take the minimum
steam required to maintain QF status shall be excused for a maximum of twelve
months in the aggregate due to any of the following: (i) an event of force
majeure; (ii) a major plant overhaul; (iii) retooling or equipment failure; or
(iv) reduced plant capacity at Camden Paperboard's facility due to economic
conditions. After such period, Camden Paperboard's obligation to take steam
will be unaffected by such events or conditions.
Assignment: The Camden Steam Sales Agreement may not be assigned or
transferred by either party without prior written consent of the other party
except that the parties may assign it to an affiliate or a lender.
CAMDEN FUEL SUPPLY AGREEMENTS
Camden Cogen entered into a Gas Service Agreement with PSE&G. Under the
terms of the Camden PPA with PSE&G, Camden Cogen is paid a fuel component for
energy which escalates with PSE&G's average cost of gas ("ACOG"). This gives
Camden Cogen an incentive to devise and implement a fuel procurement strategy
that tracks PSE&G's ACOG. For the past eight years and currently, PSE&G's ACOG
has been based primarily on spot market gas prices. Camden Cogen currently has
short-term gas supply agreements with three producers with prices indexed to
spot market prices: Anadarko Energy Services Company, Columbia Energy Services
Corp. and Texaco Natural Gas Inc. Certain provisions of the Gas Service
Agreement with PSE&G are summarized below.
Term: The agreement provides for a base term of 20 years with two 5-year
extensions subject to mutual agreement.
Quantities: PSE&G is to provide the Camden Plant with firm gas
transportation (to burner tip) for up to 30,000 MMBtu/day (the "Camden Resale
Service") and to provide interruptible gas transportation service to Camden
during peak period curtailments if interstate pipeline capacity is available.
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Obligations: PSE&G will provide firm transportation for 30,000 MMBtu/day
(plus shrinkage) on a continuous, year round basis subject to a maximum number
of days of interruption per year on any day the U.S. Weather Bureau has
forecasted that the average temperature at Newark Airport, Newark, New Jersey,
will be 26 degrees Fahrenheit or less. During such interruptions, the Camden
Plant can burn kerosene, Jet-A or L.S. Diesel, although interruptible gas
service may be available via extended service or through other arrangements
that the venture may make for incremental gas supplies. PSE&G is required to
obtain firm gas transportation for at least 15 years to provide the resale
service. PSE&G is responsible for obtaining any additional regulatory
approvals that may be required in the future.
Camden Cogen is obligated to sell and deliver the contract quantity of gas
to PSE&G at the receipt points and to purchase such gas at the plant upon
delivery by PSE&G during the period April through October. If the venture
cannot supply or accept the contract quantity during this period, it is
obligated to pay PSE&G an agreed upon fee. Camden Cogen has the right to
adjust the contract quantity every three years provided cumulative adjustments
do not exceed plus or minus 10% of the original contract quantity. Upon
curtailment, the Camden Plant may substitute alternative fuels in lieu of the
resale service for up to 25 days per year.
Services: Under the Camden Resale Service arrangement, Camden Cogen
purchases 30,000 MMBtu/day (plus shrinkage) of gas from producers in the Gulf
Coast region of the United States under a portfolio of short to intermediate-
term, spot price based firm contracts. Gas purchased by Camden Cogen is sold
to PSE&G at a price equal to Camden Cogen's cost and is then delivered by
PSE&G to the Camden Plant and resold to Camden Cogen. FERC Order 636, issued
April 1992, prohibits new contracts for such resale transportation services.
This contract is allowed under the grandfather provision of Order 636, but it
cannot be extended or renewed.
Pricing: PSE&G purchases gas from Camden Cogen, transports the gas to the
Camden Plant site and resells it to Camden Cogen for the same price plus
certain agreed additional components.
Force Majeure: The Gas Service Agreement between Camden Cogen and PSE&G may
be terminated by the suppliers for lack of performance by Camden Cogen due to
occurrence of force majeure if the inability to perform extends for 18 months.
Camden Cogen may terminate the Gas Service Agreement if the supplier
experiences a force majeure event for a period of six consecutive months.
CAMDEN OPERATION AND MAINTENANCE AGREEMENTS
Camden Cogen has entered into an operation and maintenance agreement dated
effective as of June 6, 1997 (the "Camden O&M Agreement"), with GE. The
initial term of the Camden O&M Agreement is 12 project years. Camden Cogen has
a right to terminate the Camden O&M Agreement by the payment of specified
amounts at the end of each of the fourth, seventh and tenth project years and
a right to extend such agreement for two years after the initial term. The
Camden O&M Agreement is a "cost reimbursable" contract with a monthly
operator's fee and with performance bonuses payable to GE and liquidated
damages assessed against GE based on a series of performance criteria. In
1997, Camden Cogen paid performance bonuses of $0.1 million to GE and paid no
operator's fees. Pursuant to the Camden O&M Agreement, the Company expects
operator fees will be paid in future years. Under the Camden O&M Agreement,
Camden Cogen is obligated to buy all parts and services needed at the Camden
Plant from GE at certain discount prices, and GE is obligated to furnish such
parts and services to the plant; provided if GE is unable to provide such
parts or services in a timely or cost effective manner, Camden Cogen may
obtain such parts and services from alternative sources.
CAMDEN INSURANCE ARRANGEMENTS
Camden Cogen carries insurance consisting of:
. "All Risk" property insurance for direct damage from non-excluded periods
including but not limited to fire and extended coverage, vandalism, theft,
collapse, flood, and earthquake. Such coverage is required to be written on
a replacement cost basis.
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. Comprehensive boiler and machinery insurance for sudden or accidental
breakdown of mechanical or electrical equipment.
. "Single Interest Excess of Loss Policy" insurance is maintained above the
coverage of the property and boiler machinery policies.
. Business interruption insurance covering loss of net profits and continuing
expenses resulting from physical loss or damage at the Camden Plant subject
to a 30-day deductible.
. General Liability insurance, employer's liability insurance and excess
liability insurance.
. Workers' compensation and employer's liability insurance.
CAMDEN ENVIRONMENTAL
All waste water, consisting primarily of cooling tower blowdown, storm
water, boiler blowdown, demineralizer rinse water and sanitary waste are
processed, and temperature and pH are monitored and controlled prior to
discharge to the Camden County Municipal Utility Authority. Air emissions from
the facility are controlled and reduced through steam injection into the gas
turbine combuster, SCR and turbine design with all emissions well below
permitted limits. The Company has solid waste disposal arrangements with
contractors it believes to be legally and financially responsible.
CAMDEN SITE ARRANGEMENTS
Camden Cogen owns the Camden Site. Camden Cogen acquired the Camden Site,
which consisted of two adjacent parcels, in January 1992 prior to the
commencement of construction of the Camden Plant.
CAMDEN OWNERSHIP STRUCTURE
The Camden Plant is owned by Camden Cogen, a limited partnership. The
general partner of Camden Cogen, Camden GPLP, is a limited partnership
subsidiary of the Company. The limited partner in Camden Cogen is GECC.
CAMDEN FINANCING STRUCTURE
Pursuant to the Camden Cogen Term Loan Agreement, the development and
construction of the Camden Plant was initially financed through a $136.0
million loan. On April 1, 1993 (the "Second Capital Contribution Date"), and
pursuant to the Camden Cogen Term Loan Agreement, such loan was refinanced as
a term facility to provide for 3 tranches of term loans payable to GECC: the
Camden Tranche A Loan of $81.6 million, the Camden Tranche B Loan of $27.2
million and the Camden Tranche C Loan of $10.2 million; the remaining balance
of the construction loan was contributed to Camden Cogen as equity by GECC.
Subsequently, on December 22, 1993, GECC assigned the Camden Tranche A Loan to
The Bank of Tokyo--Mitsubishi Trust Company and Toronto Dominion (Texas) Inc.,
GECC retained the Camden Tranche B Loan, and GECC also contributed an amount
equal to the amount represented by the Camden Tranche C Loan as additional
equity in Camden Cogen for payment in full by Camden Cogen of the Camden
Tranche C Loan.
The Camden Tranche A Loan and the Camden Tranche B Loan (collectively, the
"Camden Cogen Term Loans") are secured by a lien on the Camden Plant, Camden
Cogen's revenues and other assets, a pledge of the partnership interest of
Camden GPLP, and a pledge of Camden GPLP's general partner's general
partnership interest in Camden GPLP. The Camden Tranche A Loan matures May 1,
2007, and at March 31, 1998, the aggregate outstanding principal balance of
the Camden Tranche A Loan was $65.0 million. The Camden Tranche B Loan matures
May 1, 2009, and at March 31, 1998, the outstanding principal balance of the
Camden Tranche B Loan was $23.9 million. See "Description of Certain
Indebtedness--Plant Project Financings--Camden Cogen". In addition, pursuant
to the Camden Cogen Term Loan Agreement, GECC has issued for the account of
Camden Cogen, a standby letter of credit for the benefit of the holders of the
Camden Tranche A Loan in an amount representing six months debt service on
that loan, which amount at March 31, 1998 was $4.8 million. See "Description
of Certain Indebtedness--Plant Project Financings--Camden Cogen".
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CAMDEN GENERAL PARTNER TERM LOAN
Pursuant to the Camden GP Term Loan Agreement, GECC has made available a
$36.3 million term loan facility to Camden GPLP (the "Camden GP Term Loan")
secured by Camden GPLP's general partnership interest in Camden Cogen, the
general partnership interest in Camden GPLP of its general partner and certain
reserve accounts created with revenue of Camden Cogen. No further borrowings
may be made by Camden GPLP under the Camden GP Term Loan, and at March 31,
1998, the outstanding principal balance of the Camden GP Term Loan was $12.7
million. The Camden GP Term Loan matures in May 2010. See "Description of
Certain Indebtedness--Plant Project Financings--Camden Cogen".
CAMDEN CASH DISTRIBUTIONS
Camden Cogen's cash ("Camden Cogen Distributable Cash") remaining after the
payment of project expenses and, pursuant to the security deposit agreement
entered into in connection with the Camden Cogen Term Loan Agreement, monthly
transfers from revenues of Camden Cogen for (i) fees and expenses owed to
lenders, interest rate swap counterparties and letter of credit issuers under
the Camden Cogen Term Loan Agreement, (ii) principal interest rate and
interest debt service for lenders under the Camden Cogen Term Loan Agreement,
(iii) reimbursement obligations owed on letters of credit issued under the
Camden Cogen Term Loan Agreement and (iv) reserve amounts required if the
fixed charge coverage ratio of the Camden Cogen Term Loan Agreement is less
than 1.2 to 1.0, is, absent the existence of a default under the Camden Cogen
Term Loan Agreement, distributed monthly by Camden Cogen to the partners of
Camden Cogen. In addition, distributions of Camden Cogen Distributable Cash to
Camden GPLP are to be made (a) net of monthly (1) principal and interest debt
service requirements under the Camden GP Term Loans and (2) reserve
requirements of the Camden GP Term Loan, in each case if Camden Cogen's fixed
charge coverage ratio is less than 1.2 to 1.0 and (b) in the absence of a
default under the Camden GP Term Loans. Under the terms of Camden Cogen's
partnership agreement, GECC receives 99% and Camden GPLP 1% of Camden Cogen
Distributable Cash up to a capped amount (approximately $0.3 million to $0.4
million per month through May 2007 and varying amounts thereafter) ("Camden
Tranche 1"). Camden Tranche 1 distributions are set at a level such that, GECC
will receive its initial equity investment and a specified return thereon
through its share of Camden Tranche 1 distributions and the allocation of all
venture tax benefits (depreciation).
The balance of the Camden Cogen Distributable Cash following satisfaction of
the Camden Tranche 1 obligations, or "Camden Tranche 2", is distributed 99% to
Camden GPLP and 1% to GECC. Payments on Camden Tranche 1 must be made in full
before any payments on Camden Tranche 2 may be made. Once GECC receives its
specified return, distributions of cash according to the above mechanism ends
and Camden Cogen Distributable Cash is to be distributed 10% to GECC and 90%
to Camden GPLP. Historical annual distributions from Camden Cogen are set out
in the table below.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----- ----- ----- ----- -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
CAMDEN COGEN DISTRIBUTABLE CASH
Payments to GECC and lenders
--Camden Tranche 1....................... $15.9 $15.7 $15.3 $15.5 $10.0
--Camden Tranche 2....................... 0.1 0.1 0.2 -- 0.3
Distributions to Camden GPLP
--Camden Tranche 1....................... 0.3 0.2 0.2 0.2 0.1
--Camden Tranche 2....................... 8.3 14.3 14.8 4.2 7.9
----- ----- ----- ----- -----
Total...................................... $24.6 $30.3 $30.5 $19.9 $18.3
===== ===== ===== ===== =====
</TABLE>
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SELKIRK
Two subsidiaries of the Company are investors in Selkirk Venture, which owns
a natural-gas fired cogeneration facility (the "Selkirk Plant") in Bethlehem,
New York. First, Selkirk GP Inc. is a non-managing general partner in Selkirk
Venture. Secondly, Selkirk LP is a limited partner in Selkirk Venture. The
Company is not the operator of the Selkirk Plant and its investment in Selkirk
Venture is not material to the business, financial condition, results of
operations or cash flow of the Company taken as a whole. The Company does not
anticipate receiving any material amount of distributions from Selkirk Venture
for the foreseeable future.
Selkirk Venture has long-term contracts to sell electric capacity and energy
produced by the Selkirk Plant to Niagara Mohawk Power Corporation ("Niagara
Mohawk") and Con Ed and steam produced by such Plant is sold to GE Plastics, a
division of GE. On March 31, 1998, Selkirk Venture filed with the Securities
and Exchange Commission (the "Commission") an Annual Report on Form 10-K (the
"Selkirk 10-K") for the year ended December 31, 1997, in which it discusses
the circumstances of Niagara Mohawk's current financial restructuring efforts,
including the possibility of Niagara Mohawk's filing for reorganization under
Chapter 11 of Title 11 of the United States Code, which efforts will likely
include a substantial restructuring of Selkirk Venture's long-term power
purchase agreement with Niagara Mohawk. In the Selkirk 10-K, Selkirk Venture
refers to a Report on Form 8-K filed with the Commission by Niagara Mohawk on
July 10, 1997, in which Niagara Mohawk stated that it had entered into a
Master Restructuring Agreement ("NMMRA") pursuant to which it and 29
independent power producers, including Selkirk Venture, had agreed to
terminate, restate or amend their power purchase agreements with Niagara
Mohawk. The Selkirk 10-K also states that in early 1998 the NYPSC approved
Niagara Mohawk's restructuring proposal, referred to as its "Power Choice"
proposal or settlement, which incorporates the terms of the NMMRA. Under the
NMMRA, Selkirk Venture's power purchase agreement would be substantially
amended and restructured as to price and delivery provisions, but details are
still subject to extensive negotiation and the NMMRA is subject to a number of
other conditions. In its 10-K filing, Selkirk Venture stated that it was
unable to predict what effect such restructurings would have on the venture,
but noted that approximately 19.3% of its revenues in 1997 were attributable
to electric sales to Niagara Mohawk.
Also in the Selkirk 10-K, Selkirk Venture noted that 72.5% of its total
project revenues for 1997 were attributable to electric sales to Con Ed under
its long-term power purchase agreement with Con Ed. Selkirk Venture stated
that it was engaged in a dispute with Con Ed as to a claim by Con Ed that it
has the right to acquire certain excess natural gas supplies of the Selkirk
Plant, which claim, if adversely determined to Selkirk Venture, could
materially and adversely affect the venture's cash flows from electric output.
In the Selkirk 10-K, Selkirk Venture also noted other proceedings,
regulatory matters and on-going negotiations that could materially affect its
future business. The impact of all of such matters on Selkirk Venture,
including the Niagara Mohawk and Con Ed matters, could be to decrease the
likelihood of, or the amount of, future dividends distributed by Selkirk
Venture to the Company.
According to the Selkirk 10-K, the Selkirk Plant is located on an
approximately 15.7 acre site leased from GE adjacent to GE's plastic
manufacturing plant in Bethlehem, New York, and has a total electric
generating capacity of 345 MW with a maximum average steam output of 400,000
lbs/hr. The Selkirk Plant consists of one unit ("Unit 1") with an electric
generating capacity of approximately 79.9 MW and a second unit ("Unit 2") with
an electric generating capacity of approximately 265 MW. The Selkirk Plant
burns natural gas as its primary fuel. The Plant is a "topping-cycle
cogeneration facility", which means that when the Plant is operated in a
combined-cycle mode like the Company's principal plants, it uses natural gas
or fuel oil to produce electricity, and the reject heat from power production
is then used to provide steam. Unit 1 and Unit 2 have been designed to operate
independently for electrical generation, while being thermally integrated for
steam generation, thereby optimizing efficiencies in the combined performance
of the Plant. The Selkirk Plant has been certified as a QF in accordance with
PURPA and the regulations promulgated thereunder by FERC.
The principal and managing general partner of Selkirk Venture is an indirect
wholly-owned subsidiary of a corporation jointly owned, according to the
Selkirk 10-K, by affiliates of PG&E Enterprises and Bechtel
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Enterprises, Inc., which is generally responsible for managing and controlling
the business and affairs of the venture.
The indebtedness of Selkirk Venture (the terms of which contain substantial
restrictions on Selkirk Venture's making cash distributions to its general and
limited partners pursuant to a segregated fund mechanism which provides a
hierarchy of funds, with partnership distribution funds being the lowest into
which cash receipts from the project flow) is not guaranteed by, or otherwise
the obligation of, the Company or any of its subsidiaries except that the
Company's subsidiary which is the 1% general partner in Selkirk Venture has
joint and several general partner liability for the obligations of such
Venture, as does the principal and managing general partner of such Venture,
and the general partnership interest of such subsidiary in Selkirk Venture, as
well as the capital stock of such subsidiary, is pledged to secure the
principal indebtedness of the Selkirk Venture. The general partners have
contribution rights from each other, in proportion to their ownership
interests, to the extent of their general partnership interests. In addition,
Selkirk Venture has agreed to indemnify the general partners against various
potential liabilities which could be incurred by the general partners, with
satisfaction of such indemnity obligation being limited solely to the assets
of Selkirk Venture. The financial statements of Selkirk Venture contained in
the Selkirk 10-K indicate that Selkirk Venture has had positive net income,
cash flows and working capital in the recent periods ended December 31, 1997,
but Selkirk Venture had a negative net worth for accounting purposes as of
such date. In "Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Selkirk 10-K, Selkirk Venture
indicates that, based on current conditions and circumstances, it will have
sufficient liquidity available from cash flows from operations to fund
existing debt obligations and operating costs.
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GOVERNMENT REGULATION
The Company is subject to complex and stringent energy, environmental and
other governmental laws and regulations at the federal, state and local levels
in connection with the development, ownership and operation of its energy
generation facilities. Federal laws and regulations govern transactions by
electrical and gas utility companies, the types of fuel which may be utilized
by an electric generating plant, the type of energy which may be produced by
such a plant and the ownership structure of a plant. State utility regulatory
commissions may examine the prudence of the rates and, in some instances,
other terms and conditions under which public utilities purchase electric
power from independent producers and approve the rates for sale of retail
electric power. Under certain circumstances where specific exemptions are
otherwise unavailable, state utility regulatory commissions may have broad
jurisdiction over non-utility electric power plants. Energy producing projects
also are subject to federal, state and local laws and administrative
regulations which govern the emissions and other substances produced,
discharged or disposed of by a plant and the geographical location, zoning,
land use and operation of a plant. Applicable federal environmental laws
typically have both state and local enforcement and implementation provisions.
These environmental laws and regulations generally require that a wide variety
of permits and other approvals be obtained before the commencement of
construction or operation of an energy-producing facility and that the
facility then operate in compliance with such permits and approvals.
FEDERAL ENERGY REGULATION
PURPA. The enactment of the PURPA and the adoption of regulations thereunder
by FERC provided incentives for the development of cogeneration facilities
like the Company's plants.
A domestic electricity generating project must be a Qualifying Facility
("QF") under FERC regulations in order to take advantage of certain rate and
regulatory incentives provided by PURPA. PURPA exempts owners of QFs from
PUHCA, and exempts QFs from most provisions of the Federal Power Act (the
"FPA") and, except under certain limited circumstances, state laws concerning
rate or financial regulation. These exemptions are important to the Company
and its competitors. The Company believes that each of the electricity
generating plants in which the Company owns an interest currently meets the
requirements under PURPA necessary for QF status. Further, the Company has not
received any notice that any of the required regulatory approvals have been
revoked or that FERC or any power purchaser has initiated any regulatory
proceedings to revoke the QF status of any of the Company's plants.
PURPA provides two primary benefits to QFs. First, QFs generally are
relieved of compliance with extensive federal, state and local regulations
that control the organizational and financial structure of an electric
generating plant and the prices and terms on which electricity may be sold by
the plant. Secondly, FERC's regulations promulgated under PURPA require that
electric utilities purchase needed electricity generated by QFs at a price
based on the purchasing utility's Avoided Cost and that the utility sell back-
up power to the QF on a non-discriminatory basis. The term "Avoided Cost" is
defined as the incremental cost to an electric utility of electric energy or
capacity, or both, which, but for the purchase from QFs, such utility would
generate for itself or purchase from another source. FERC regulations also
permit QFs and utilities to negotiate agreements for utility purchases of
power at rates lower than the utility's Avoided Cost. Due to increasing
competition for utility contracts, the current practice is for most power
sales agreements to be awarded at a rate below Avoided Cost. While public
utilities are not explicitly required by PURPA to enter into long-term power
sales agreements, PURPA helped to create a regulatory environment in which it
was common for long-term agreements to be negotiated.
In order to be a QF, a cogeneration facility must produce not only
electricity, but also useful thermal energy for use in an industrial or
commercial process for heating or cooling applications in certain minimum
proportions to the facility's total energy output and must meet certain energy
efficiency standards. Finally, a QF must not be more than 50% owned by an
electric utility company or by an electric utility holding company, or a
subsidiary of such a utility or holding company or any combination thereof, or
receive more than 50% of the stream of economic benefits from the operation of
the QF.
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The Company endeavors to operate its ventures, monitor compliance by the
ventures with applicable regulations and choose its customers in a manner
which minimizes the risks of any plant losing its QF status. Certain factors
necessary to maintain QF status are, however, subject to the risk of events
outside the Company's control. For example, loss of a thermal energy customer
or failure of a thermal energy customer to take required amounts of thermal
energy from a cogeneration facility that is a QF could cause the facility to
fail to meet requirements regarding the level of useful thermal energy output.
Upon the occurrence of such an event, the Company would seek to replace the
thermal energy customer or find another use for the thermal energy which meets
PURPA's requirements, but no assurance can be given that this would be
possible.
If one of the plants in which the Company has an interest should lose its
status as a QF, the plant would no longer be entitled to the exemptions from
PUHCA and the FPA afforded to QFs. Loss of such exemption could trigger
certain rights of termination under the power sales agreement or any
applicable steam sales agreement as applicable to such plant, could subject
such plant to rate and financial regulation as a public utility under the FPA
and state law and could result in the Company inadvertently becoming a public
utility holding company by owning more than 10% of the voting securities of,
or controlling, a facility that would no longer be exempt from PUHCA. Such
events could cause all of the Company's remaining plants to lose their
qualifying status because QFs may not be controlled or more than 50% owned by
such public utility holding companies. Loss of QF status may also trigger
defaults under covenants to maintain QF status in the ventures' power purchase
agreements, steam sales agreements and financing agreements, and under the
Indenture, and result in termination, penalties or acceleration of
indebtedness under such agreements such that loss of status may be on a
retroactive or a prospective basis. Further, certain of the Company's power
purchase agreements are structured such that the loss of QF status could
result in a reduction in revenues or elimination of the parties' obligations
to perform unless certain conditions are met under the power purchase
agreements. See "Existing Venture and Plant Description--NJ Venture Power
Purchase Agreement--PSE&G" and "Existing Venture and Plant Description--Camden
Power Purchase Agreements".
If a plant were to lose its QF status, the Company could attempt to avoid
holding company status (and thereby protect the QF status of its other plants)
on a prospective basis by restructuring the venture, by changing its voting
interest in the entity owning the non-qualifying plant to nonvoting or limited
partnership interests and selling the voting interests to an individual or
company which could tolerate the lack of exemption from PUHCA, by otherwise
restructuring ownership of the venture so as not to become a holding company
or qualifying as an EWG. These actions, however, would require approval of the
Securities and Exchange Commission (the "Commission") or a no-action letter
from the Commission, and would result in a loss of control over the non-
qualifying plant, could result in a reduced financial interest therein and
might result in a modification of the Company's operation and maintenance
agreement relating to such plant. A reduced financial interest could result in
a gain or loss on the sale of the interest in such plant. Loss of QF status on
a retroactive basis could lead to, among other things, fines and penalties
being levied against the Company and its subsidiaries and claims by utilities
for refund of payments previously made and the termination of the applicable
power purchase agreement or a reduction of payments thereunder.
Under the Energy Policy Act of 1992, if a plant can be qualified as an EWG,
it will be exempt from PUHCA even if it does not qualify as a QF. Therefore,
another response to the loss or potential loss of QF status would be to apply
to have the plant qualified as an EWG. However, assuming this changed status
would be permissible under the terms of the applicable power sales agreement,
rate approval from FERC and approval of the utility would be required. In
addition, the plant would be required to cease selling electricity to any
retail customers (such as the thermal energy customer) and could become
subject to state regulation of sales of thermal energy. See "--Public Utility
Holding Company Regulation."
Public Utility Holding Company Regulation. Under PUHCA, any corporation,
partnership or other legal entity which owns or controls 10% or more of the
outstanding voting securities of a "public utility company" or a company which
is a "holding company" for a public utility company is subject to registration
with the Commission and regulation under PUHCA, unless eligible for an
exemption from regulation under PUHCA. A holding company of a public utility
company that is subject to registration is required by PUHCA to limit its
utility operations to a single integrated utility system and to divest any
other operations not functionally related
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to the operation of that utility system. Approval by the Commission is
required for nearly all important financial and business dealings of a
registered holding company. Most QFs are not public utility companies under
PUHCA.
The Energy Policy Act of 1992, among other things, amends PUHCA to allow
EWGs, under certain circumstances, to own and operate non-QFs without
subjecting those producers to registration or regulation under PUHCA. The
expected effect of such amendments would be to enhance the development of non-
QFs which do not have to meet the fuel, production and ownership requirements
of PURPA. The Company believes that the amendments could benefit the Company
by expanding its ability to own and operate facilities that do not qualify for
QF status, but may also result in increased competition by allowing utilities
and others to develop such facilities which are not subject to the constraints
of PUHCA.
Federal Natural Gas Transportation Regulation. The Company has an ownership
interest in and operates three natural gas-fired cogeneration plants. The cost
of natural gas is ordinarily the largest expense (other than debt costs) of a
venture and is critical to the venture's economics. The risks associated with
using natural gas can include the need to arrange transportation of the gas
from great distances, including obtaining removal, export and import authority
if the gas is transported from Canada; the possibility of interruption of the
gas supply or transportation (depending on the quality of the gas reserves
purchased or dedicated to the plant, the financial and operating strength of
the gas supplier and whether firm or non-firm transportation is purchased);
and obligations to take a minimum quantity of gas or pay for it (i.e., take-
or-pay obligations).
Pursuant to the Natural Gas Act, FERC has jurisdiction over the
transportation and storage of natural gas in interstate commerce. With respect
to most transactions that do not involve the construction of pipeline
facilities, regulatory authorization can be obtained on a self-implementing
basis. However, pipeline rates for such services are subject to continuing
FERC oversight.
Proposed Deregulation. The United States Congress is considering proposed
legislation which would repeal PURPA entirely or at least repeal the
obligation of utilities to purchase energy from QFs at Avoided Costs, subject
to any provisions grandfathering existing QF contracts (if such legislation is
passed) and require utilities to conduct competitive bidding for new electric
generation (if the purchase obligation is eliminated) that may be part of any
such legislation. The Company believes that if any such legislation were to be
passed, it most likely would apply only to new plants. As a result, although
such legislation may adversely affect the Company's ability to develop new
plants, the Company believes that it would not affect the existing plants in
which the Company has interests.
Various bills also have proposed the repeal of PUHCA which would eliminate
some of the adverse consequences flowing from a loss of QF status, but also
would likely result in increased competition in the power generation business
and an acceleration of electric industry restructuring. The effect of any such
repeal cannot be predicted, although any such repeal could have a material
adverse effect on the Company.
FERC and many state utility commissions are currently studying a number of
proposals to restructure the electric utility industry in the United States.
Such restructuring could permit utility customers to choose their utility
generator supplier in a competitive electric energy market. FERC issued a
final rule in April 1996 which requires utilities to offer eligible wholesale
transmission customers non-discriminatory open access on utility transmission
lines on a comparable basis to the utilities' own use of the lines. The final
rule has been the subject of rehearing and now is undergoing judicial review.
Many utilities have already filed "open access" tariffs. Utilities contend
that they should recover from departing customers their fixed costs that will
be "stranded" by the ability of their wholesale customers (and perhaps
eventually, their retail customers) to choose new electric power suppliers.
The FERC final rule endorses the recovery of legitimate and verifiable
"stranded costs". These may include the costs utilities are required to pay
under many QF contracts which some utilities view as excessive when compared
with current market prices. Many utilities are therefore seeking ways to lower
these QF contract prices or rescind the contracts altogether out of concern
that their shareholders will be required to bear all or part of such "stranded
costs". Some utilities have engaged in litigation against QFS to achieve these
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ends. In addition, future electric rates may be deregulated in a restructured
United States electric utility industry and increased competition may result
in lower rates and less profit for sellers of electricity in the United
States. Falling electricity prices and uncertainty as to the future structure
of the industry may inhibit United States utilities from entering into long-
term power purchase contracts. The effect of any such restructuring cannot be
predicted, although any such restructuring could have a material adverse
effect on the Company.
The Clinton administration recently announced a proposal to deregulate the
United States electricity markets by the year 2003 under a plan that would
allow consumers to choose which electric company would supply power to their
residences and businesses. Under the proposal, states would not be required to
open their markets to competition, but could retain the current regulatory
scheme if they were to decide that their consumers would benefit from a
regulated monopoly system. In the event that a particular state were to elect
to maintain the status quo, it would be required to hold public hearings to
explain why competition in the electricity market in that state would not be
in the interests of its residents. A number of states already have begun the
process of opening their electricity markets to competition. The
administration's proposal would allow electric utilities to recover reasonable
"stranded costs", funds invested in nuclear and other high-cost power plants
that no longer may be economically viable to operate in a competitive market.
Individual states would determine the amounts of the stranded costs that
utilities would be permitted to recover. The plan also attempts to address
environmental concerns by requiring that 5.5% of the electricity sold in the
United States be generated from renewable energy sources such as the wind or
sun. In addition, the proposal would permit power plants to trade pollution
credits for nitrogen oxides, which combine with other air pollutants to form
ground-level ozone. There can be no assurance that such proposed legislation
will be enacted or, if enacted, as to the effect that it may have on the power
generation industry or the Company's business.
STATE ENERGY REGULATION
State public utility commissions ("PUCs") have historically had broad
authority to regulate both the rates charged by, and the financial activities
of, electric utilities and to promulgate regulations for implementation of
PURPA. Since a power sales contract becomes a part of a utility's cost
structure (generally reflected in its retail rates), the utility's costs
associated with power sales contracts with independent electricity producers
are potentially under the regulatory purview of PUCs. If a PUC has approved
the process by which a utility secures its power supply, a PUC is generally
inclined to "pass through" the expense associated with an independent power
contract to the utility's retail customers. However, a regulatory commission
under certain circumstances may disallow the full pass through to a utility
for the cost to purchase power from a QF or other source. In addition, retail
sales of electricity or thermal energy by an independent power producer may be
subject to PUC regulation depending on state law. Independent power producers
which are not QFs under PURPA, or EWGs pursuant to the Energy Policy Act of
1992, are considered to be public utilities in many states and are subject to
broad regulation by a PUC, ranging from the requirement of a certificate of
public convenience and necessity to regulation of organizational, accounting,
financial and other corporate matters. States may assert jurisdiction over the
siting and construction of electric generating facilities including QFs and,
with the exception of QFs, over the issuance of securities and the sale or
other transfer of assets by these facilities.
New Jersey. Industry restructuring efforts are also underway in New Jersey.
On April 30, 1997, NJBPU issued an order adopting its Final Report in the
Energy Master Planning Process entitled, "Restructuring the Electric Power
Industry in New Jersey: Findings and Recommendations". The principal announced
goal of NJBPU in its Final Report is to open the electric generation market to
increased competition and thereby reduce generation and production costs. On
July 15, 1997, each of New Jersey's four electric utility companies filed: (1)
a Restructuring Plan, (2) an Unbundled Rate Filing, and (3) a Stranded Costs
Filing with NJBPU pursuant to NJBPU's Final Report.
NJ Stranded Costs. The stranded costs filing of each utility will determine
the specific initial level of non-mitigatable stranded costs to be recovered
by each utility. Each of these stranded costs filings has been transmitted to
the Office of Administrative Law for evidentiary hearings. The JCP&L hearing
commenced on
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December 2, 1997; the Initial Decision from the Administrative Law Judge was
due on May 15, 1998, with a Final Decision by NJBPU due thereafter.
NJBPU concluded in its Final Report that electric utilities "should be given
an opportunity to recover from customers the costs associated with past
financial commitments made by the utility for the purpose of procuring
generating supplies to serve the retail electric customers in their service
territory". NJBPU also concluded, however, "there neither can nor should be a
guarantee provided for 100% recovery of stranded costs". These pronouncements
remain subject to current and future regulatory proceedings and actions by the
New Jersey Legislature. Additionally, federal legislation has been proposed
that may alter a state's ability to regulate the emerging competitive market
and the recovery of stranded costs. See "Risk Factors--Dependence on Third
Parties".
On March 2, 1998, NJBPU released draft legislation for the restructuring of
the electric power industry in New Jersey, which included provisions for the
determination and recovery of stranded costs of electric utilities. Stranded
costs are defined by NJBPU in that draft legislation "as the amount by which
the net cost of an electric public utility's electric generating assets or
electric power purchase commitments, as determined by NJBPU pursuant to this
Act, exceeds the market value of those assets or contractual commitments in a
competitive supply market place". NJBPU seeks to address the stranded costs
that may be created as a result of its decision "to open the power generation
market up to competition". NJBPU has determined to "limit the eligibility for
stranded cost surcharge recovery to costs related directly to utility power
supply" including, "utility generation plant, long and short-term power
purchase contracts with other utilities and long-term power purchase contracts
with non-utility generators".
NJ Above Market Power Purchase Contracts. The JCP&L PPA received initial
regulatory approval on December 16, 1985 and final approval of the contract
amendment on December 8, 1986. The PSE&G PPA received regulatory approval on
July 5, 1989. The Camden PPA (with PSE&G) received initial approval on June
29, 1989 and final approval of contract amendments on February 27, 1991. The
approval orders found all contracts reasonable, fairly negotiated and prudent
through the term of the contract and permit recovery of all costs through the
companies' fuel clauses. Both PSE&G contracts contain a section entitled
"Repeal of PURPA" explaining the process for resolution of possible
disallowance of costs by NJBPU. NJBPU stated in its Final Report that
utilities must and should "take all available measures to mitigate stranded
costs caused by the introduction of retail competition", including the "buy-
out or renegotiation of existing purchased power contracts with non-utility
generators". NJBPU has acknowledged that it appears to lack jurisdiction to
order modification of non-utility generators' contracts, and has determined
that the "non-mitigatable costs associated with all such contracts which have
previously been reviewed and approved by NJBPU, notwithstanding the specific
date, must be eligible for stranded cost recovery."
NJBPU based its determination that it lacks jurisdiction to order
modification of non-utility generators' contracts on the decision of the Third
Circuit Court of Appeals in Freehold Cogeneration Associates, L.P. v. Board of
Regulatory Commissioners of New Jersey, 44 F.3d. 1178 (3rd Cir. 1995), cert.
den., 516 U.S. 815, which held that:
Once the [NJBPU] approved the power purchase agreement between Freehold and
JCP&L, on the grounds that the rates were consistent with avoided cost, any
action or order by the [NJBPU] to reconsider its approval or to deny the
passage of those rates to JCP&L consumers under purported state authority
was preempted by federal law. (Id., Freehold 44 F.3d at 1194).
NJBPU has interpreted the Freehold decision to mean that without legislative
action at the federal or state level, a state regulator has minimal ability to
subsequently adjust the pricing in such non-utility generators' contracts once
approved.
Notwithstanding NJBPU's acknowledgment that it appears to lack jurisdiction
to order modification of non-utility generators' contracts under current law,
it has "strongly encouraged all stakeholders to renew their efforts
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to explore all reasonable means to mitigate IPP contracts". NJBPU further
stated that the appropriate regulatory and legislative bodies may "wish to
review this issue to provide an added impetus for parties to these contracts
to seriously consider mitigation." JCP&L has reported to NJBPU that it intends
to pursue efforts to mitigate its above-market costs for non-utility generator
purchase power agreements on a voluntary basis.
New York. The New York Public Service Commission ("NYPSC") is conducting a
generic "competitive opportunities" proceeding through which it is examining
how to introduce greater competition into the electric utility industry in New
York. This process began in March 1993 with a Phase I proceeding, and
continued into 1994 with the start of a Phase II proceeding. In June 1995,
NYPSC adopted a set of principles to guide its Phase II investigation. In
December 1995, an administrative law judge recommended that NYPSC implement
wholesale and retail competition. On May 20, 1996, NYPSC issued a final order
in the Phase II "competitive opportunities" case in which it endorsed a
fundamental restructuring of the electric industry. NYPSC's goals as stated in
that order are lower prices for customers from competition, increased choice
of suppliers and services for customers, information dissemination to allow
educated customer decisions, maintenance of the reliability of the electric
system, continuation of social/conservation programs, mitigation of market
power, and continuation of the obligation to serve customers. To commence the
transition process, NYPSC required the larger investor-owned utilities to
submit, by October 1, 1996, a transition plan that addresses market structure
issues, corporate structure issues, operational constraints, the schedule for
customer choice, unbundled prices, and a rate plan for the duration of the
transition.
Con Ed made a filing in compliance with this order on October 1, 1996. In
September 1997, the NYPSC approved a settlement agreement between Con Ed, the
NYPSC staff and certain other parties. The settlement agreement includes,
among other things the recovery of at least 90% of stranded costs relating to
non-utility generator ("NUG") contracts (including Linden). Any disallowance
below 100% recovery of these stranded costs will be reduced by, among other
factors, NUG contract mitigation achieved by Con Ed.
New York--Linden Venture Contract. Linden Venture received initial
regulatory approval on September 12, 1989, and final approval of contract
amendments on May 9, 1991, pursuant to a Con Ed petition for approval,
supported by an affirmative recommendation from the NYPSC staff. The approval
was based on estimates that the venture would be less costly than existing
ventures of Con Ed's long-run avoided cost. NYPSC granted "recovery of all
direct purchase costs incurred pursuant to the Linden PPA through the
utility's fuel adjustment clause". To the extent Linden Venture operates in
conformance with the Linden PPA, Con Ed is entitled to full cost recovery
without any subsequent regulatory requirements. There are ongoing
investigations into certain aspects of NYPSC regulation of non-utility
generators in New York. NYPSC has granted utilities permission to closely
monitor the QF status of plants in the state. There is still pending a request
by the utilities to enable them to curtail "must-run" plants; however, the
Linden Venture contract has a specific exemption from any such request. There
is no litigation pending between Linden Venture and Con Ed.
Other State Regulation. State PUCs also have jurisdiction over the
transportation of natural gas by local distribution companies ("LDCs"). Each
state's regulatory laws are somewhat different; however, all generally require
the LDC to obtain approval from the PUC for the construction of facilities and
transportation services if the LDC's generally applicable tariffs do not cover
the proposed transaction. LDC rates are usually subject to continuing PUC
oversight.
ENVIRONMENTAL REGULATIONS
The construction and operation of power projects are subject to extensive
federal, state and local laws and regulations adopted for the protection of
the environment and to regulate land use. The laws and regulations applicable
to the Company primarily involve the discharge of emissions into the water and
air and the use of water, but can also include wetlands preservation,
endangered species, waste disposal and noise regulations. These laws and
regulations in many cases require a lengthy and complex process of obtaining
licenses, permits and approvals from federal, state and local agencies as well
as ongoing reporting and compliance obligations. Additional or modified
licenses, permits and approvals may be required for any physical or
operational changes
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to the Company's facilities. As discussed below, the Company believes it is in
material compliance with all such laws and regulations.
Noncompliance with environmental laws and regulations can result in the
imposition of civil or criminal fines or penalties. In some instances,
environmental laws also may impose cleanup or other remedial obligation in the
event of a release of pollutants or contaminants into the environment. The
following federal and state laws are among the more significant environmental
laws as they apply to the Company. The state laws impose requirements on the
Company that are similar, and in some cases more stringent, than the
requirements in the analogous federal laws.
The Clean Air Act provides for the regulation, largely through state
implementation of federal requirements, of emissions of air pollutants from
certain facilities and operations, including an obligation to obtain
preconstruction and operating permits for sources of air pollution. In New
Jersey, the requirements of the Clean Air Act are implemented through the
State Air Pollution Control Act and implementing regulations. As originally
enacted, the Clean Air Act set guidelines for emission standards for major
pollutants (e.g., sulfur dioxide and oxides of nitrogen) from newly built
sources. In late 1990, significant amendments to the Clean Air Act were
adopted. The 1990 Amendments attempt to reduce emissions from existing
sources, particularly previously exempted older power plants. The Company
believes that all of the Company's operating plants are in compliance in all
material respects with the applicable federal and state performance standards
under the Clean Air Act, the 1990 Amendments and the State Air Pollution
Control Act.
In addition to the above, the 1990 Amendments established the Northeast
Ozone Transport Region ("NEOTR") which required various states, including New
Jersey, to adopt more stringent controls on the pollutants that contribute to
the formation of low-level ozone (i.e., volatile organic compounds and oxides
of nitrogen). Pursuant to a September 27, 1994 Memorandum of Understanding
between the member states of the NEOTR, New Jersey has proposed regulations to
implement a region-wide budget for nitrogen oxide emissions. While the
Company's operating plants will be subject to this new rule (as presently
drafted), and therefore will be subject to additional operating limits, the
Company believes that the new rules will not have a material impact on its
ability to maintain its present level of operations.
The Federal Clean Water Act (the "Clean Water Act") and the New Jersey Water
Pollution Control Act (the "Water Pollution Control Act") establish rules
regulating the discharge of pollutants into surface and ground waters. The
Clean Water Act and the Water Pollution Control Act also establish
requirements for municipally-owned sewage treatment plants, including
pretreatment requirements for industrial users of those plants. Each local
municipal sewerage authority has established regulations governing connections
to and discharges into its sewer system and treatment plants. Pursuant to
these federal, state and local laws and regulations, the Company is required
to obtain permits for the discharge of its wastewater and storm water runoff.
The Company believes that it is in material compliance with applicable
discharge requirements under the Clean Water Act, the Water Pollution Control
Act and applicable local regulations.
The Resource Conservation and Recovery Act ("RCRA") regulates the
generation, treatment, storage, handling, transportation and disposal of solid
and hazardous waste. The Company generates certain non-hazardous and hazardous
wastes that are subject to the requirements of RCRA and parallel state
statutes. The hazardous wastes that the Company generates are subject to more
rigorous and costly disposal requirements than are non-hazardous wastes,
although the cost of disposal is not anticipated to be material. The Company
believes that it is in substantial compliance with the RCRA and the parallel
state regulations.
The Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA" or "Superfund"), requires cleanup of sites from
which there has been a release or threatened release of hazardous substances
and authorizes the United States Environmental Protection Agency ("EPA") to
take any necessary response action at Superfund sites, including ordering
potentially responsible parties ("PRPs") that are liable for the release to
take or pay for such actions. PRPs are broadly defined under CERCLA to include
past and present owners and operators of, as well as generators of wastes sent
to, a site. In addition,
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the New Jersey Spill Act ("Spill Act") imposes similar liability under state
law for discharges of hazardous substances (including petroleum products) and,
under certain circumstances, authorizes the collection of treble damages from
a responsible party. Similar to CERCLA, the definition of who is responsible
is broadly defined to include owners and operators of the facility where the
discharge occurred, the owners of the hazardous substance that is discharged,
or anyone who has caused or allowed the discharge to occur. As of the present
time, the Company is not subject to liability for any Superfund or Spill Act
matters. However, the Company generates certain wastes, including hazardous
wastes, and sends certain of its wastes to third-party waste disposal sites.
As a result, there can be no assurance that the Company will not incur
liability under CERCLA or the Spill Act in the future.
The Spill Act also requires facilities that store significant quantities of
petroleum products or other hazardous substances to prepare detailed discharge
prevention containment and countermeasure plans and discharge cleanup and
removal plans. The Company believes that it is in substantial compliance with
these regulations with respect to each of its operating plants.
The New Jersey Toxic Catastrophe Prevention Act ("TCPA") requires owners of
facilities that use an "extraordinarily hazardous substance" to prepare a
comprehensive risk management plan pertaining to its use of such substances.
The Company's Bayonne Facility is subject to these requirements due to its use
of anhydrous ammonia in its air pollution control systems. The Company
believes that it is in material compliance with the TCPA requirements.
Because the Formation Transactions and the Common Stock Offering will
involve a significant change in the ownership structure of the entities that
own the operating plants, the Formation Transactions may trigger the Company's
obligations pursuant to the New Jersey Industrial Site Recovery Act ("ISRA").
ISRA requires the owner or operator of an industrial establishment to notify
the New Jersey Department of Environmental Protection ("NJDEP") of the pending
transaction and to obtain NJDEP approval prior to the closing of any such sale
of ownership interests. In order to obtain NJDEP approval for a proposed
transaction, the owner or operator must conduct a satisfactory investigation
of the environmental conditions of the industrial establishment and, if
necessary, commit to undertake appropriate remedial measures to address any
contamination present at the industrial establishment. Based upon the history
of the construction and operation of the Company's facilities, previous
investigations of site conditions, and the status of ongoing remediation
projects currently being undertaken by current or prior owners of the
properties, the Company believes that it will not incur any material cost as a
result of its compliance with ISRA.
To the extent the Company acquires interests in plants in other states, such
plants will be subject to such states' implementation of federal law and other
state and local environmental laws and regulations.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information about the executive
officers and director of Cogen following consummation of the Formation
Transactions and the Common Stock Offering. The director of Cogen will hold
office until the next annual meeting of stockholders or until their respective
successors have been elected and qualified. Executive officers are elected by
Cogen's Board of Directors to hold office until their respective successors
are elected and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- --- -----------
<S> <C> <C>
Robert C. McNair........ 61 Chairman of the Board, President and Chief Executive Officer
and Director*
Ross D. Ain............. 51 Senior Vice President--Corporate Development
Joseph M. Bollinger..... 51 Senior Vice President--Chief Operating Officer
Donald R. Kendall, Jr. . 46 Senior Vice President--Mergers and Acquisitions
Richard A. Lydecker,
Jr. ................... 54 Senior Vice President, Chief Financial Officer and Secretary
</TABLE>
Although Mr. McNair currently has other significant business interests,
priority will be given to his responsibility as Chief Executive Officer of
Cogen.
Messrs. Kendall and Lydecker also serve as directors or executive officers
or both of certain other entities controlled by Mr. McNair. The time allocated
to such services will be limited and is not expected to detract from the
necessary services of such executives to the Company. As discussed in "Certain
Transactions--Other Transactions", such other entities will reimburse the
Company based upon fully allocated costs plus an appropriate markup for such
services. In addition, Mr. Kendall may earn certain incentive fees from other
entities controlled by Mr. McNair for financial advisory services. No portion
of these fees, if any, will be paid by the Company.
INDIVIDUAL BACKGROUND INFORMATION
Set forth below is a description of the backgrounds of the executive
officers and the sole director of the Company.
Robert C. McNair is the founder of the Company's subsidiaries and its
principal ventures and has served as Chief Executive Officer of companies
within the Group and its affiliates in Houston, Texas, for more than the past
five years.
Ross D. Ain has served as an executive officer of companies within the Group
since 1994. Prior to joining the Group, he was engaged in the private practice
of law in Washington D.C. as a partner with the firm of Van Ness Feldman, a
Professional Corporation, for many years prior to 1994.
Joseph M. Bollinger, who is an engineer, has served as an executive officer
of companies within the Group for more than the past five years after prior
positions in engineering and project management with GE.
Donald R. Kendall, Jr. has served as an executive officer of companies
within the Group for more than the past five years after prior positions with
several investment banking firms.
Richard A. Lydecker, Jr. has served as an executive officer of companies
within the Group for more than the past five years after prior positions in
finance and accounting with several energy companies.
- --------
* At present Mr. McNair is the only director of the Company. Prior to the
Common Stock Offering, it is anticipated that several additional persons
will become directors, or will agree to become directors of the Company.
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Prior to the consummation of the Common Stock Offering, Cogen's Board of
Directors will establish an Audit Committee and a Compensation Committee.
The duties of the Audit Committee will be to recommend to the Board of
Directors the selection of independent public accountants to audit annually
the books and records of the Company, discuss with the independent auditors
and internal auditors the scope and results of audits and approve and review
any nonaudit services performed by the Company's independent auditing firm.
The duties of the Compensation Committee will be to provide a general review
of the Company's compensation and benefit plans to ensure that they meet the
Company's objectives. In addition, the Compensation Committee will approve the
Chief Executive Officer's compensation and review the Chief Executive
Officer's recommendations on (i) the compensation of all other officers of the
Company, (ii) the grant of awards under the Company's then existing
compensation and benefit plans and (iii) the adoption of major Company
compensation policies and practices. The Compensation Committee will report
its recommendations to the Board of Directors for approval and authorization.
BOARD COMPENSATION
Non-employee directors of the Company will be paid an annual director's fee
of $ plus $ for each board or committee meeting attended in person
and $ for each board or committee meeting in which the director
participates by telephone.
EXECUTIVE COMPENSATION
Cogen was incorporated in May 1998, and, prior to the Common Stock Offering,
has not conducted any operations other than activities related to the Common
Stock Offering and the Formation Transactions. Prior to the consummation of
such transactions, Cogen will not pay any compensation to its senior executive
officers. Cogen anticipates that during 1998 and following the consummation of
such transactions, its Chief Executive Officer and four other most highly
compensated executive officers and their annualized base salaries will be:
Robert C. McNair, --$ ; Ross D. Ain--$ ; Joseph M. Bollinger--
$ ; Donald R. Kendall, Jr.--$ ; and Richard A Lydecker, Jr.--
$ .
EMPLOYMENT AGREEMENTS
The Company expects to enter into employment agreements with certain members
of senior management, but the terms thereof have not been set at the present
time.
EMPLOYEE PLANS
Although the terms of a stock option plan have not yet been determined, the
Company anticipates that a number of shares of Common Stock not to exceed 20%
of the aggregate number of shares of Common Stock to be outstanding following
the consumation of the Formation Transactions will be reserved for issuance to
employees of the Company under the stock option plan.
The Company intends to adopt a 401(k) plan.
MANAGEMENT SERVICES AGREEMENTS
Cogen expects to enter into agreements with various other entities
controlled by Robert C. McNair pursuant to which Cogen would provide services
including certain management, financial and administrative support to such
entities. See "Certain Transactions--Other Transactions". In addition, NJ Inc.
has entered into management services agreements with an entity indirectly
owned and controlled by Robert C. McNair. See "Certain Transactions--Other
Transactions".
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CERTAIN TRANSACTIONS
FORMATION TRANSACTIONS
Cogen was incorporated in May 1998 to acquire operating control of, and a
substantial equity interest in (or, in the case of Selkirk Venture, only an
equity interest in), a group of affiliated entities (the subsidiaries)
beneficially owned approximately 82% by the McNair Interests and approximately
18% by the Minority Interests. In connection with its organization, Cogen
issued an aggregate of 1,000 shares of Common Stock to the holders of the
McNair Interests and the holders of the Minority Interests in their respective
82% and 18% ratios in consideration for the proportionate payment of an
aggregate of $1,000 to Cogen. In connection with the Common Stock Offering,
the following transactions will be consummated simultaneously immediately
prior to the consummation of the Common Stock Offering:
First, 49.9% of the general partner interests and 49.9% of the limited
partner interests of Linden Ltd., a limited partnership which is the
general partner in the Linden Venture, which owns and operates the Linden
Plant will be transferred by the McNair Interests and the Minority
Interests to Cogen or a subsidiary thereof in consideration for the
issuance to the McNair Interests of 20.0 million shares of Common Stock and
to the Minority Interests of 4.4 million shares of Common Stock.
Second (i) 100% of the stock of Camden, Inc., which is the general partner
in Camden GPLP, a limited partnership which is the general partner of
Camden Cogen, another limited partnership which constitutes the venture
that owns and operates the Camden Plant, and (ii) all the equity interests
in Camden GPLP represented by the limited partnership interests therein
owned by the Minority Interests, will be transferred by the McNair
Interests and the Minority Interests to Cogen or a subsidiary thereof in
consideration for the payment and issuance to the McNair Interests of an
aggregate of approximately $820,000 in cash and 6.5 million shares of
Common Stock and to the Minority Interests of an aggregate of approximately
$180,000 in cash and 1.5 million shares of Common Stock.
Third, MESC, a Texas corporation approximately 82% owned by the McNair
Interests and approximately 18% owned by the Minority Interests, will be
merged with Bayonne Acquisition Corp., a wholly owned subsidiary of Cogen
("Bayonne Newco"), pursuant to which merger Bayonne Newco will survive and
the stockholders of MESC will receive 11.0 million shares of Common Stock
in proportion to their ownership. MESC owns NJ Inc., which is the operating
and 86.5% managing general partner of NJ Venture, which owns the Bayonne
Plant.
Fourth, the McNair Interests and the Minority Interests will transfer
directly or indirectly their minority non-operating general partner and
limited partner interests in Selkirk Cogen Partners, L.P., which owns the
Selkirk Plant, to Cogen or a subsidiary thereof, in consideration for 1.3
million shares of Common Stock.
Fifth, Financial Services will transfer its 100% ownership in CT Global,
engaged at present solely in the business of insuring the first levels of
property and casualty insurance for the Company's principal plants (the
"Insurance Subsidiary"), to the Company in consideration for 200,000 shares
of Common Stock.
Finally and immediately after the transactions described in the five
preceding paragraphs, the remaining equity interests in Linden Ltd. owned
by the McNair Interests and the Minority Interests will be redeemed by
Linden Ltd. in consideration for the proportionate distribution to the
McNair Interests and the Minority Interests of an account receivable in the
amount of $159.4 million owed to Linden Ltd. by Financial Services, a
limited partnership owned by the McNair Interests and the Minority
Interests, and the proportionate payment to the McNair Interests and the
Minority Interests of $331.1 million in cash. The funds for such redemption
will be borrowed by Linden Ltd. from Morgan Stanley & Co. Incorporated
pursuant to the Bridge Loan Agreement.
After the consummation of all the foregoing transactions (the "Formation
Transactions") and the Common Stock Offering, Cogen will have outstanding 44.9
million shares of Common Stock, of which million shares ( %) will be
owned by the McNair Interests, million shares ( %) will be owned by
the Minority
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Interests, and shares ( %) will be owned by the public. See
"Principal and Selling Stockholders". Further, Cogen will beneficially own all
of the equity interests currently held by the McNair Interests and the
Minority Interests in the ventures that operate and own the Linden, Bayonne
and Camden Plants and also all of the equity interests of the McNair and
Minority Interests in the venture which owns the Selkirk Plant, as well as
100% of CT Global. The McNair Interests will receive an aggregate of
approximately $272.3 million in cash, 82% of a receivable from Financial
Services, an entity not owned by Cogen, having a face value of $159.4 million
and 36.8 million shares of Common Stock in connection with the Formation
Transactions, although the only consideration to be paid to the McNair
Interests by Cogen is the shares of Common Stock thereof and $820,000 in cash.
In addition, in connection with the Formation Transactions, RCM, a limited
partnership indirectly owned and controlled by Robert C. McNair, will receive
a payment of $ in consideration for the termination of certain existing
management services agreements between RCM and Camden GPLP, Linden Ltd. and
Selkirk GP Inc. and Selkirk LP, respectively, and one of the Minority
Interests will receive from Linden Venture, Camden Cogen, Selkirk GP Inc. and
Selkirk LP, an aggregate of $ in consideration for the termination of
certain gas management agreements between him and Cogen Technologies Capital
Company, L.P.
Immediately after consummation of the Debt Offering, the Company will
advance as a loan to Linden Ltd., a portion of the Debt Offering proceeds
necessary for Linden Ltd. to repay, in full, the $331.1 million Bridge Loan.
In addition, to facilitate the consummation of the Formation Transactions,
immediately prior to the consummation of the Common Stock Offering, Morgan
Stanley & Co. Incorporated will loan an aggregate of $ to the McNair
Interests and the Minority Interests, which will be repaid from a portion of
the proceeds of the Common Stock Offering.
The consummation of the Formation Transactions and, thus, the consummation
of the Common Stock Offering are subject to the various entities that are
parties to the Formation Transactions obtaining all necessary consents of
other partners in, and lenders to, the entities which are to be owned directly
or indirectly by the Company after the consummation of the Formation
Transactions.
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The following chart sets forth in substance in a simplified manner the
organizational structure of the Company with respect to its interests in the
ventures owning the plants immediately following the consummation of the
Formation Transactions, eliminating certain intermediate entities that may be
formed to hold various interests.
[Post Formation Transactions Chart appears here]
- --------
(1) See "Existing Venture and Plant Descriptions--NJ Venture Distributions" for
information as to partnership distributions.
(2) See "Existing Venture and Plant Descriptions--Camden Cogen Distributions"
for information as to partnership distributions.
(3) See "Existing Venture and Plant Descriptions--Linden Venture Distributions"
for information as to partnership distributions.
(4) See "Existing Venture and Plant Description--Selkirk" for information as to
partnership distributions.
OTHER TRANSACTIONS
NJ Inc. has entered into a management services agreement with RCM, pursuant
to which RCM provides certain management services for NJ Venture. RCM is a
Delaware limited partnership that is indirectly owned and controlled by Robert
C. McNair. The agreement with NJ Inc. was entered into in September 1989,
expires on the date NJ Inc. ceases to be the managing venturer of NJ Venture
(or if earlier terminated pursuant to cause as defined therein) and provides
that NJ Inc. will provide to RCM a management fee equal to 1.5% of the gross
revenues of NJ Venture. The Company expects that this agreement will remain in
place following the closing of the Offerings and the Formation Transactions.
COMPANY POLICY
Cogen expects to provide certain management, financial and administrative
support services to other entities controlled by Mr. McNair for which it will
receive a fee equal to estimated cost plus an appropriate markup. Estimated
cost, including office space and facilities, will be determined on a full
allocation basis, including staff time, burden and direct charges.
To the extent that the Company makes use of corporate aircraft owned by Mr.
McNair or entities controlled by him--transactions that are likely to occur
from time to time--the Company will be charged on the basis of an estimate of
the cost of alternate transportation and on an allocation of use.
All future transactions with affiliates of the Company, including the support
services to other entities controlled by Mr. McNair, will be approved by the
Board of Directors, including by a majority of the disinterested members of the
Board of Directors, pursuant to a determination by the Board of Directors that
they are on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of , 1998, assuming the consummation of
the Formation Transactions and, as adjusted to reflect the sale of Common
Stock in this Common Stock Offering, by (i) each director of Cogen, (ii) each
person known or believed by Cogen to own beneficially 5% or more of the Common
Stock, (iii) all directors and executive officers as a group and (iv) the
Selling Stockholders. See note (1) below. Unless otherwise indicated, each
person has sole voting and dispositive power with respect to such shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO NUMBER OWNED AFTER
THE COMMON OF THE COMMON
STOCK OFFERING SHARES STOCK OFFERING
NAME AND ADDRESS OF ------------------- BEING -------------------
BENEFICIAL OWNER(1) NUMBER % OFFERED NUMBER %
------------------- ------------------- ------- -------------------
<S> <C> <C> <C> <C> <C>
Robert C. McNair..........
711 Louisiana, 33rd Floor
Houston, Texas 77002
Cogen Technologies Limited
Partners Joint Venture...
Robert Cary McNair, Jr....
Daniel Calhoun McNair.....
Robert Cary McNair, Jr.
and Daniel Calhoun
McNair, trustees of:
Robert Cary McNair, Jr.,
Trust UTA..............
Daniel Calhoun McNair
Trust UTA..............
Ruth McNair Smith Trust
UTA....................
Melissa Eileen McNair
Trust UTA..............
Ross D. Ain...............
Joseph M. Bollinger.......
Donald R. Kendall, Jr.....
Richard A. Lydecker, Jr...
Directors and officers as
a group (5 persons)......
</TABLE>
- --------
(l) Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares of Common Stock beneficially
owned by a person, and the percentage of ownership by that person, shares
of Common Stock issuable pursuant to options and warrants held by that
person that are currently exercisable or exercisable within 60 days of
, 1998 are deemed outstanding. Such shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any
other person.
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DESCRIPTION OF CAPITAL STOCK
The following summary of certain provisions of the capital stock of Cogen
does not purport to be complete and is subject to, and qualified in its
entirety by, the Certificate of Incorporation (the "Charter") and the Bylaws
(the "Bylaws") of Cogen, which are included as exhibits to the Registration
Statement of which this Prospectus forms a part and by the provisions of
applicable law.
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
As of the date of this Prospectus, the authorized capital stock of Cogen
consists of 300.0 million shares of Common Stock, par value $.01 per share
("Common Stock"), and 50.0 million shares of Preferred Stock, par value $.01
per share ("Preferred Stock"). As of May 21, 1998, the outstanding shares of
Common Stock were owned of record by eight stockholders. No shares of
Preferred Stock were outstanding on such date.
Common Stock. The holders of Common Stock are entitled to dividends in such
amounts and at such times as may be declared by the Board of Directors out of
funds legally available therefor. The decision whether to apply legally
available funds to the payment of dividends on the Common Stock will be made
by the Board of Directors of the Company from time to time in the exercise of
its prudent business judgment, taking into account, among other things, the
Company's results of operations and financial condition, any then existing or
proposed commitments for the use by the Company of available funds, and the
Company's obligations with respect to any then outstanding class or series of
its preferred stock. In addition, the Company expects that its debt and
financing agreements will contain certain restrictions on its ability to pay
cash dividends on its capital stock. See "Dividend Policy".
Holders of the Common Stock are entitled to one vote per share for the
election of directors and other corporate matters. Such holders are not
entitled to vote cumulatively for the election of directors and are not
entitled to act by written consent. In the event of liquidation, dissolution
or winding up of Cogen, holders of Common Stock would be entitled to share
ratably in all assets of Cogen available for distribution to the holders of
Common Stock. The Common Stock carries no preemptive rights. All outstanding
shares of Common Stock are duly authorized, validly issued, fully paid and
non-assessable.
Preferred Stock. The Board of Directors is authorized to issue from time to
time, without stockholder authorization, in one or more designated series,
shares of Preferred Stock with such dividend, redemption, conversion and
exchange provisions as are provided in the particular series. The issuance of
Preferred Stock could have the effect of delaying or preventing a change in
control of the Company. The Board of Directors has no present plans to issue
any Preferred Stock.
RIGHTS PLAN
Prior to the consummation of the Common Stock Offering, the Board of
Directors of the Company will declare a dividend of one common share purchase
right (a "Right") for each outstanding share of Common Stock and authorize the
issuance of one Right for each share of Common Stock which shall become
outstanding between the Record Date and the earlier of the Distribution Date
(each as hereinafter defined) or the final expiration date or redemption date
of the Rights. The dividend will be payable on , 1998 (the
"Record Date") to the stockholders of record on that date. Each Right will
entitle the registered holder to purchase from the Company one share of Common
Stock at a price of $ per share (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Company and , as
Rights Agent (the "Rights Agent") which is included as an exhibit to the
Registration Statement of which this Prospectus forms a part.
Until the earlier to occur of (i) ten business days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 20% or more of the
outstanding shares of Common Stock or (ii) ten business days following the
commencement of, or
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announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 20% or more of the outstanding shares of Common Stock (the earlier of
such dates being called the "Distribution Date"), the Rights will be evidenced
by a Common Stock certificate.
Until the Distribution Date (or earlier redemption, exchange or expiration
of the Rights), Common Stock certificates issued upon transfer or new issuance
of shares of Common Stock will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption,
exchange or expiration of the Rights), the surrender for transfer of any
certificates for shares of Common Stock outstanding will also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of Common Stock as of the close of business on the
Distribution Date, and such separate Right Certificates alone will evidence
the Rights.
The Rights will not be exercisable until the Distribution Date. The Rights
will expire on , 2008 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of shares of Common Stock or
other securities or property issuable, upon exercise of the Rights will be
subject to adjustment from time to time to prevent dilution (i) in the event
of a stock dividend on, or a subdivision, combination or reclassification of,
the Common Stock, (ii) upon the grant to holders of Common Stock of certain
rights or warrants to subscribe for or purchase Common Stock at a price, or
securities convertible into Common Stock with a conversion price, less than
the then current market price of the Common Stock or (iii) upon the
distribution to holders of shares of Common Stock of evidences of indebtedness
or assets (excluding regular quarterly cash dividends or dividends payable in
Common Stock) or of subscription rights or warrants (other than those referred
to above). The Company may adjust the number of Rights in substitution for any
adjustment in the number of shares of Common Stock issuable upon exercise of
each Right.
In the event that (i) the Company is, in effect, acquired in a merger or
other business combination transaction or (ii) 50% or more of the Company's
consolidated assets or earning power are sold, proper provision will be made
so that each holder of a Right will thereafter generally have the right to
receive, upon the exercise thereof at the then current Purchase Price of the
Right, that number of shares of common stock of the acquiring company which at
the time of such transaction will have a market value of two times the
Purchase Price of the Right. In the event that any person becomes an Acquiring
Person, proper provision will be made so that each holder of a Right, other
than Rights beneficially owned by the Acquiring Person (which will thereafter
be void for all purposes of the Rights Agreement), will thereafter have the
right to receive upon exercise that number of shares of Common Stock having a
market value of two times the Purchase Price of the Rights. Under some
circumstances, in lieu of Common Stock, other securities, property, cash or
combinations thereof, including combinations with Common Stock, may be issued
upon payment of the Purchase Price if of equal value to the number of shares
of Common Stock for which the Right is exercisable.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Common Stock will be issued and
in lieu thereof, an adjustment in cash will be made based on the market price
of the Common Stock on the last trading day prior to the date of exercise.
At any time up until ten business days after a public announcement that an
Acquiring Person has become such, the Board of Directors of the Company may
redeem the Rights in whole, but not in part, at a price of $.01 per Right (the
"Redemption Price"). Immediately upon any redemption of the Rights, the right
to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
At any time after an Acquiring Person has become such, the Board of
Directors of the Company may exchange the Rights (other than Rights owned by
an Acquiring Person which are void), in whole or in part, at an exchange ratio
of one share of Common Stock per Right (subject to adjustment).
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The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights at any time to cure
any ambiguity or to correct or supplement any defective or inconsistent
provisions and may, prior to the Distribution Date, be amended to change or
supplement any other provision in any manner which the Company may deem
necessary or desirable. After the Distribution Date, the terms of the Rights
may be amended (other than to cure ambiguities or correct or supplement
defective or inconsistent provisions) only so long as such amendment shall not
adversely affect the interests of the holders of the Rights (excluding an
Acquiring Person, in whose possession the Rights are void). After an Acquiring
Person has become such, amendments to the Rights may not be made unless there
are disinterested members of the Company's Board of Directors then in office
and the amendment is approved by a majority of the disinterested members.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends.
PROVISIONS HAVING POSSIBLE ANTI-TAKEOVER EFFECT
Classified Board of Directors. The Charter will be amended prior to the
closing of the Common Stock Offering to provide that the Board of Directors
shall be divided into three classes, the members of which will serve staggered
three-year terms. The Company believes that a classified board of directors
could help to assure the continuity and stability of the Board of Directors'
and the Company's business strategies and policies. The classified board
provision could make the removal of incumbent directors more time-consuming,
which could have the effect of discouraging a third party from making a tender
offer or otherwise attempting to obtain control of the Company, even though
such an attempt might be beneficial to Cogen and its stockholders. Thus, the
classified board provision could increase the likelihood that incumbent
directors would retain their positions. In addition, the Charter provides that
directors may be removed from office only "for cause" (as defined therein).
Subject to rights of any holders of Preferred Stock, newly created directors
and vacancies on the Board of Directors will be filled solely by the remaining
directors then in office.
Advance Notice Provisions for Certain Stockholder Actions. The Bylaws
establish an advance notice procedure with regard to the nomination, other
than by or at the direction of the Board of Directors, of candidates for
election as directors (the "Nomination Procedure") and with regard to certain
matters to be brought before an annual meeting of stockholders of Cogen (the
"Business Procedure").
The Nomination Procedure requires that a stockholder give prior written
notice, in proper form, of a planned nomination of a director to the Board of
Directors to the Secretary of Cogen. The requirements as to the form and
timing of that notice are specified in the Bylaws. If it is determined that a
person was not nominated in accordance with the Nomination Procedure, such
person will not be eligible for election as a director.
Under the Business Procedure, a stockholder seeking to have any business
conducted at an annual meeting must give prior written notice, in proper form,
to the Secretary of Cogen. The requirements as to the form and timing of that
notice are specified in the Bylaws and are also governed by federal securities
law proxy rules. If the Chairman or other officer presiding at a meeting
determines that other business was not properly brought before such meeting in
accordance with the Business Procedure, such business will not be conducted at
the meeting.
Although the Bylaws do not give the Board any power to approve or disapprove
stockholder nominations for the election of directors or of any other business
desired by stockholders to be conducted at an annual or any other meeting, the
Bylaws (i) may have the effect of precluding a nomination for the election of
directors or precluding the conduct of business at a particular annual meeting
if the proper procedures are not followed, and (ii) may discourage or deter a
third party from conducting a solicitation of proxies to elect its own slate
of directors or otherwise attempting to obtain control of the Company, even if
the conduct of such solicitation or such attempt might be beneficial to the
Company and its stockholders.
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Delaware Section 203. Section 203 ("Section 203") of the General Corporation
Law of the State of Delaware (the "Delaware Act") restricts certain
transactions between a corporation organized under Delaware law (or its
majority-owned subsidiaries) and any person holding 15% or more of the
corporation's outstanding voting stock, together with the affiliates or
associates of such person (an "Interested Stockholder"). Section 203 generally
prohibits a publicly held Delaware corporation from engaging in the following
transactions with an Interested Stockholder for a period of three years from
the time the stockholder becomes an Interested Stockholder (unless certain
conditions, described below, are met): (a) all mergers or consolidations, (b)
sales, leases, exchanges or other transfers of 10% or more of the aggregate
assets of the corporation, (c) issuances or transfers by the corporation of
any stock of the corporation which would have the effect of increasing the
Interested Stockholder's proportionate share of the stock of any class or
series of the corporation, (d) any other transaction which has the effect of
increasing the proportionate share of the stock of any class or series of the
corporation which is owned by the Interested Stockholder, and (e) receipt by
the Interested Stockholder of the benefit (except proportionately as a
stockholder) of loans, advances, guarantees, pledges or other financial
benefits provided by the corporation.
The three-year ban does not apply if either (i) the proposed prohibited
transaction or (ii) the transaction by which the Interested Stockholder became
an Interested Stockholder is approved by the board of directors of the
corporation prior to the time such stockholder becomes an Interested
Stockholder. Additionally, an Interested Stockholder may avoid the statutory
restriction if, upon the consummation of the transaction whereby such
stockholder becomes an Interested Stockholder, the stockholder owns at least
85% of the outstanding voting stock of the corporation without regard to those
shares owned by the corporation's officers and directors or certain employee
stock plans. Business combinations are also permitted within the three-year
period if approved by the board of directors and authorized at an annual or
special meeting of stockholders by the holders of at least 66 2/3% of the
outstanding voting stock not owned by the Interested Stockholder. In addition,
any transaction is exempt from the statutory ban if it is proposed at a time
when the corporation has proposed, and a majority of certain continuing
directors of the corporation have approved, a transaction with a party which
is not an Interested Stockholder of the corporation (or who becomes such with
board approval) if the proposed transaction involves (a) certain mergers or
consolidations involving the corporation, (b) a sale or other transfer of over
50% of the aggregate assets of the corporation or (c) a tender or exchange
offer for 50% or more of the outstanding voting stock of the corporation.
A Delaware corporation may, at its option, exclude itself from the coverage
of Section 203 by amending its Certificate of Incorporation or Bylaws by
action of its stockholders to exempt itself from coverage, provided that such
charter or bylaw amendment shall not become effective until 12 months after
the date it is adopted. Cogen has not adopted such a charter or bylaw
amendment.
The foregoing provisions of Section 203 could delay or frustrate the removal
of incumbent directors or the assumption of control by the holder of a large
block of Common Stock, even if such removal or assumption would be beneficial,
in the short term, to stockholders of the Company. The provisions could also
discourage or make more difficult a merger, tender offer or proxy contest even
if such event would be favorable to the interests of stockholders.
LIMITATION ON DIRECTORS AND OFFICERS LIABILITY
The Delaware Act authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of directors' fiduciary duty of care. The duty of care
requires that, when acting on behalf of the corporation, directors must
exercise an informed business judgment based on all material information
reasonably available to them. Absent the limitations authorized by such
legislation, directors are accountable to corporations and their stockholders
for monetary damages for conduct constituting gross negligence in the exercise
of their duty of care and for certain failures to properly supervise the
affairs of the corporation. Although the Delaware Act does not change
directors' duty of care, it enables corporations to limit available relief to
equitable remedies such as injunction or rescission. The Charter limits the
liability of Cogen's directors to Cogen or its stockholders to the fullest
extent permitted by the
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Delaware Act. Specifically, directors of Cogen will not be personally liable
for monetary damages for breach by directors of their fiduciary duty as
directors, except for liability (i) for any breach of the directors' duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware Act (having to do with unlawful
distributions to stockholders or unlawful purchases or redemptions of its
shares by Cogen), or (iv) for any transaction from which the director derived
an improper personal benefit.
The inclusion of this provision in the Charter may have the effect of
reducing the likelihood of derivative litigation against directors and may
discourage or deter stockholders or management from bringing a lawsuit against
directors for breach of their duty of care, even though such an action, if
successful, might otherwise have benefitted Cogen and its stockholders.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
SENIOR NOTES
Concurrently with of the Common Stock Offering, the Company is offering up
to $625.0 million aggregate principal amount of Senior Notes, pursuant to the
Debt Offering. The following discussion summarizes certain terms of the Senior
Notes and is qualified in its entirety by reference to the Indenture relating
to the Senior Notes.
The Senior Notes will be unsecured senior obligations of the Company and
will rank pari passu in right of payment with all existing and future senior
indebtedness of Cogen. The Senior Notes will mature in tranches and
will bear interest from the date of issuance at the rate of % per annum
payable semi-annually.
The Senior Notes will be redeemable at the option of Cogen, in whole or in
part, at any time or from time to time, at the Make Whole Premium (as defined
in the Indenture). The Senior Notes will be subject to mandatory redemption in
amounts equal to (i) all of the cash received by certain designated ventures
in excess of $50 million with respect to certain events of loss or
condemnation and (ii) all of the cash received by certain designated ventures
in excess of $100 million from an electricity purchase or steam purchaser in
connection with the buyout of a power purchase agreement or steam sales
agreement. The Senior Notes also will be subject to mandatory redemption if
the Company sells or otherwise disposes of more than $100 million in assets
unless, after giving effect to such sale or disposition, the applicable rating
agencies confirm that the ratings of the Senior Notes is the same as the
ratings immediately prior to the announcement of such sale or transfer.
The Indenture contains certain restrictive covenants, including covenants
that (i) limit indebtedness of the Company, other than the Senior Notes, up to
$300 million in senior secured bank indebtedness and certain other parity
indebtedness the issuance of which will not result in a rating downgrade of
the Senior Notes, (ii) limit additional indebtedness of the ventures (except
Selkirk Venture) in which the Company currently has an interest, other than up
to $100 million for plant improvements and expansion and amounts required to
satisfy the fiduciary responsibilities of each of the ventures, and (iii)
prohibit cash distributions to shareholders unless no default exists under the
Indenture and such distributions do not exceed 100% of Funds From Operations
(as of the closing date of the issuance of the Senior Notes) plus $50 million.
The Indenture contains provisions that will eliminate the foregoing covenants
in the event that (i) the Company owns and is expected to continue to own an
equity interest in at least eight ventures with no single venture contributing
more than 25% or less than 5% of the aggregate Cash Distributions (as defined
in the Indenture) for a period of time defined in the Indenture and (ii) the
then current ratings of the Senior Notes are at least Baa3/BBB-/BBB- by
Moody's Investor Services, Inc., Standard & Poor Rating Services and Duff &
Phelps Credit Rating Co., respectively.
PLANT PROJECT FINANCINGS
Linden Venture. At March 31, 1998, Linden Venture had no outstanding project
financing indebtedness. The construction lender to Linden Venture contributed
the outstanding construction loan balance in exchange for a limited
partnership interest in Linden Venture. Pursuant to the terms of the
partnership agreement relating to Linden Venture, the limited partner is
entitled to receive distributions of Linden Venture Distributable Cash on a
basis preferential to the interest of Linden Ltd., which is the general
partner of Linden Venture; the limited partner receives 99% of the Linden
Venture Distributable Cash until it has received a pre-determined amount, and
thereafter, Linden, Ltd. receives a substantially increased percentage of the
Linden Venture Distributable Cash. See "Existing Venture and Plant
Descriptions--Linden Overview--Linden Cash Distributions".
In addition, at March 31, 1998, standby letters of credit issued by GECC for
the account of Linden Venture in favor of Bayway Refinery (the "Bayway L/C")
and Con Ed (the "Con Ed L/C"), in the aggregate amount of $57.2 million, were
outstanding pursuant to a September 17, 1992 letter of credit facility between
Linden Venture and GECC, which provides for the issuance of standby letters of
credit in an aggregate outstanding amount not to exceed $57.2 million. The
Bayway L/C is in the face amount of $10.0 million and expires August 1, 1998
and
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is renewed on an annual basis. The Con Ed L/C is in the face amount of $47.2
million and expires in June 1998; it is not expected to be renewed. The
monthly fee payable by Linden Venture for this facility is 0.75% per annum on
the face amount of the outstanding letters of credit. Linden Venture's
reimbursement obligation under this facility is unsecured. Linden Venture has
no indebtedness other than its reimbursement obligations under the GECC letter
of credit facility.
Pursuant to the Linden GP Term Loan Agreement between Linden Ltd. and the
Owner Trust, and as of March 31, 1998, Linden Ltd. is indebted to the Owner
Trust in a principal amount of $215.1 million, which indebtedness is secured
by its general partnership interest in Linden Venture and, as described below,
certain segregated deposit accounts created with the revenue of Linden
Venture. The proceeds of the Linden GP Term Loan were used for working capital
($10.0 million), as the equity contribution of Linden Ltd. in Linden Venture
($25.0 million) and as loans to a company owned by the McNair Interests and
the Minority Interests that is not a part of the Company, Financial Services.
The Linden GP Term Loan is comprised of a fixed rate portion, a floating rate
portion and a working capital portion, all of which mature September 1, 2007.
At March 31, 1998, $98.3 million was outstanding under the fixed rate portion,
$106.8 million was outstanding under the floating rate portion, and $10.0
million was outstanding under the working capital portion. The fixed rate
portion bears interest at 8.8% with principal and interest payments due
quarterly. Principal payments with respect to the fixed rate portion increase
by 2.85% each quarter with the principal payment due June 1, 1998 being $1.5
million, and the final principal payment being $4.1 million. The floating rate
portion bears interest at LIBOR plus 1.65%, with principal and interest
payments due quarterly. Principal payments with respect to the floating rate
portion increase by 2.85% each quarter, with the principal payment due June 1,
1998 being $1.6 million, and the final principal payment being $4.5 million.
The working capital portion bears interest at the one month, financial
commercial paper rate (as reported in Federal Statistical Release H.15 (519)
or successor publication) plus 0.55%, with interest payable quarterly. The
principal with respect to the working capital portion is due September 1,
2007. All such borrowings are secured by Linden Ltd.'s partnership interest in
Linden Venture. Linden Ltd. cannot make further borrowings under the Linden GP
Term Loan Agreement. See "Existing Venture and Plant Descriptions--Linden
Overview--Linden General Partner Term Loan".
The Linden GP Term Loan Agreement contains certain restrictions that
significantly limit or prohibit, among other things, the ability of Linden
Ltd. to incur indebtedness, make payments of certain indebtedness, pay
distributions to its owners, make investments, engage in transactions with
affiliates, create liens, sell assets and engage in acquisitions, mergers and
consolidations.
Pursuant to the terms of a security deposit agreement among Linden Venture,
Linden Ltd., the Owner Trust, as limited partner and as lender, and a
financial institution as security agent and escrow agent, Linden Venture has
agreed that a portion of Linden Venture's revenues will be deposited in, among
other accounts, a segregated deposit account for the debt service and ratio
requirements of the Linden GP Term Loan, which deposit is made prior to any
distributions of amounts to owners of Linden Venture, and a segregated account
for amounts to be distributed to its owners. See "Existing Venture and Plant
Descriptions--Linden Overview--Linden Cash Distributions". Further pursuant to
such security deposit agreement, Linden Ltd. has pledged its rights in the
preceding-described accounts to secure the Linden GP Term Loans.
The effect of the Owner Trust's prior right to Linden Venture Distributable
Cash and the depositary arrangement described in the immediately preceding
paragraph is that the Company's rights (and, consequently, the Company's
creditors' and shareholders' rights) to Linden Venture Distributable Cash and
the cash deposited in the accounts governed by the security deposit agreement
are subordinated to the Owner Trust's and the Linden Ltd. term lender's
respective rights therein. In addition, while there is no indebtedness on
Linden Venture's balance sheet, the Linden Venture partnership agreement
contains certain provisions that effectively restrict Linden Venture from,
among other things, entering into certain agreements or commitments, selling
or otherwise transferring assets, incurring indebtedness (other than defined
permitted indebtedness), creating or allowing any lien on its property (other
than defined permitted liens) and amending or modifying project documents.
Camden Cogen. Pursuant to the Camden Cogen Term Loan Agreement, and as of
March 31, 1998, Camden Cogen had $88.9 million of outstanding non-recourse
project financing term indebtedness from GECC and a
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syndication of international banks, which indebtedness is secured by the
Camden Plant and the other Camden Cogen assets, revenues of Camden Cogen, the
general partnership interest of Camden GPLP, and the general partnership
interest in Camden GPLP owned by Cogen Technologies Camden, Inc. ("Camden
Inc."), the general partner of Camden GPLP and a subsidiary of the Company. Of
such outstanding indebtedness, $65.0 million represents the Camden Tranche A
Loan, which matures May, 2007 and accrues interest at the per annum rate of
either (i) 3-month LIBOR plus an increasing margin of 1.00 to 1.625% (1.25%
for the period November 3, 1998 to November 1, 2001) or (ii) if such loan is
in default, the Bank of Tokyo Trust prime rate (which has an increasing margin
of .375% to 1.0%) plus 2.0% or the fed funds rate plus 2.0%, whichever is
higher, with principal and interest payable quarterly. Principal payments with
respect to the Camden Tranche A Loan increase each quarter by varying amounts
ranging from approximately 1.5% to approximately 5.5% of the prior quarter's
payment with the principal payment due May 1, 1998 being $2.5 million, and the
final principal payment being $4.1 million. Camden Cogen has entered into an
interest rate swap agreement with GECC which effectively fixes the interest
rate with respect to the Camden Tranche A Loan at 5.945%. The swap agreement
has a notional amount equal at all times to the outstanding principal balance
of the Camden Tranche A Loan. The remaining portion of this indebtedness,
$23.9 million, represents the Camden Tranche B Loan, which matures in May 2009
and accrues interest at the per annum rate of 11.4%, with interest and
principal payable quarterly. Principal payments with respect to the Camden
Tranche B Loan increase each quarter by varying amounts ranging from
approximately 1.6% to approximately 4.0% of the prior quarter's payment, with
the principal payment due May 1, 1998 being $0.2 million, and the final
principal payment being $1.4 million. Optional prepayments on the Camden
Tranche B Loan are subject to a yield maintenance premium.
The Camden Cogen Term Loan Agreement contains certain restrictions that
significantly limit or prohibit, among other things, the ability of Camden
Cogen or its general partner, Camden GPLP, to incur indebtedness, make
payments of certain indebtedness, pay distributions to its owners, make
investments, engage in transactions with affiliates, create liens, sell
assets, amend material contracts and engage in acquisitions, mergers and
consolidations. In addition, such loan agreement requires Camden Cogen to
establish and maintain security deposit accounts with a financial institution
into which its revenues are deposited and from which reserve accounts are
funded and maintained for various obligations, including the repayment of the
Camden Cogen Term Loans, the Camden Cogen letter of credit facility and the
Camden GP Term Loans. See "Existing Venture and Plant Descriptions--Camden
Overview--Camden Cash Distributions".
At March 31, 1998, a standby letter of credit issued by GECC for the account
of Camden Cogen was outstanding in the aggregate amount of $4.8 million, for
the purpose of securing certain of its reserve account obligations on the
Camden Tranche A Loan. No fee is payable by Camden Cogen for such outstanding
letter of credit, which expires in May 2007. Camden Cogen's reimbursement
obligations under this letter of credit are secured by the same collateral
that secures the Camden Cogen Term Loans.
Pursuant to the terms of Camden Cogen's partnership agreement, the limited
partner is entitled to receive distributions on a basis preferential to the
interest of Camden GPLP. See "Existing Venture and Plant Description--Camden
Overview--Camden Cash Distributions".
Pursuant to the Camden GP Term Loan Agreement between Camden GPLP and GECC,
and as of March 31, 1998, Camden GPLP is indebted to GECC in the principal
amount of $12.7 million, which indebtedness is secured by its general
partnership interest in Camden Cogen, the general partnership interest in
Camden GPLP of its general partner, Camden Inc., and a portion of Camden Cogen
revenues committed to a corresponding reserve account. This term indebtedness
matures May 2010. Interest on this term indebtedness accrues at either a fixed
rate or a floating rate. The fixed rate is a per annum rate based upon the 10-
year Treasury rate plus 5%, and the floating rate is a per annum rate of
either (i) Citibank prime plus 3% or (ii) LIBOR plus 4.25%. Interest accruing
at the prime rate or the fixed rate is payable monthly, and interest accruing
at the LIBOR rate is payable on the last day of a relevant interest period.
Principal payments are determined on a quarterly basis and made monthly in an
amount equal to one-third of the quarterly amount. The quarterly amount
increases each quarter by approximately 2.6% of the prior quarterly amount.
Principal payments for the quarter ended May 1, 1998 total $0.1 million, and
principal payments for the final quarterly period total $0.5 million. Optional
prepayments
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on portions of the indebtedness accruing interest at the fixed rate are
subject to the payment of a yield maintenance premium, and optional
prepayments on portions of the indebtedness accruing interest at a floating
rate which are made during the period from April 1996 to April 2000 are
subject to the payment of a premium on the prepaid portion thereof calculated
at an annually decreasing percentage which begins at 4%. Camden GPLP cannot
make further borrowings under the term loan agreement pursuant to which this
term indebtedness was incurred.
The Camden GP Term Loan Agreement contains certain restrictions that
significantly limit or prohibit, among other things, the ability of the Camden
GPLP to incur indebtedness, make payments of certain indebtedness, pay
distributions to its owners, make investments, engage in transactions with
affiliates, create liens, sell assets and engage in acquisitions, mergers and
consolidations.
The effect of the foregoing financing arrangements regarding Camden Cogen
and Camden GPLP is that the Company's rights (and, consequently, the Company's
creditors' and shareholders' rights) to Camden Cogen Distributable Cash and
the cash deposited in the above-described security deposit accounts are
subordinated to the rights of Camden Cogen's and Camden GPLP's lenders'
respective rights therein.
NJ Venture. Pursuant to the Prudential Loan Agreement and as of March 31,
1998, NJ Venture had $70.6 million of outstanding, non-recourse term project
financing indebtedness from Prudential, which is secured by the Bayonne Plant
and other NJ Venture assets and all revenues of NJ Venture. This indebtedness
matures October 2008 and accrues interest at the per annum rate of 10.85%,
with accrued interest and principal payable quarterly. The Prudential Term
Loan is non-callable through September 2002, and thereafter may, at the option
of NJ Venture, be prepaid at a premium on the prepaid portion thereof
calculated at a decreasing percentage which commences at 10.85%.
The Prudential Loan Agreement contains certain restrictions that
significantly limit or prohibit, among other things, the ability of NJ Venture
to incur indebtedness, make payments of certain indebtedness, pay
distributions to its owners, make investments, engage in transactions with
affiliates, create liens, sell assets and engage in acquisitions, mergers and
consolidations. In addition, such loan agreement requires NJ Venture to create
a debt service reserve fund from net cash flow if NJ Venture's annual debt
service coverage ratio, calculated each quarter using the previous twelve
months' financial information, falls below 1.50x. NJ Venture must increase the
reserve until funds held in such reserve plus the funds available for debt
service equal 1.50x the previous twelve months' debt service. Any funds held
in such reserve may be released as, and to the extent that, the balance of
funds retained in such reserve (if any) together with NJ Venture's net cash
flow cause NJ Venture's coverage ratio to exceed 1.50x. Such annual debt
service coverage ratio has not been below 1.5x, and as a result, NJ Venture
has not been required to fund the debt service reserve. At December 31, 1997,
NJ Venture's debt service coverage ratio as calculated under the Prudential
Loan Agreement was 1.84x.
Pursuant to the Equipment Loan Agreement and as of March 31, 1998, NJ
Ventures is indebted to the Bayonne Equipment Lender in the principal amount
of $0.2 million and an additional amount for accrued interest of $0.2 million.
Such outstanding principal amount and accrued interest thereon mature the
later of May 22, 1998 and the expiration of the IMTT Steam Sale Agreement. The
obligations under the Equipment Loan Agreement are secured by the equipment
purchased by NJ Venture in connection with such agreement, and the payment of
the interest that has accrued and continues to accrue on the remaining
principal balance is non recourse to NJ Venture, it being limited to the
security for the loan.
At March 31, 1998, NJ Venture had no indebtedness outstanding under the $5.0
million Revolving Facility with SBT, which was established by it for short
term working capital requirements and expires December 1998. Borrowings under
the Revolving Facility are payable at the expiration of the facility and
accrue interest at the per annum rate of 0.5% below SBT prime, with accrued
interest being payable monthly, and are secured by rights to payments from NJ
Venture power purchase agreements. NJ Venture pays a commitment fee of 1/4 of
1% on the average unused principal balance of the Revolving Facility. In
addition, at March 31, 1998, a standby letter of credit issued by the UBS for
the account of NJ Venture in the amount of $4.4 million was outstanding for
the
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purpose of securing certain obligations of NJ Venture to PSE&G pursuant to a
tracking account arrangement. See "Existing Venture and Plant Descriptions--
Bayonne Power Purchase Agreement--Public Service Electric and Gas Company of
New Jersey". The letter of credit was procured for NJ Venture by Financial
Services. Financial Services pays a quarterly fee on such letter of credit
calculated at 0.3% per annum on the face amount of the letter of credit to the
issuer thereof and has the reimbursement obligations to such issuer in the
event any drawing is made on the letter of credit. Pursuant to agreement
between NJ Venture and Financial Services, NJ Venture agrees to reimburse
Financial Services for all fees and reimbursement obligations incurred by
Financial Services under the letter of credit, which obligation of NJ Venture
is unsecured. Such letter of credit expires May 1999.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to completion of the Common Stock Offering, there has been no public
market for the Common Stock. Sales of substantial amounts of Common Stock in
the public market, or the perception that such sales may occur, could have an
adverse effect on the price of the Common Stock.
Upon completion of the Common Stock Offering, the Company will have
outstanding 44.9 million shares of Common Stock. Of such shares, shares
of Common Stock are considered "restricted securities" for the purpose of Rule
144 under the Securities Act and may only be sold if they are registered under
the Securities Act or if an exemption from registration is available,
including an exemption afforded by Rule 144 under the Securities Act.
In general, under Rule 144, as currently in effect, a person (or person
whose shares are aggregated), including an affiliate of the Company, who has
beneficially owned his or her restricted securities for at least one year but
less than two years, is entitled to sell within any three-month period a
number of such shares that does not exceed the greater of (i) 1% of the then
outstanding shares of Common Stock or (ii) the average weekly trading volume
in the Common Stock during the four calendar weeks preceding the date on which
notice of such sale is filed with the Commission. Sales pursuant to Rule 144
are subject to certain requirements relating to manner of sale, notice, and
availability of current public information about the Company. A person who is
not deemed to have been an affiliate of the Company at any time during the
three months preceding a sale, and who owns shares that have not been held by
the Company or an affiliate of the Company for at least two years, would be
entitled to sell the shares under Rule 144(k) without compliance with the
limitations described above. Restricted securities properly sold in reliance
on Rule 144 are thereafter freely tradeable without restrictions or
registration under the Securities Act unless thereafter held by an affiliate
of the Company.
The holders of shares of Common Stock have certain rights to
require Cogen to register sales of such shares under the Securities Act,
subject to certain restrictions, if, subsequent to the consummation of the
Common Stock Offering, Cogen proposes to register any of its securities under
the Securities Act. Such holders are entitled to notice of such registration
and to include their shares in such registration with their expenses borne by
Cogen, subject to the right of an underwriter participating in the offering to
limit the number of shares included in such registration. In addition, the
holders of shares of Common Stock, have the right to demand, on
occasions, that Cogen file a registration statement covering sales
of their respective shares, and Cogen is obligated to pay the expenses of such
registrations. Some of the shares as to which registration rights exist are
subject to the Underwriters' over-allotment option.
Each of the Company, the Selling Stockholders and the directors and
executive officers of the Company has agreed that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it
will not, during the period ending 180 days after the date of this Prospectus,
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any
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option, right or warrant to purchase, lend or otherwise transfer or dispose
of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the Common Stock,
subject to limited exceptions. See "Underwriters."
No prediction can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price of the Common Stock prevailing from time to time. Sales of substantial
amounts of Common Stock (including shares issued upon the exercise of stock
options), or the perception that such sales could occur, could adversely
affect prevailing market prices for the Common Stock. If such sales reduce the
market price of the Common Stock, the Company's ability to raise additional
capital in the equity markets could be adversely affected.
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UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement") the U.S.
Underwriters named below for whom Morgan Stanley & Co. Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, Goldman, Sachs & Co. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting as U.S.
Representatives, and the International Underwriters named below for whom
Morgan Stanley & Co. International Limited, Donaldson, Lufkin & Jenrette
International, Goldman Sachs International and Merrill Lynch International are
acting as International Representatives, have severally agreed to purchase,
and, the Selling Stockholders have agreed to sell them severally the
respective number of shares of Common Stock set forth opposite the names of
such Underwriters below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ---- -----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated.................................
Donaldson, Lufkin & Jenrette Securities Corporation...............
Goldman, Sachs & Co...............................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................................
-----------
Subtotal........................................................
-----------
International Underwriters:
Morgan Stanley & Co. International Limited........................
Donaldson, Lufkin & Jenrette International........................
Goldman Sachs International.......................................
Merrill Lynch International.......................................
Subtotal..........................................................
-----------
Total...........................................................
===========
</TABLE>
The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively
referred to as the "Underwriters" and the "Representatives", respectively. The
Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to
take and pay for all of the shares of Common Stock offered hereby (other than
those covered by the Underwriters' overallotment option described below) if
any such shares are taken.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any Shares (as defined herein) for the account of anyone
other than a United States or Canadian Person (as defined herein) and (ii) it
has not offered or sold, and will not offer or sell, directly or indirectly,
any Shares or distribute any prospectus relating to the Shares outside the
United States or Canada or to anyone other than a United States or Canadian
Person. Pursuant to the Agreement between U.S. and International Underwriters,
each International Underwriter has represented and agreed that, with certain
exceptions: (i) it is not purchasing any Shares for the account of any United
States or Canadian Person and (ii) it has not offered or sold, and will not
offer or sell, directly or indirectly, any Shares or distribute any prospectus
relating to the Shares in the United States or Canada or to any United States
or Canadian Person. With respect to any Underwriter that is a U.S. Underwriter
and an International Underwriter, the foregoing representations and agreements
(i) made by it in its capacity as a U.S. Underwriter apply only to it in its
capacity as a U.S. Underwriter and (ii) made by it in its capacity as an
International Underwriter apply only to it in its capacity as an International
Underwriter. The foregoing limitations do not apply to stabilization
transactions or to certain other transactions specified in the Agreement
between U.S. and International Underwriters. As used herein, "United States or
Canadian Person" means any national or resident of the United States or
Canada, or any corporation, pension, profit-sharing or other trust or other
entity organized under the
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laws of the United States or Canada or of any political subdivision thereof
(other than a branch located outside the United States and Canada of any
United States or Canadian Person), and includes any United States or Canadian
branch of a person who is otherwise not a United States or Canadian Person.
All shares of Common Stock to be purchased by the Underwriters under the
Underwriting Agreement are referred to herein as the "Shares".
Pursuant to the Agreement between U.S. and International Underwriters, sales
may be made between the U.S. Underwriters and International Underwriters of
any number of Shares as may be mutually agreed. The per share price of any
Shares so sold shall be the public offering price set forth on the cover page
hereof, in United States dollars, less an amount not greater than the per
share amount of the concession to dealers set forth below.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has
agreed not to offer or sell, any Shares, directly or indirectly, in any
province or territory of Canada or to, or for the benefit of any resident of
any province or territory of Canada in contravention of the securities laws
thereof and has represented that any offer or sale of Shares in Canada will be
made only pursuant to an exemption from the requirement to file a prospectus
in the province or territory of Canada in which such offer or sale is made.
Each U.S. Underwriter has further agreed to send to any dealer who purchases
from it any of the Shares a notice stating in substance that, by purchasing
such Shares, such dealer represents and agrees that it has not offered or
sold, and will not offer or sell, directly or indirectly, any of such Shares
in any province or territory of Canada or to, or for the benefit of, any
resident of any province or territory of Canada in contravention of the
securities laws thereof and that any offer or sale of Shares in Canada will be
made only pursuant to an exemption to file a prospectus in the province or
territory of Canada in which such offer or sale is made, and that such dealer
will deliver to any other dealer to whom it sells any of such Shares a notice
containing substantially the same statement as is contained in this sentence.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not
offered or sold and, prior to the date six months after the closing date for
the sale of the Shares to the International Underwriters, will not offer or
sell any Shares to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing
of investments (as principal or agent) for the purpose of their business or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations (1995); (ii) it has complied and will comply
with all applicable provisions of the Financial Services Act 1986 with respect
to anything done by it in relation to the Shares in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and
will only issue or pass on in the United Kingdom any document received by it
in connection with the offering of the Shares to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996, or is a person to whom such document
may otherwise lawfully be issued or passed on.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any of the Shares acquired in
connection with the distribution contemplated hereby, except for offers or
sales to Japanese International Underwriters or dealers and except pursuant to
any exemption from the registration requirements of the Securities and
Exchange Law and otherwise in compliance with applicable provisions of
Japanese law. Each International Underwriter has further agreed to send to any
dealer who purchases from it any of the Shares a notice stating in substance
that, by purchasing such Shares, such dealer represents and agrees that it has
not offered or sold, and will not offer or sell, any of such Shares, directly
or indirectly, in Japan or to or for the account of any resident thereof
except for offers or sales to Japanese International Underwriters or dealers
and except pursuant to any exemption from the registration requirements of the
Securities and Exchange Law and otherwise in compliance with applicable
provisions of Japanese law, and that such dealer will send to any other dealer
to whom it sells any of such Shares a notice containing substantially the same
statement as is contained in this sentence.
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The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the
cover page hereof and part to certain dealers at a price which represents a
concession not in excess of $. per share under the public offering price.
Any Underwriter may allow, and such dealers may re-allow, a concession not in
excess of $. per share to other Underwriters or to certain other dealers.
After the initial offering of the shares of Common Stock, the offering price
and other selling terms may from time to time be varied by the
Representatives.
Pursuant to the Underwriting Agreement, certain Selling Stockholders have
granted to the U.S. Underwriters an option, exercisable for 30 days from the
date of this Prospectus, to purchase up to an aggregate of
additional shares of Common Stock at the public offering price set forth on
the cover page hereof, less underwriting discounts and commissions. The U.S.
Underwriters may exercise such option to purchase solely for the purpose of
covering overallotments, if any, made in connection with the offering of the
shares of Common Stock offered hereby. To the extent such option is exercised,
each U.S. Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares of Common
Stock as the number set forth next to such Underwriter's name in the preceding
table bears to the total number of shares of Common Stock set forth next to
the names of all of the U.S. Underwriters in the preceding table.
The Company intends to apply to list the Common Stock on the NYSE, subject
to official notice of issuance, under the symbol "CGT".
At the request of the Company, the Underwriters have reserved for sale, at
the initial public offering price; up to shares of Common Stock for
directors, officers, employees, business associates and related persons of the
Company. The number of shares of Common Stock available for sale to the
general public will be reduced to the extent such individuals purchase such
reserved shares. Any reserved shares which are not so purchased will be
offered by the Underwriters to the general public on the same basis as the
other shares offered hereby.
Each of the Company, the Selling Stockholders, the directors and executive
officers of the Company has agreed that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 180 days after the date of this Prospectus, (i)
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend or otherwise transfer, or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The
restrictions described in this paragraph do not apply to (x) the sale to the
Underwriters of the shares of Common Stock offered hereby, (y) the issuance by
the Company of shares of Common Stock upon the exercise of any options granted
or shares of Common Stock issued pursuant to existing benefit plans of the
Company or (z) transactions of any person other than the Company relating to
shares of Common Stock or other securities acquired in open market
transactions after the completion of the Offering.
The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Common Stock offered by them.
In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may overallot in
connection with the offering, creating a short position in the Common Stock
for their own account. In addition, to cover overallotments or to stabilize
the price of the Common stock, the Underwriters may bid for, and purchase,
shares of Common Stock in the open market. Finally, the underwriting syndicate
may reclaim selling concessions allowed to an Underwriter or a dealer for
distributing the Common Stock in the Common Stock Offering, if the syndicate
repurchases previously distributed Common Stock in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the Common
Stock above independent market levels. The Underwriters are not required to
engage in these activities and may end any of these activities at any time.
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From time to time, Morgan Stanley & Co. Incorporated has provided and
continues to provide investment banking services to the Company.
The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
PRICING OF OFFERING
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price will be determined by negotiations between
the Company and the Representative. Among the factors to be considered in
determining the initial public offering price will be the future prospects of
the Company and its industry in general, revenues, earnings and certain other
financial and operating information of the Company in recent periods, and the
price-earnings ratios, price-sales ratios, market prices of securities and
certain financial and operating information of companies engaged in activities
similar to those of the Company. The estimated initial public offering price
range set forth on the cover page of this Prospectus is subject to change as
the result of market conditions and other factors.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain material United States federal income
tax considerations relating to the purchase, ownership and disposition of
Common Stock to U.S. Holders (as defined below) and certain material United
States federal income and estate tax consequences relating to the purchase,
ownership and disposition of Common Stock to non-U.S. Holders (as defined
below). This summary is based on current provisions of the United States
Internal Revenue Code of 1986, as amended (the "Code"), existing, temporary
and proposed regulations promulgated thereunder and administrative and
judicial interpretations thereof, all of which are subject to change, possibly
with retroactive effect.
This summary deals only with initial purchasers of Common Stock who hold
Common Stock as capital assets and does not address tax considerations
applicable to investors that may be subject to special tax rules, including,
without limitation, banks, insurance companies, tax-exempt entities, regulated
investment companies, common trust funds, dealers in securities, or persons
that hold Common Stock as part of a hedge, conversion or constructive sale
transaction, straddle or other risk reduction transaction. This discussion
also does not address the tax consequences arising under the laws of any
foreign, state or local jurisdiction.
INVESTORS CONSIDERING THE PURCHASE OF COMMON STOCK SHOULD CONSULT THEIR OWN
TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING,
HOLDING OR OTHERWISE DISPOSING OF COMMON STOCK, INCLUDING THE EFFECT AND
APPLICABILITY OF STATE, LOCAL OR FOREIGN TAX LAWS.
U.S. HOLDERS
As used herein, the term "U.S. Holder" means a holder of Common Stock that
is (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, (iii) an estate, the
income of which is subject to United States federal income taxation regardless
of its source, or (iv) a trust, the administration of which is subject to the
primary supervision of a court within the United States and which has one or
more United States persons with authority to control all substantial
decisions. As used herein, the term non-U.S. Holder means a holder of Common
Stock other than a U.S. Holder.
Dividends. Distributions, if any, made with respect to Common Stock
generally will be includible in the income of a U.S. Holder as ordinary
dividend income to the extent of the Company's current or accumulated earnings
and profits as determined for U.S. federal income tax purposes. If the amount
distributed to the holder of shares of Common Stock exceeds the U.S. Holder's
allocable share of such earnings and profits, the excess will be treated first
as a non-taxable return of capital to the extent of such U.S. Holder's
adjusted basis in the Common Stock and, thereafter, as a gain from the sale or
exchange of a capital asset. During the initial years of the Company's
operations, dividends distributed with respect to the Common Stock are
expected to exceed the Company's current and accumulated earnings and profits.
No assurance can be given, however, that distributions
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made with respect to the Common Stock will exceed the Company's current and
accumulated earnings and profits nor, if such distributions are made,
regarding the amount of any such excess. Furthermore, although the Company has
taken certain steps in order to "step up" its basis in the assets of Linden
Venture, Camden Cogen and Selkirk Venture, with the result that the Company
expects certain depreciation deductions and reductions to earnings and profits
to be available to it, such deductions and reductions depend, in part, on the
Company's determination of the relative value of the respective assets of each
of Linden Venture and Camden Cogen. Such valuations are not binding upon the
United States Internal Revenue Service ("IRS"). If the IRS were to
successfully challenge such allocation, it is likely that at least a portion
of such depreciation deductions and reductions in earnings and profits for the
years challenged would be reduced or moved to later periods, possibly
resulting in a larger portion of the distributions with respect to the Common
Stock made in such years being taxable as a dividend.
Sale or Other Disposition of Common Stock. Upon the sale or exchange of
Common Stock, U.S. Holders generally will recognize capital gain or capital
loss equal to the difference between the amount realized on such sale or
exchange and the U.S. Holder's adjusted basis in such shares.
NON-U.S. HOLDERS
Dividends. Distributions with respect to Common Stock paid by the Company
out of current and accumulated earnings and profits, as determined for United
States federal income tax purposes, to a non-U.S. Holder generally will be
subject to withholding of United States federal income tax at the rate of 30%,
unless reduced or eliminated by an applicable tax treaty or unless such
dividends are treated as effectively connected with a United States trade or
business of the non-U.S. Holder. Distributions paid by the Company in excess
of its current and accumulated earnings and profits will be treated first as a
nontaxable return of capital to the extent of the non-U.S. Holder's adjusted
basis in his Common Stock and, thereafter, as gain from the sale or exchange
of a capital asset. Under current law, if the Company cannot determine at the
time it makes a distribution whether such distribution will exceed the current
and accumulated earnings and profits of the Company, the gross amount of the
distribution will be subject to withholding at the same rate as dividends.
Amounts so withheld, however, will be refundable or creditable against the
non-U.S. Holder's United States federal income tax liability if it is
subsequently determined that such distribution was, in fact, in excess of the
current and accumulated earnings and profits of the Company. Treasury
Regulations effective for payments made after December 31, 2000 (the "New
Regulations"), would permit the Company to elect to reduce the amount of
withholding with respect to a distribution if, based on a reasonable estimate
of the Company's anticipated accumulated and current earnings and profits for
the taxable year in which such distribution is made, such distribution would
be in excess of such earnings and profits. No assurance can be given, however,
that the Company will be eligible to make this election with respect to any
distribution, or if eligible, that the Company will make such election.
If the receipt of a dividend is treated as being effectively connected with
the conduct of a United States trade or business by a non-U.S. Holder, the
dividend received by such non-U.S. Holder will be subject to United States
federal income tax in the same manner as U.S. Holders generally (and, in the
case of a corporate holder, possibly an additional branch profits tax).
Effectively connected dividends may be subject to different treatment under an
applicable tax treaty depending on whether such dividends are attributable to
a permanent establishment of the non-U.S. Holder in the United States.
Currently, for purposes of determining whether tax is to be withheld at the
30% rate or at a reduced rate as specified in an applicable income tax treaty,
the Company will ordinarily presume that dividends paid to an address in a
foreign country are paid to a resident of such country absent knowledge that
such presumption is not warranted. Under the New Regulations, non-U.S. Holders
will be required to satisfy certain applicable certification requirements to
claim treaty benefits.
Sale or Other Disposition of Common Stock. A non-U.S. Holder generally will
not be subject to United States federal income tax in respect of any gain
recognized on the sale or other taxable disposition of Common Stock unless (i)
the gain is effectively connected with a trade or business of the non-U.S.
Holder in the United States; (ii) in the case of a non-U.S. Holder who is an
individual and holds Common Stock as a capital asset, the
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<PAGE>
holder is present in the United States for 183 or more days in the taxable
year of the disposition and either (a) the individual has a "tax home" for
United States federal income tax purposes in the United States or (b) the gain
is attributable to an office or other fixed place of business maintained by
the individual in the United States; (iii) the non-U.S. Holder is subject to
tax pursuant to the provisions of United States federal income tax law
applicable to certain United States expatriates; or (iv) (A) the Company is or
has been during certain periods preceding the disposition a "U.S. real
property holding corporation" for United States federal income tax purposes
and (B) provided that the Common Stock continues to be "regularly traded on an
established securities market" for United States federal income tax purposes,
the non-U.S. Holder held, directly or indirectly, at any time during the five-
year period ending on the date of disposition, more than 5% of the outstanding
Common Stock. Non U.S. Holders who would be subject to United States federal
income tax with respect to gain recognized on a sale or other disposition of
Common Stock should consult applicable treaties, which may provide for
different rules.
Backup Withholding and Information Reporting. Payments of dividends to a
Non-U.S. Holder at an address outside the United States may be subject to
information reporting, but will not, under current law, generally be subject
to backup withholding. The payment of the proceeds of the disposition of
Common Stock to or through the United States office of a broker is subject to
information reporting and backup withholding at a rate of 31% unless the owner
of the stock certifies its non-United States status under penalties of perjury
or otherwise establishes an exemption. The payment of the proceeds of the
disposition by a Non-U.S. Holder of Common Stock to or through a foreign
office of a broker will not be subject to backup withholding. The Service has
indicated, however, that it is studying the possible application of backup
withholding in the case of a foreign office of a broker that is (a) a United
States person, (b) a United States-controlled foreign corporation or (c) a
foreign person 50% or more of whose gross income for certain periods is from a
United States trade or business. Moreover, in the case of foreign offices of
such brokers, information reporting will apply to such payments of proceeds
unless such broker has documentary evidence in its files of the owner's
foreign status and has no actual knowledge to the contrary. Backup withholding
is not an additional tax. Amounts withheld under the backup withholding rules
are generally allowable as a refund or credit against such Non-U.S. Holder's
United States federal income tax liability, if any, provided that the required
information is furnished to the Internal Revenue Service.
Federal Estate Taxes. Common Stock owned or treated as owned by an
individual who is not a citizen or resident (as specifically defined for
United States federal estate tax purposes) of the United States at the time of
such individual's death will be included in such individual's gross estate for
United States federal income tax purposes, unless an applicable estate tax
treaty provides otherwise.
LEGAL MATTERS
The validity of the Common Stock offered hereby and certain legal matters
will be passed upon for Cogen by Fulbright & Jaworski L.L.P., Houston, Texas.
Certain legal matters will be passed upon for the Underwriters by Skadden,
Arps, Slate, Meagher & Flom LLP, New York, New York ("Skadden Arps"). Skadden
Arps from time to time has performed legal services for Cogen.
EXPERTS
The audited combined financial statements of the Group and the NJ
Partnerships and the balance sheet of Cogen Technologies, Inc. included in
this Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
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AVAILABLE INFORMATION
Cogen has not previously been subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Cogen has
filed with the Securities and Exchange Commission (the "Commission") a
Registration Statement (which term shall include all amendments, exhibits,
schedules and supplements thereto) on Form S-1 under the Securities Act with
respect to the shares of Common Stock offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted as permitted by the rules and regulations of the Commission.
For further information with respect to the Company and the Common Stock
offered hereby, reference is made to the Registration Statement, copies of
which may be examined without charge at the Commission's principal office at
450 Fifth Street, N.W. Washington, D.C. 20549 and the regional offices of the
Commission located at 7 World Trade Center, New York, New York 10048 and 500
West Madison Street, 14th Floor, Chicago, Illinois 60661. Copies of such
materials may be obtained from the Public Reference Section of the Commission,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at its
public reference facilities in New York, New York and Chicago, Illinois at
prescribed rates, or on the Internet at http://www.sec.gov. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each statement being qualified in all respects by such
reference. Copies of materials filed with the Commission may also be inspected
at the offices of National Association of Securities Dealers, Inc., 1801 K
Street, N.W., 8th Floor, Washington, D.C. 20006.
105
<PAGE>
GLOSSARY
The following terms used in this Prospectus have the following meanings:
"ACOG" means average cost of gas.
"Average availability" means the fraction of time (usually expressed as a
percent on an annual or multi-annual basis) within which a generating plant
(or unit) is actually capable of providing service, whether or not it is
actually in service and regardless of the capacity level that can be provided.
"Availability factor" means the ratio (usually expressed as a percent) of
the time a generating unit is ready for, or in service, to the total time
interval under consideration.
"Avoided Costs" means, the incremental costs that would be incurred by an
electric utility for electric energy or capacity or both which, but for the
purchase from a Qualifying Facility, it would produce or purchase from some
other service.
"Base load plant" means a generation unit which is normally operated to
supply all or part of the minimum load of a utility system and which,
consequently, operates at a high load factor.
"Bayway" means Bayway Refining Company, a Delaware corporation.
"Btu" means British thermal units, a unit of energy.
"Camden Cogen" means Camden Cogen, L.P., a Delaware limited partnership,
which is the venture that owns the Camden Plant.
"Camden GPLP" means Cogen Technologies Camden GP Limited Partnership, a
Delaware limited partnership, which is the managing general partner of Camden
Cogen.
"Camden Paperboard" means Camden Paperboard Company, a New Jersey
corporation, a subsidiary of Caraustar Industries, Inc., a publicly traded
non-rated company based in Austell, Georgia.
"Capacity factor" means the ratio (usually expressed as a percent) of the
average load on a generating plant (or unit) plus the average load dispatched
off for the period of time considered to the contractual capacity of the
generating plant (or unit).
"Clean Air Act" means the Federal Clean Air Act of 1955, as amended.
"Cogeneration" means the sequential use of a simple energy source to produce
two or more forms of energy output. For example, the Company's plants burn
natural gas to produce electricity and steam.
"Con Ed" means The Consolidated Edison Company of New York.
"Dispatchable" means the ability of an electric generating unit to be
committed to meet demand for electricity in a fashion determined to be most
efficient by the system controller.
"Equivalent availability" means the ratio (usually expressed as a percent)
of the time a generating unit is ready for, or in, service multiplied by the
capacity level that can be provided, plus the time a generating unit is given
contractual credit for being ready for service multiplied by the contractual
capacity, to the total time interval under consideration multiplied by the
contractual capacity. (It is possible for the equivalent availability to be
above or below 100%.)
"EWG" means an exempt wholesale generator under the Energy Policy Act of
1992.
"FERC" means the United States Federal Energy Regulatory Commission.
"Gas Turbine, Combined Cycle Facility" means a facility in which a gas
turbine, burning natural gas or fuel oil, turns an electrical generator. The
exhaust gases from the turbine are directed into a waste heat recovery boiler,
producing high pressure steam which is run through a steam turbine, producing
additional electricity. After exiting the steam turbine, the low pressure
steam is delivered to the steam host facility for processing and building
heat.
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"GE" means General Electric Company.
"JCP&L" means Jersey Central Power & Light Company.
"Kilowatt" or "KW" means one thousand watts.
"Kilowatt-hours" or "KWh" means a unit of electrical energy equal to one
kilowatt of power supplied or taken from an electric circuit steadily for one
hour.
"Linden Ltd." means Cogen Technologies Linden, Ltd., a Texas limited
partnership, which is the managing general partner of Linden Venture.
"Linden Venture" means Cogen Technologies Linden Venture, L.P., a Delaware
limited partnership, which is the venture that owes the Linden Plant.
"MBtu" means one thousand Btus.
"MMBTU" means one million Btus.
"Mcf" means one thousand cubic feet of gas at 60(degrees)F and at a pressure
of 14.73 pounds per square inch absolute.
"Megawatt" or "MW" means one million watts. References to specific amounts
of megawatts in the case of plant capacities are to the "name plate"
capacities on the turbines in the plants.
"Megawatt hour" or "MWH" means one thousand kilowatt-hours.
"Merchant plant" means an electric generating plant that is seeking to sell
some or all of its uncommitted capacity or energy in excess of its existing
contractual or legal commitments.
"MESC" means McNair Energy Services Corporation, a Texas corporation, which
owns 100% of NJ Inc.
"MMBtu" means one million Btus.
"Nameplate capacity" means the output rating at a given set of ambient
conditions (usually annual average or ISO conditions) of the gas and steam
turbines in the plant expressed in kilowatts less the auxiliary power consumed
by the plant. The actual nameplate rating is usually engraved on a permanently
affixed metal plate mounted on the turbine, hence the term "nameplate".
"Net Electrical Capability" means the sum of the nameplate rating of the
generators for each venture, as designated by the manufacturer and expressed
in megawatts, less allowance for station service, at which such venture is
designed to operate continuously in a reasonable and prudent manner under
independent systems operator conditions in accordance with good utility
practice.
"NJ, Inc." means Cogen Technologies NJ, Inc., a Delaware corporation, which
is the managing general partner of NJ Venture.
"NJ Venture" means Cogen Technologies NJ Venture, a New Jersey general
partnership, which is the venture that owns the Bayonne Plant.
"PSE&G" means Public Service Electric and Gas Company of New Jersey.
"PURPA" means the Public Utilities Regulatory Policies Act of 1978, as
amended, and the regulations promulgated thereunder.
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"QF" or "Qualifying Facility" means a "qualifying cogeneration facility" in
accordance with PURPA.
"Securities Act" means the Securities Act of 1933, as amended.
"Selkirk GP Inc." means Cogen Technologies Selkirk GP, Inc., a Texas
corporation, which is the non-managing general in the Selkirk Venture.
"Selkirk LP" means Cogen Technologies Selkirk LP, a Delaware limited
partnership, which is a limited partner in the Selkirk Venture.
"Selkirk Venture" means Selkirk Cogen Partners, L.P., a Delaware limited
partnership that owns the Selkirk Plant.
"tracking account" means an accounting device designed to relate a utility
power purchaser's Avoided Cost to the payments it makes on such power purchase
agreement over the life thereof. Often, because of project financing
considerations, payments exceed the initial estimated Avoided Cost in the
early years of a power purchase agreement and come into line with, and are
less than, such estimated Avoided Costs in later years of the agreement.
Accordingly, many power purchase agreements set up the device of a tracking
account so that if there is a termination of the power purchase agreement at a
time when the utility purchaser has paid amounts exceeding its estimated
Avoided Costs, the utility can be paid back the difference. To the extent that
the amounts paid by the purchaser exceed its estimated Avoided Cost, the
venture selling the power under the power purchase agreement is indebted to
the purchaser for such amount, which is recorded in the tracking account.
108
<PAGE>
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS OF COGEN TECHNOLOGIES, INC.
Report of Independent Public Accountants................................ F-3
Balance Sheet of Cogen Technologies, Inc. at May 20, 1998............... F-4
FINANCIAL STATEMENTS OF COGEN TECHNOLOGIES GROUP
Audited Financial Statements
Report of Independent Public Accountants................................ F-7
Combined Statements of Income of Cogen Technologies Group for the years
ended December 31, 1997, 1996 and 1995................................. F-8
Combined Balance Sheets of Cogen Technologies Group as of December 31,
1997 and 1996.......................................................... F-9
Combined Statements of Cash Flows of Cogen Technologies Group for the
years ended
December 31, 1997, 1996 and 1995....................................... F-10
Combined Statements of Owners' Equity of Cogen Technologies Group for
the years ended December 31, 1997, 1996 and 1995....................... F-11
Notes to Combined Financial Statements of Cogen Technologies Group...... F-12
Unaudited Financial Statements
Combined Statements of Income of Cogen Technologies Group for the three
months ended
March 31, 1998 and 1997................................................ F-22
Combined Balance Sheets of Cogen Technologies Group as of March 31, 1998
and December 31, 1997.................................................. F-23
Combined Statements of Cash Flows of Cogen Technologies Group for the
three months ended March 31, 1998 and 1997............................. F-24
Combined Statements of Owners' Equity of Cogen Technologies Group for
the three months ended March 31, 1998 and 1997......................... F-25
Notes to Combined Financial Statements of Cogen Technologies Group...... F-26
FINANCIAL STATEMENTS OF COGEN TECHNOLOGIES NEW JERSEY OPERATING
PARTNERSHIPS
Audited Financial Statements
Report of Independent Public Accountants................................ F-28
Combined Statements of Income of Cogen Technologies New Jersey Operating
Partnerships for the years ended December 31, 1997, 1996 and 1995...... F-29
Combined Balance Sheets of Cogen Technologies New Jersey Operating
Partnerships at
December 31, 1997 and 1996............................................. F-30
Combined Statements of Cash Flows of Cogen Technologies New Jersey
Operating Partnerships for the years ended December 31, 1997, 1996 and
1995................................................................... F-31
Combined Statements of Partners' Capital of Cogen Technologies New
Jersey Operating Partnerships for the years ended December 31, 1997,
1996 and 1995.......................................................... F-32
Notes to Combined Financial Statements of Cogen Technologies New Jersey
Operating Partnerships................................................. F-33
Unaudited Financial Statements
Combined Statements of Income of Cogen Technologies New Jersey Operating
Partnerships for the three months ended March 31, 1998 and 1997........ F-40
</TABLE>
F-1
<PAGE>
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Combined Balance Sheets of Cogen Technologies New Jersey Operating
Partnerships at March 31, 1998 and December 31, 1997................... F-41
Combined Statements of Cash Flows of Cogen Technologies New Jersey
Operating Partnerships for the three months ended March 31, 1998 and
1997................................................................... F-42
Combined Statements of Partners' Capital of Cogen Technologies New
Jersey Operating Partnerships at March 31, 1998 and 1997............... F-43
Notes to Combined Financial Statements of Cogen Technologies New Jersey
Operating Partnerships................................................. F-44
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Cogen Technologies, Inc.:
We have audited the accompanying balance sheet of Cogen Technologies, Inc. as
of May 20, 1998. This balance sheet is the responsibility of the Company's
management. Our responsibility is to express an opinion on the balance sheet
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Cogen Technologies, Inc. as of
May 20, 1998 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
May 20, 1998
F-3
<PAGE>
COGEN TECHNOLOGIES, INC.
BALANCE SHEET
AT MAY 20, 1998
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets
Cash and cash equivalents.......................................... $ 1
=========
SHAREHOLDERS' EQUITY
Shareholders' Equity
Preferrred stock, $0.01 par value, 50.0 million shares authorized,
no shares issued and outstanding.................................. $ --
Common Stock, $0.01 par value, 300.0 million shares authorized,
1,000 shares issued and outstanding............................... --
Additional paid-in capital......................................... 1
---------
$ 1
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
COGEN TECHNOLOGIES, INC.
NOTES TO BALANCE SHEET
(1) ORGANIZATION AND BASIS OF PRESENTATION
Cogen Technologies, Inc. (the "Company") was incorporated in May 1998 to
acquire control of certain entities and interests owned by Robert C. McNair
and members of his family and by entities controlled by his family (the
"McNair Interests") and by other persons or entities with no relation to the
McNair Interests (the "Minority Interests"). In connection with the
organization of the Company, the McNair Interests and the Minority Interests
contributed an aggregate amount of $1,000 to the Company for 820 shares and
180 shares, respectively, of the Company's common stock.
Through the following series of transactions (the "Formation Transactions"),
the Company intends to acquire certain interests from the McNair Interests and
the Minority Interests:
(i) The Company will issue shares of common stock in exchange for 49.9%
of the general and limited partnership interests in Cogen Technologies
Linden Ltd. ("Linden Ltd."), a Texas limited partnership which is the
managing general partner of Cogen Technologies Linden Venture, LP ("Linden
Venture"), a Delaware limited partnership that owns and operates a 715-
megawatt cogeneration facility in Linden, New Jersey;
(ii) The Company will issue shares of common stock plus $1.0 million in
cash in exchange for 100% of the outstanding common stock of Cogen
Technologies Camden, Inc. ("Camden Inc.") and the limited partnership
interests in Cogen Technologies Camden GP Limited Partnership ("Camden
GPLP") held by the Minority Interests. Camden Inc. is a Texas corporation
that is the general partner of Camden GPLP, a Delaware partnership that is
the managing general partner of Camden Cogen LP ("Camden Cogen"), a
Delaware partnership that owns and operates a 146-megawatt cogeneration
facility in Camden, New Jersey;
(iii) McNair Energy Services Corporation ("MESC"), a Texas corporation
owned approximately 82% by the McNair Interests and 18% by the Minority
Interests, will be merged with Bayonne Acquisition Corp., a wholly owned
subsidiary of the Company, pursuant to which merger Bayonne Acquisition
Corp. will survive and the shareholders of MESC will receive shares of the
Company's common stock. MESC's wholly owned subsidiary Cogen Technologies
NJ, Inc. ("NJ Inc.") is the managing general partner of Cogen Technologies
NJ Venture ("NJ Venture"), a New Jersey general partnership that owns and
operates a 176-megawatt cogeneration facility in Bayonne, New Jersey.
(iv) The Company will issue shares of common stock in exchange for 100%
of the limited and general partnership interests in Cogen Technologies
Selkirk, L.P. ("Selkirk LP") and 100% of the common stock of Cogen
Technologies Selkirk GP, Inc. ("Selkirk GP Inc."). All of such interests
are held by the McNair Interests and the Minority Interests. Selkirk LP and
Selkirk GP Inc. hold limited and general partnership interests in Selkirk
Cogen Partners, L.P. which owns and operates a 345-megawatt cogeneration
facility in Bethlehem, New York;
(v) The Company will issue shares of common stock in exchange for 100% of
the common stock of CT Global Insurance, Ltd. ("CT Global"), a Bermuda
corporation whose primary business is underwriting a portion of the
insurance carried by NJ Venture, Camden Cogen and Linden Venture.
(vi) Linden Ltd. will redeem its remaining general and limited
partnership interests in consideration for the distribution of a $159.4
million account receivable and a $331.1 million in cash.
The Company's acquisition of Linden Ltd., Camden Inc. and the limited
partnership interests in Camden GPLP, approximately 89.5% of MESC, CT Global,
Selkirk LP and Selkirk GP Inc. will be accounted for at historical cost as a
reorganization of entities under common control because the composition of the
ownership by the McNair Interests and certain of the Minority Interests among
all such entities is identical. The acquisition
F-5
<PAGE>
COGEN TECHNOLOGIES, INC.
NOTES TO BALANCE SHEET--(CONTINUED)
of the remaining 10.5% of MESC, for which the ownership of a portion of the
Minority Interests is different from that of the other entities, will be
accounted for as a purchase transaction. The accounts of Linden Ltd., Camden
Inc., MESC, Selkirk LP, Selkirk GP Inc. and CT Global will be included in the
Company's consolidated financial statements.
Following the Formation Transactions, the McNair Interests and the Minority
Interests intends to sell shares of the Company's common stock in a public
offering (the "Common Stock Offering"). In connection with the Common Stock
Offering, the Company will pay certain costs which are estimated to total $6.2
million. Also following the Formation Transactions, the Company intends to
issue $625.0 million of Senior Notes, the proceeds from which will be used to:
(i) retire Linden Ltd.'s $331.1 million note payable; (ii) purchase $232.1
million of U.S. Treasury securities which will be used to defease the
outstanding long-term debt of Linden Ltd.; and (iii) for working capital
purposes.
Because the operations of the Company following the Formation Transactions
will be conducted primarily by its subsidiaries and ultimately by the ventures
in which the subsidiaries have interests, the Company's cash flow and its
ability to service indebtedness, including its ability to pay the interest on
and principal of its indebtedness and to pay dividends on the Common Stock,
will depend entirely upon the earnings of the ventures and the subsidiaries
and the distribution of those earnings to the Company. The Company initially
will have no significant business other than its ownership interests in the
subsidiaries and its planned development and acquisition business. The future
earnings of the ventures will be affected by a number of factors, including
competition in the power generation industry, possible changes in existing
laws and regulations, possible amendment or termination of the ventures' above
market power purchase agreements and various other economic, regulatory and
operating factors.
F-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Cogen Technologies Group:
We have audited the accompanying combined balance sheets of Cogen
Technologies Group (a group of cogeneration investing entities owned by Robert
C. McNair and affiliates) as of December 31, 1997 and 1996, and the related
combined statements of income, owners' equity and cash flows for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of the Group's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cogen Technologies Group
as of December 31, 1997 and 1996, and the results of their operations and
their cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
March 6, 1998
(except with respect to the matter discussed in Note 2, as to which the date
is May 20, 1998)
F-7
<PAGE>
COGEN TECHNOLOGIES GROUP
COMBINED STATEMENTS OF INCOME
(IN MILLIONS OF DOLLARS, EXCEPT AS NOTED)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1997 1996 1995
------ ----- -----
<S> <C> <C> <C>
Revenues:
Equity in earnings of:
Cogen Technologies Linden Venture, LP................ $ 73.8 $78.7 $59.0
Camden Cogen LP...................................... 14.5 13.7 13.4
Cogen Technologies NJ Venture........................ 17.6 18.2 28.4
Selkirk Cogen Partners, L.P.......................... 0.8 1.0 (1.3)
Other.................................................. 2.2 2.3 0.8
------ ----- -----
108.9 113.9 100.3
------ ----- -----
Costs and Expenses:
Operating overhead..................................... 13.4 14.4 10.8
General and administrative............................. 19.8 10.9 10.4
Depreciation and amortization.......................... 0.2 0.2 0.2
------ ----- -----
33.4 25.5 21.4
------ ----- -----
Income from Operations................................... 75.5 88.4 78.9
Other Income (Expense):
Interest and other income.............................. 16.0 17.0 17.8
Interest expense....................................... (21.7) (23.2) (26.3)
Allowance for long-term receivable..................... 10.3 (10.3) 6.5
------ ----- -----
Income Before Income Taxes............................... 80.1 71.9 76.9
Income Taxes............................................. (5.1) (4.0) (7.6)
------ ----- -----
Net Income............................................... $ 75.0 $67.9 $69.3
===== =====
Unaudited:
Pro Forma Income Taxes................................... (25.9)
------
Net Income After Pro Forma Income Taxes.................. $ 49.1
======
Pro Forma Primary and Fully Diluted Earnings Per Share
(in dollars)............................................ $ 1.09
======
Pro Forma Weighted Average Number of Shares Outstanding
(millions).............................................. 44.9
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
COGEN TECHNOLOGIES GROUP
COMBINED BALANCE SHEETS
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1997 1996
------ ------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents...................................... $ 18.9 $ 17.9
Accounts receivable, affiliate................................. 3.3 6.6
Other current assets........................................... 0.2 1.1
------ ------
22.4 25.6
------ ------
Investments in Affiliates
Cogen Technologies Linden Venture, LP.......................... 60.6 62.4
Selkirk Cogen Partners, L.P.................................... 24.1 26.6
Camden Cogen LP................................................ 12.7 6.8
Cogen Technologies NJ Venture.................................. 2.4 2.6
------ ------
99.8 98.4
------ ------
Other Assets
Accounts receivable, affiliate................................. 160.8 158.3
Other.......................................................... 1.8 2.1
------ ------
162.6 160.4
------ ------
$284.8 $284.4
====== ======
LIABILITIES AND OWNERS' EQUITY
Current Liabilities
Accounts payable, affiliate.................................... $ 11.7 $ 13.1
Current maturities on long-term debt........................... 12.9 16.0
Income taxes payable........................................... 0.5 --
Interest payable............................................... 2.0 1.7
Other current liabilities...................................... 0.1 0.1
------ ------
27.2 30.9
Long-Term Debt................................................... 218.0 230.9
Other Long-Term Liabilities...................................... 14.5 15.5
Deferred Income Taxes............................................ 4.7 3.5
Commitments and Contingencies (Note 7)........................... -- --
Owners' Equity (Deficit)......................................... 20.4 3.6
------ ------
$284.8 $284.4
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
COGEN TECHNOLOGIES GROUP
COMBINED STATEMENTS OF CASH FLOWS
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
-----------------------
1997 1996 1995
------ ------- ------
<S> <C> <C> <C>
Operating Activities:
Net income.......................................... $ 75.0 $ 67.9 $ 69.3
Adjustments to reconcile net income to net cash
provided by operating activities:
Distributions received from affiliates greater
than (less than) equity in earnings:
Cogen Technologies Linden Venture, LP........... 1.8 (1.0) 0.4
Selkirk Cogen Partners, L.P..................... 2.5 10.0 12.9
Camden Cogen LP................................. (5.9) 0.8 1.6
Cogen Technologies NJ Venture................... 0.5 6.3 3.5
Depreciation and amortization..................... 0.2 0.2 0.2
Deferred income taxes............................. 1.2 0.7 2.4
Allowance for long-term receivable................ (10.3) 10.3 (6.5)
Changes in other operating assets and liabilities
Decrease (increase) in accounts receivable,
affiliate........................................ 3.3 1.0 (5.6)
Decrease (increase) in other current assets....... 0.9 0.1 (0.4)
Increase (decrease) in accounts payable,
affiliate........................................ (1.4) (9.5) (12.6)
Increase (decrease) in interest payable........... 0.3 (0.4) (0.7)
Increase (decrease) in income taxes payable....... 0.5 (0.2) (0.3)
Increase (decrease) in other current liabilities.. -- (0.2) 0.3
Net change in other assets and liabilities........ (1.2) 1.6 2.6
------ ------- ------
Net Cash Provided by Operating Activities........... 67.4 87.6 67.1
------ ------- ------
Investing Activities:
Decrease in long-term receivable, affiliate......... 7.8 17.2 12.6
------ ------- ------
Net Cash Provided by Investing Activities............. 7.8 17.2 12.6
------ ------- ------
Financing Activities:
Principal payments on long-term borrowings.......... (16.0) (15.3) (14.0)
Cash distributions.................................. (58.4) (89.3) (63.4)
Other............................................... 0.2 3.2 0.2
------ ------- ------
Net Cash Used in Financing Activities................. (74.2) (101.4) (77.2)
------ ------- ------
Net Increase in Cash and Cash Equivalents............. 1.0 3.4 2.5
Cash and Cash Equivalents at Beginning of Year........ 17.9 14.5 12.0
------ ------- ------
Cash and Cash Equivalents at End of Year.............. $ 18.9 $ 17.9 $ 14.5
====== ======= ======
Cash Payments for:
Income taxes........................................ $ 3.4 $ 3.5 $ 5.5
====== ======= ======
Interest............................................ $ 21.4 $ 23.6 $ 27.0
====== ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
COGEN TECHNOLOGIES GROUP
COMBINED STATEMENTS OF OWNERS' EQUITY
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Owners' Equity at Beginning of Year.................. $ 3.6 $ 21.8 $ 15.7
Net income......................................... 75.0 67.9 69.3
Contributions...................................... 0.2 3.2 0.2
Distributions...................................... (58.4) (89.3) (63.4)
------- ------- -------
Owners' Equity at End of Year........................ $ 20.4 $ 3.6 $ 21.8
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
The combined financial statements of the Cogen Technologies Group (the
"Group") includes McNair Energy Services Corp. ("MESC") and its wholly owned
subsidiary Cogen Technologies NJ, Inc. ("NJ Inc."), Cogen Technologies Camden,
Inc. ("Camden Inc."), Cogen Technologies Linden, Ltd. ("Linden Ltd."), Cogen
Technologies Selkirk GP, Inc. ("Selkirk GP Inc."), Cogen Technologies Selkirk
LP ("Selkirk LP"), CT Global Insurance, Ltd. ("CT Global") and the limited
partnership interests in Cogen Technologies Camden GP Limited Partnership
("Camden GPLP") not held by Camden Inc. All material transactions between the
combined entities have been eliminated.
MESC is a Texas corporation that is controlled by Robert C. McNair and
affiliates ("McNair") and owns 100% of NJ Inc., a Delaware corporation. NJ
Inc. provides planning, operational and financial management services as
managing general partner for Cogen Technologies NJ Venture ("NJ Venture"), a
New Jersey general partnership that owns and operates a 176-megawatt
cogeneration facility in Bayonne, New Jersey.
Camden Inc. is a Texas corporation that is controlled by McNair and is the
general partner of Camden GPLP, a Delaware limited partnership. Under the
terms of Camden GPLP's partnership agreement, Camden Inc. is allocated 81.9%
of Camden GPLP's profits and losses and receives 81.9% of all cash
distributions. Camden GPLP provides planning, operational and financial
management services as managing general partner of Camden Cogen LP ("Camden
Cogen"), a Delaware limited partnership that owns and operates a 146-megawatt
cogeneration facility in Camden, New Jersey.
Linden Ltd. is a Texas limited partnership whose general partner, Cogen
Technologies, Inc. ("Cogen"), is controlled by McNair. Under the terms of
Linden Ltd.'s partnership agreement, Cogen is allocated 81.9% of Linden Ltd.'s
profits and losses and receives 81.9% of all cash distributions. Linden Ltd.
provides planning, operational and financial management services as managing
general partner of Cogen Technologies Linden Venture, LP ("Linden Venture"), a
Delaware limited partnership that owns and operates a 715-megawatt
cogeneration facility in Linden, New Jersey.
Selkirk GP Inc. is a Texas corporation and Selkirk LP is a Delaware limited
partnership, both of which are controlled by McNair. Selkirk GP Inc. holds a
1% general partnership interest and Selkirk LP holds a 78% limited partnership
interest in Selkirk Cogen Partners, L.P. ("Selkirk Cogen"), a Delaware limited
partnership which owns and operates a 345-megawatt cogeneration facility in
Bethlehem, New York.
The Group's investments in NJ Venture, Camden Cogen, Linden Venture and
Selkirk Cogen are accounted for using the equity method of accounting as major
decisions with respect to the partnerships' operations require the consent of
the limited partners.
CT Global is a Bermuda corporation controlled by McNair whose primary
business is underwriting a portion of the insurance carried by NJ Venture,
Camden Cogen and Linden Venture.
Cash and Cash Equivalents/Restricted Cash
All highly liquid short-term investments with original maturities of three
months or less are considered to be cash equivalents. At December 31, 1997 and
1996, most of the Group's cash was held by Linden Ltd. and all such cash was
restricted either to service Linden Ltd.'s debt or, if necessary, to make
working capital loans to Linden Venture.
F-12
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Credit Risk
Financial instruments which potentially subject the Group to credit risk
consist primarily of cash and accounts receivable. Cash accounts are held by
major financial institutions and accounts receivable are with related parties.
Income Taxes
Federal and state income taxes with respect to Camden GPLP, Linden Ltd. and
Selkirk LP and federal income taxes with respect to Camden Inc. and Selkirk GP
Inc. are not levied at the partnership or corporate levels but rather on the
individual partners or shareholders. Accordingly, such income taxes have not
been recognized in the combined financial statements for such entities. MESC
and CT Global account for federal income taxes and MESC, Camden Inc. and
Selkirk GP Inc. account for state income taxes in accordance with Statement of
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". Deferred
tax assets and liabilities are recognized based on anticipated future tax
consequences attributable to differences between the financial statement
carrying amounts of assets and liabilities and their respective tax bases.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of certain estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities, if any, and the periods in
which certain items of revenue and expense are included. Actual results may
differ from such estimates.
Earnings Per Share
Historical earnings per share have been omitted from the combined statements
of income since such information is not meaningful and the historically
combined company is not a separate legal entity with a singular capital
structure. Pro forma earnings per share is presented using the weighted
average number of common shares outstanding after giving effect to the
Formation Transactions discussed in Note 2.
(2) FORMATION OF COGEN TECHNOLOGIES, INC.
Cogen Technologies, Inc. (the "Company") was incorporated in May 1998 to
acquire control of certain entities and interests owned by McNair and by other
persons or entities with no relation to McNair (the "Minority Interests"). In
connection with the organization of the Company, McNair and the Minority
Interests contributed an aggregate amount of $1,000 to the Company for 820
shares and 180 shares, respectively, of the Company's common stock.
Through the following series of transactions (the "Formation Transactions"),
the Company intends to acquire certain interests from McNair and the Minority
Interests:
(i) The Company will issue shares of common stock in exchange for 49.9%
of the general and limited partnership interests in Linden Ltd.;
(ii) The Company will issue shares of common stock plus $1.0 million in
cash in exchange for 100% of the outstanding common stock of Camden, Inc.
and the limited partnership interests in Camden GPLP held by the Minority
Interests.
(iii) MESC will be merged with Bayonne Acquisition Corp., a wholly owned
subsidiary of the Company, pursuant to which merger Bayonne Acquisition
Corp. will survive and the shareholders of MESC will receive shares of the
Company's common stock;
F-13
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(iv) The Company will issue shares of common stock in exchange for 100%
of the limited and general partnership interests in Selkirk LP and 100% of
the common stock of Selkirk GP, Inc. All of such interests are held by
McNair and the Minority Interests;
(v) The Company will issue shares of common stock in exchange for 100% of
the common stock of CT Global;
(vi) Linden Ltd. will redeem its remaining general and limited
partnership interests in consideration for the distribution of a $159.4
million account receivable and a $331.1 million in cash;
The Company's acquisition of Linden Ltd., Camden Inc. and the limited
partnership interests in Camden GPLP, approximately 89.5% of MESC, CT Global,
Selkirk LP and Selkirk GP Inc. will be accounted for at historical cost as a
reorganization of entities under common control because the composition of the
ownership by McNair and certain of the Minority Interests among all such
entities is identical. The acquisition of the remaining 10.5% of MESC, for
which the ownership of a portion of the Minority Interests
is different from that of the other entities, will be accounted for as a
purchase transaction. The accounts of Linden Ltd., Camden Inc., MESC, Selkirk
LP, Selkirk GP Inc. and CT Global will be included in the Company's
consolidated financial statements.
Following the Formation Transactions, McNair and the Minority Interests
intend to sell shares of the Company's common stock in a public offering (the
"Common Stock Offering"). In connection with the Common Stock Offering, the
Company will pay certain costs which are estimated to total $6.2 million. Also
following the Formation Transactions, the Company intends to issue $625.0
million of Senior Notes, the proceeds from which will be used to: (i) retire
Linden Ltd.'s $331.1 million note payable; (ii) purchase $232.1 million of
U.S. Treasury securities which will be used to defease the outstanding long-
term debt of Linden Ltd.; and (iii) for working capital purposes.
F-14
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(3) INVESTMENTS IN AFFILIATES
The following table reflects the changes in the Group's investments in
affiliates (in millions of dollars):
<TABLE>
<CAPTION>
NJ CAMDEN LINDEN SELKIRK
VENTURE(1) COGEN VENTURE COGEN
---------- ------ ------- -------
<S> <C> <C> <C> <C>
Balance at December 31, 1994................. (0.3) 9.2 61.8 49.5
Equity in earnings........................... 28.6 13.4 59.0 (1.3)
Distributions................................ (31.9) (15.0) (59.4) (11.6)
Amortization of excess cost.................. (0.2) -- -- --
----- ----- ----- -----
Balance at December 31, 1995................. (3.8) 7.6 61.4 36.6
Equity in earnings........................... 18.4 13.7 78.7 1.0
Distributions................................ (24.5) (14.5) (77.7) (11.0)
Amortization of excess cost.................. (0.2) -- -- --
----- ----- ----- -----
Balance at December 31, 1996................. (10.1) 6.8 62.4 26.6
Equity in earnings........................... 17.8 14.5 73.8 0.8
Distributions................................ (18.1) (8.6) (75.6) (3.3)
Amortization of excess cost.................. (0.2) -- -- --
----- ----- ----- -----
Balance at December 31, 1997................. (10.6) 12.7 60.6 24.1
===== ===== ===== =====
</TABLE>
- --------
(1) Through December 31, 1997 NJ Inc., received distributions from NJ Venture
in excess of its proportionate share of NJ Ventures earnings of $13.0
million ($12.7 million at December 31, 1996, $6.6 million at December 31,
1995 and $3.3 million at December 31, 1994). All partners share in
liquidation rights to the extent of their individual capital accounts,
accordingly, such excess is classified as a long-term liability in the
financial statements. The amount reflected as Investment in NJ Venture
represents NJ Inc.'s unamortized cost in excess of its equity in the
underlying net assets of NJ Venture and such amount is being amortized
over twenty years.
The following table presents summary balance sheet information for the
Group's significant affiliates at December 31, 1997 and 1996 (in millions of
dollars):
<TABLE>
<CAPTION>
NJ CAMDEN LINDEN
VENTURE COGEN VENTURE
--------- ----------- -----------
1997 1996 1997 1996 1997 1996
---- ---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets................................ 25.0 18.9 19.0 19.5 64.2 64.7
Property, plant and equipment, net............ 73.8 80.6 106.3 108.9 428.2 450.1
Other assets.................................. 0.2 0.3 -- -- -- --
---- ---- ----- ----- ----- -----
99.0 99.8 125.3 128.4 492.4 514.8
==== ==== ===== ===== ===== =====
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities........................... 18.9 15.5 11.8 13.7 31.8 31.5
Long-term debt................................ 67.9 71.8 84.7 90.2 -- --
Other long-term liabilities -- -- 0.8 0.7 2.2 2.9
Partners' capital............................. 12.2 12.5 28.0 23.8 458.4 480.4
---- ---- ----- ----- ----- -----
99.0 99.8 125.3 128.4 492.4 514.8
==== ==== ===== ===== ===== =====
</TABLE>
F-15
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The following table presents summary income statement information for the
Group's significant affiliates for the years ended December 31, 1997, 1996 and
1995 (in millions of dollars):
<TABLE>
<CAPTION>
NJ VENTURE CAMDEN COGEN LINDEN VENTURE
------------------- ------------------- ----------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
----- ----- ----- ----- ----- ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ 96.5 95.3 96.5 80.2 77.2 67.5 299.0 305.5 255.6
Costs and expenses...... (67.9) (65.6) (54.8) (57.0) (54.8) (45.7) (194.5) (195.8) (166.4)
----- ----- ----- ----- ----- ----- ------ ------ ------
Income from operations.. 28.6 29.7 41.7 23.2 22.4 21.8 104.5 109.7 89.2
Other income (expense).. (8.0) (8.4) (8.7) (7.3) (7.8) (8.0) 1.1 0.5 0.7
----- ----- ----- ----- ----- ----- ------ ------ ------
Net income.............. 20.6 21.3 33.0 15.9 14.6 13.8 105.6 110.2 89.9
===== ===== ===== ===== ===== ===== ====== ====== ======
</TABLE>
Under the terms of NJ Venture's joint venture agreement, NJ Inc. is
allocated 86.5% of NJ Venture's profits and losses and receives 86.5% of all
cash distributions.
Under the terms of Camden Cogen's partnership agreement, monthly cash
distributions are allocated 1% to Camden GPLP and 99% to the limited partner
up to a specified cumulative rate of return (approximately $0.3 million to
$0.4 million per month through May 2007 and varying amounts thereafter) and
the remaining available cash for the month is allocated 99% to Camden GPLP and
1% to the limited partner. Once the limited partner has received its specified
rate of return, cash distributions will be allocated 90% to Camden GPLP and
10% to the limited partner. During 1997, 1996 and 1995 Camden GPLP received
74%, 83% and 84%, respectively, of Camden Cogen's cash distributions. Camden
Cogen's income before depreciation is allocated as follows: (i) an amount
equal to debt principal payments, 100% to the limited partner; (ii) an amount
equal to and allocated on the same basis as cash distributed; and (iii) any
remainder generally 99% to Camden GPLP and 1% to the limited partner. Losses
are allocated 100% to Camden GPLP until its capital account equals zero and
then to the limited partner until its capital account equals zero and then to
Camden GPLP. Depreciation is allocated 100% to the limited partner until its
capital account equals zero and then to Camden GPLP. During 1997, 1996 and
1995 Camden GPLP was allocated 91%, 94% and 97%, respectively, of Camden
Cogen's net income.
Under the terms of Linden Venture's partnership agreement, cash is
distributed monthly, 1% to Linden Ltd. and 99% to the limited partner up to a
specified rate of return (approximately $4.3 million per month through
September 1998, approximately $3.0 million per month from October 1998 through
September 2001 and between $4.3 million and $4.8 million per month thereafter)
("Tranche 1"), then 99% to Linden Ltd. and 1% to the limited partner up to a
capped amount, which is twice the amount of Tranche 1, and the remainder 90%
to Linden Ltd. and 10% to the limited partner. During 1997, 1996 and 1995
Linden Ltd. received 59%, 60% and 54%, respectively, of Linden Venture's cash
distributions. Linden Venture's income before depreciation is allocated to the
partners on the basis of cash distributed with any excess primarily allocated
99% to Linden Ltd. Losses are allocated 100% to Linden Ltd. until its capital
account equals zero and then to the limited partner until its capital account
equals zero with any remainder allocated 100% to Linden Ltd. Depreciation up
to $525.0 million is allocated 5% to Linden Ltd. and 95% to the limited
partners. All remaining depreciation is allocated 99% to Linden Ltd. During
1997, 1996 and 1995 Linden Ltd. was allocated 70%, 71% and 66%, respectively,
of Linden Venture's net income.
Under the terms of the amended partnership agreement, available cash is
distributed, up to a specified level (the "Level 1 Distributions"), 99% to the
partners in accordance with their current equity interests and 1% in
accordance with the original ownership structure (which does not include
Selkirk GP Inc. and Selkirk LP). Any additional funds are distributed 99% in
accordance with the original ownership structure and 1% to the partners in
accordance with their current equity interests. Subsequent to the earlier of
September 1, 2013 or the date all Level 1 Distributions are made,
distributions will be made based on the partners' residual interest (17.5% for
the
F-16
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
combined interests of Selkirk GP Inc. and Selkirk LP). Under the terms of the
amended partnership agreement, Selkirk GP Inc. and Selkirk LP are being
allocated a total of approximately 6% of the earnings of Selkirk Cogen.
(4) LONG-TERM DEBT
In February 1992, Camden GPLP entered into a $36.5 million Term Loan
Agreement with General Electric Capital Corporation which matures in May 2010.
Borrowings under the agreement, which totaled $14.8 million, bear interest at
the London Interbank Offering Rate (LIBOR) plus 4.25% and are secured by
Camden GPLP's holdings in Camden Cogen. Principal and interest payments are
made quarterly at varying amounts in accordance with the terms of the
agreement.
In September 1992, Linden Ltd. entered into a $250.0 million Amended and
Restated Term Loan Agreement with State Street Bank & Trust Co. which matures
in September 2007 and is comprised of a fixed rate portion, a floating rate
portion and a working capital portion. Under the terms of the agreement the
fixed rate portion bears interest at 8.8%, the floating rate portion bears
interest at LIBOR plus 1.65% and the working capital portion bears interest at
the banks commercial paper rate plus 0.55%. Borrowings under the agreement are
secured by Linden Ltd.'s interest in Linden Venture. Principal and interest
payments are made quarterly at varying amounts in accordance with the terms of
the agreement.
At December 31, 1996 NJ Inc. had outstanding $4.4 million under the terms of
a term loan agreement with The Prudential Insurance Company of America. Such
amount was repaid in 1997.
Long-term debt at December 31, 1997 and 1996 consisted of the following (in
millions of dollars):
<TABLE>
<CAPTION>
1997 1996
------------- -------------
LONG- LONG-
CURRENT TERM CURRENT TERM
------- ----- ------- -----
<S> <C> <C> <C> <C>
Camden GPLP......................................... 0.5 12.4 0.5 12.9
---- ----- ---- -----
NJ Inc.............................................. -- -- 4.4 --
---- ----- ---- -----
Linden Ltd.,
Fixed rate........................................ 6.0 93.7 5.3 99.7
Floating rate..................................... 6.4 101.9 5.8 108.3
Working capital................................... -- 10.0 -- 10.0
---- ----- ---- -----
12.4 205.6 11.1 218.0
---- ----- ---- -----
12.9 218.0 16.0 230.9
==== ===== ==== =====
</TABLE>
Aggregate total maturities during the next five years are as follows: 1998--
$12.9 million; 1999--$14.5 million; 2000--$16.2 million; 2001--$18.1 million;
and 2002--$20.3 million.
The term loan agreements of Linden Ltd. and Camden GPLP contain certain
restrictions that limit or prohibit, among other things, the ability to incur
indebtedness, make payments of certain indebtedness, pay distributions, make
investments, engage in transactions with affiliates, create liens, sell assets
and engage in acquisitions, mergers and consolidations.
F-17
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(5) RELATED PARTY TRANSACTIONS
Camden GPLP provides planning, operational and financial management services
to Camden Cogen for a monthly fee equal to 1.5% of Camden Cogen's gross
revenues. Such fees charged to Camden Cogen in 1997, 1996 and 1995 totaled
$1.2 million, $1.2 million and $1.0 million, respectively. Linden Ltd.
provides similar services to Linden Venture for a monthly management fee equal
to 1.5% of Linden Venture's gross revenues. Such fees charged to Linden
Venture in 1997, 1996 and 1995 totaled $4.6 million, $4.5 million and $3.9
million, respectively. RCM Management Services, L.P. ("Management Services"),
which is controlled by McNair, provides planning, operational and financial
management services to Camden GPLP and Linden Ltd. for monthly fees equal to
1.5% of the gross revenues of Camden Cogen and Linden Venture, respectively,
and to Selkirk GP Inc. and Selkirk LP for monthly fees equal to 1.5% of 49.22%
of the gross revenues of Selkirk Cogen. Such fees charged were as follows in
1997, 1996 and 1995: (i) Camden GPLP--$1.2 million, $1.2 million and $1.0
million, respectively; and (ii) Linden Ltd.--$4.6 million, $4.5 million and
$3.9 million, respectively; and (iii) Selkirk GP Inc. and Selkirk LP--$1.2
million, $1.1 million and $1.0 million, respectively.
Cogen Technologies Capital Company, L.P. ("Cogen Capital"), which is
controlled by McNair, charges Camden GPLP, Linden Ltd., NJ Inc., Selkirk GP
Inc. and Selkirk LP for overhead costs from which they benefit. Such fees
totaled: (i) Camden GPLP--$4.3 million in 1997, $2.9 million in 1996 and $2.6
million in 1995; (ii) Linden Ltd.--$21.2 million in 1997, $13.7 million in
1996 and $12.5 million in 1995; (iii) NJ Inc.--$5.2 million in 1997, $3.3
million in 1996 and $3.0 million in 1995 and (iv) Selkirk GP Inc. and Selkirk
LP--$0.2 million in each of 1997, 1996 and 1995. NJ Inc. charged certain
overhead costs to Cogen Capital totaling $2.2 million in 1997, $2.0 million in
1996 and $1.7 million in 1995.
Selkirk GP Inc. and Selkirk LP pay a natural gas management fee of $0.02 per
thousand cubic feet of natural gas purchased to an affiliate. Fees for such
services totaled $0.3 million in each of 1997, 1996 and 1995.
Linden Ltd. has advanced funds to Cogen Technologies Financial Services,
L.P. ("Financial Services") which amounted to $160.8 million and $168.6
million at December 31, 1997 and 1996, respectively. Such amount is classified
as a long-term receivable in the combined balance sheets. The receivable bears
interest at 8.8% and Linden Ltd. has earned net interest of $14.6 million in
1997, $15.6 million in 1996 and $16.8 million in 1995.
Financial Services has used the funds to make advances to other affiliates
for general working capital needs and has invested in treasury notes, treasury
bills and certain marketable securities. The market value of Financial
Services' investments in marketable securities supports Financial Services'
ability to repay the amounts advanced by Linden Ltd. Accordingly, from time to
time, Linden Ltd. has provided allowances with respect to the realization of
its receivable. Linden Ltd. recorded provisions (benefits) with respect to its
receivable from Financial Services of $(10.3 million) in 1997, $10.3 million
in 1996 and $(6.5 million) in 1995. At December 31, 1997 the cumulative
allowance recognized with respect to such receivable was zero.
From time to time Financial Services has made advances to MESC, which
advances totaled $9.8 million and $13.1 million at December 31, 1997 and 1996,
respectively. Such advances bear interest at 9.3% and during 1997, 1996 and
1995 Financial Services charged MESC interest totaling $1.2 million, $1.8
million and $2.8 million, respectively.
From time to time advances are made between Financial Services and Camden
Inc. At December 31, 1997 $0.9 million was payable to Financial Services by
Camden Inc. and at December 31, 1996 $6.2 million was payable by Financial
Services to Camden Inc. Advances bear interest at 9.3% and during 1997, 1996
and 1995 Camden Inc. recorded interest income totaling $0.7 million, $0.9
million and $1.0 million, respectively.
F-18
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
From time to time advances are made between Financial Services and Selkirk
GP Inc. and Selkirk LP. At December 31, 1997 and 1996 $2.3 million and $0.4
million was payable to Selkirk GP Inc. and Selkirk LP by Financial Services.
(6) INCOME TAXES
As explained in Note 1, certain entities in the Group are tax-paying
entities. Income tax expense for such entities for the years ended December
31, 1997, 1996 and 1995 consisted of (in millions of dollars):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current
Federal....................................................... 3.3 3.0 3.5
State......................................................... 0.6 0.3 1.7
--- --- ----
3.9 3.3 5.2
--- --- ----
Deferred
Federal....................................................... 0.4 0.7 3.4
State......................................................... 0.8 -- (1.0)
--- --- ----
1.2 0.7 2.4
--- --- ----
5.1 4.0 7.6
=== === ====
</TABLE>
Deferred tax liabilities (assets) at December 31, 1997 and 1996 are composed
of the following differences between financial and tax reporting amounts (in
millions of dollars):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred income tax liabilities
Tax depreciation in excess of book depreciation................... 5.6 7.5
Deferred income tax assets
Alternative minimum tax credit carryforward....................... (0.8) (3.1)
Book depreciation in excess of state tax depreciation ............ -- (0.8)
Other............................................................. (0.1) (0.1)
---- ----
Net deferred income tax liability................................. 4.7 3.5
==== ====
</TABLE>
A reconciliation of income tax expense computed by applying the statutory
federal income tax rate to income before income taxes for the years ended
December 31, 1997, 1996 and 1995 is presented in the following table (in
millions of dollars):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Federal income taxes at statutory rate........................... 4.3 3.7 7.1
Increase resulting from:
State income taxes, net of federal effect...................... 0.3 0.3 0.5
Other.......................................................... 0.5 -- --
--- --- ---
5.1 4.0 7.6
=== === ===
</TABLE>
In 1995 NJ Inc. settled a tax dispute with the state of New Jersey for an
amount less than anticipated. The excess of the amount accrued over the
settlement amount, $1.3 million, was reflected as a benefit in 1995.
F-19
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(7) COMMITMENTS AND CONTINGENCIES
A group of individuals has filed suit against several companies, including
MESC, alleging that the companies created environmental concerns in and around
two sites in Iberville Parish, Louisiana, causing personal injury and
diminished property values. At this stage of the lawsuit, MESC is not able to
estimate costs or potential liability.
There are certain other claims and legal actions pending against the Group
and its equity investees. While the outcome of such proceedings cannot be
predicted with certainty, management does not expect these matters to have a
material adverse effect on the financial condition or results of operations of
the Group.
(8) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 "Disclosures About Fair Value of Financial Instruments"
requires the disclosure, to the extent practicable, of the fair value of
financial instruments which are recognized or unrecognized in the balance
sheet. The fair value disclosed herein is not representative of the amount
that could be realized or settled, nor does the fair value amount consider tax
consequences, if any, of realization or settlement. The following table
reflects the fair value of long-term debt at December 31, 1997 and 1996 (in
millions of dollars):
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Long-Term Debt
Camden GPLP..................................... 12.9 12.9 13.4 13.4
NJ Inc.......................................... -- -- 4.4 4.4
Linden Ltd...................................... 218.0 225.5 229.1 230.1
</TABLE>
The fair value of fixed-rate long-term debt has been determined based on the
differential between the interest rates of long-term treasury securities of
equivalent maturities and the effective interest rates on the debt at the date
of the borrowing plus the interest rates on similar treasury securities at the
balance sheet date. With respect to floating rate debt, the carrying amount
approximates fair value due to the market-sensitive interest rate on such
debt.
The carrying amount of current assets and liabilities are considered to be
reasonable estimates of their fair values due to their short-term nature. The
carrying amount of the long-term receivable from an affiliate is considered to
be a reasonable estimate of fair value since interest is earned at market
rates.
F-20
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(9) SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1 QTR 2 QTR 3 QTR 4 QTR YEAR
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
1997
Revenues................................... 27.3 22.8 31.5 27.3 108.9
Costs and expenses......................... (8.7) (8.1) (9.2) (7.4) (33.4)
Income from operations..................... 18.6 14.7 22.3 19.9 75.5
Other income (expense)(1).................. (3.4) 7.9 1.4 (1.3) 4.6
Income taxes............................... (1.0) (1.3) (2.0) (0.8) (5.1)
Net income................................. 14.2 21.3 21.7 17.8 75.0
Gross profit(2)............................ 23.7 19.1 27.4 25.1 95.3
1996
Revenues................................... 28.2 28.7 30.9 26.1 113.9
Costs and expenses......................... (7.9) (4.8) (4.7) (8.1) (25.5)
Income from operations..................... 20.3 23.9 26.2 18.0 88.4
Other income (expense)(3).................. (10.2) (3.7) (2.0) (0.6) (16.5)
Income taxes............................... (0.7) (0.9) (1.6) (0.8) (4.0)
Net income................................. 9.4 19.3 22.6 16.6 67.9
Gross profit(2)............................ 22.4 25.6 27.4 23.9 99.3
</TABLE>
- --------
(1) Includes benefit (charge) for allowance on long-term receivable as
follows: 1 Qtr--($1.8 million); 2 Qtr--$9.2 million; 3 Qtr--$2.6 million;
4 Qtr--$0.3 million; Year--$10.3 million.
(2) Income from operations plus general and administrative expense.
(3) Includes benefit (charge) for allowance on long-term receivable as
follows: 1 Qtr--($8.2 million); 2 Qtr--($1.8 million); 3 Qtr--($0.6
million); 4 Qtr--$0.3 million; Year--($10.3 million).
F-21
<PAGE>
COGEN TECHNOLOGIES GROUP
COMBINED STATEMENTS OF INCOME (UNAUDITED)
(IN MILLION OF DOLLARS, EXCEPT AS NOTED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Revenues
Equity in earnings of:
Cogen Technologies Linden Venture, LP................ $ 17.4 $ 18.6
Camden Cogen LP...................................... 4.7 5.0
Cogen Technologies NJ Venture........................ 15.2 2.9
Selkirk Cogen Partners, L.P.......................... 0.2 0.2
Other.................................................. 0.5 0.6
--------- ---------
38.0 27.3
--------- ---------
Costs and Expenses:
Operating overhead..................................... 10.0 3.5
General and administrative............................. 4.9 5.1
Depreciation and amortization.......................... 0.1 0.1
--------- ---------
15.0 8.7
--------- ---------
Income from Operations................................... 23.0 18.6
Other Income (Expense)
Interest and other income.............................. 3.4 4.1
Interest expense....................................... (4.9) (5.7)
Allowance for long-term receivable..................... -- (1.8)
--------- ---------
Income Before Income Taxes............................... 21.5 15.2
Income Taxes............................................. (4.8) (1.0)
--------- ---------
Net Income............................................... $16.7 $14.2
=========
Unaudited:
Pro Forma Income Taxes................................... (3.4)
---------
Net Income After Pro Forma Income Taxes.................. $13.3
=========
Pro Forma Primary and Fully Diluted Earnings Per Share
(in dollars)............................................ $0.30
=========
Pro Forma Weighted Average Number of Shares Outstanding
(millions).............................................. 44.9
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE>
COGEN TECHNOLOGIES GROUP
COMBINED BALANCE SHEETS
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents............................ $ 18.8 $ 18.9
Accounts receivable, affiliate....................... 4.1 3.3
Other current assets................................. 0.1 0.2
------ ------
23.0 22.4
------ ------
Investments in Affiliates
Cogen Technologies Linden Venture, LP................ 59.2 60.6
Selkirk Cogen Partners, L.P.......................... 24.3 24.1
Camden Cogen L.P..................................... 12.6 12.7
Cogen Technologies NJ Venture........................ 2.4 2.4
------ ------
98.5 99.8
------ ------
Other Assets
Accounts receivable, affiliate....................... 159.4 160.8
Other................................................ 1.7 1.8
------ ------
161.1 162.6
------ ------
$282.6 $284.8
====== ======
LIABILITIES AND OWNERS' EQUITY
Current Liabilities
Accounts payable, affiliate.......................... $ 8.3 $ 11.7
Current maturities on long-term debt................. 13.3 12.9
Income taxes payable................................. 3.3 0.5
Interest payable..................................... 1.9 2.0
Other current liabilities............................ 0.1 0.1
------ ------
26.9 27.2
Long-Term Debt......................................... 214.5 218.0
Other Long-Term Liabilities............................ 8.3 14.5
Deferred Income Taxes.................................. 6.0 4.7
Commitments and Contingencies (Note 3)................. -- --
Owners' Equity ........................................ 26.9 20.4
------ ------
$282.6 $284.8
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
COGEN TECHNOLOGIES GROUP
COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
31,
--------------
1998 1997
------ ------
<S> <C> <C>
Operating Activities:
Net income..................................................... $ 16.7 $ 14.2
Adjustments to reconcile net income to net cash provided by
operating activities:
Distributions received from affiliates greater than (less
than) equity in earnings:
Cogen Technologies Linden Venture, LP...................... 1.4 6.2
Camden Cogen LP............................................ 0.1 (3.6)
Cogen Technologies NJ Venture.............................. (6.0) (0.6)
Selkirk Cogen Partners, L.P................................ (0.2) (0.2)
Depreciation and amortization................................ 0.1 0.1
Deferred income taxes........................................ 1.3 (0.2)
Allowance for long-term receivable........................... -- 1.8
Changes in other operating assets and liabilities
Decrease (increase) in accounts receivable, affiliate........ (0.8) 0.1
Decrease (increase) in other current assets.................. 0.1 0.4
Increase (decrease) in accounts payable, affiliate........... (3.4) 1.4
Increase (decrease) in other current liabilities............. 2.7 0.7
Net change in other assets and liabilities................... (0.2) (0.2)
------ ------
Net Cash Provided by Operating Activities...................... 11.8 20.1
------ ------
Investing Activities:
Decrease (increase) in long-term receivable, affiliate....... 1.4 (7.8)
------ ------
Net Cash Provided by Investing Activities...................... 1.4 (7.8)
------ ------
Financing Activities:
Principal payments on long-term borrowings................... (3.1) (3.9)
Cash distributions........................................... (10.2) (8.3)
------ ------
Net Cash Used in Financing Activities.......................... (13.3) (12.2)
------ ------
Net Increase (Decrease) in Cash and Cash Equivalents........... (0.1) 0.1
Cash and Cash Equivalents at Beginning of Period............... 18.9 17.9
------ ------
Cash and Cash Equivalents at End of Period..................... $ 18.8 $ 18.0
====== ======
Cash Payments for:
Income taxes................................................. $ 0.7 $ 0.5
====== ======
Interest..................................................... $ 5.0 $ 5.7
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
COGEN TECHNOLOGIES GROUP
COMBINED STATEMENTS OF OWNERS' EQUITY (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-------------
1998 1997
------ -----
<S> <C> <C>
Owners' Equity at Beginning of Period............................ $ 20.4 $ 3.6
Net income..................................................... 16.7 14.2
Distributions.................................................. (10.2) (8.3)
------ -----
Owners' Equity at End of Period.................................. $ 26.9 $ 9.5
====== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
The combined financial statements of the Cogen Technologies Group (the
"Group") includes McNair Energy Services Corp. ("MESC") and its wholly owned
subsidiary Cogen Technologies NJ, Inc. ("NJ Inc."), Cogen Technologies Camden,
Inc. ("Camden Inc."), Cogen Technologies Linden, Ltd. ("Linden Ltd."), Cogen
Technologies Selkirk GP, Inc. ("Selkirk GP Inc."), Cogen Technologies Selkirk
LP ("Selkirk LP"), CT Global Insurance, Ltd. ("CT Global") and the limited
partnership interests in Cogen Technologies Camden GP Limited Partnership
("Camden GPLP") not held by Camden Inc. All material transactions between the
combined entities have been eliminated.
MESC is a Texas corporation that is controlled by Robert C. McNair and
affiliates ("McNair") and owns 100% of NJ Inc., a Delaware corporation. NJ
Inc. provides planning, operational and financial management services as
managing general partner for Cogen Technologies NJ Venture ("NJ Venture"), a
New Jersey general partnership that owns and operates a 176-megawatt
cogeneration facility in Bayonne, New Jersey.
Camden Inc. is a Texas corporation that is controlled by McNair and is the
general partner of Camden GPLP, a Delaware limited partnership. Under the
terms of Camden GPLP's partnership agreement, Camden Inc. is allocated 81.9%
of Camden GPLP's profits and losses and receives 81.9% of all cash
distributions. Camden GPLP provides planning, operational and financial
management services as managing general partner of Camden Cogen LP ("Camden
Cogen"), a Delaware limited partnership that owns and operates a 146-megawatt
cogeneration facility in Camden, New Jersey.
Linden Ltd. is a Texas limited partnership whose general partner, Cogen
Technologies, Inc. ("Cogen"), is controlled by McNair. Under the terms of
Linden Ltd.'s partnership agreement, Cogen is allocated 81.9% of Linden Ltd.'s
profits and losses and receives 81.9% of all cash distributions. Linden Ltd.
provides planning, operational and financial management services as managing
general partner of Cogen Technologies Linden Venture, LP ("Linden Venture"), a
Delaware limited partnership that owns and operates a 715-megawatt
cogeneration facility in Linden, New Jersey.
Selkirk GP Inc. is a Texas corporation and Selkirk LP is a Delaware limited
partnership, both of which are controlled by McNair. Selkirk GP Inc. holds a
1% general partnership interest and Selkirk LP holds a 78% limited partnership
interest in Selkirk Cogen Partners, L.P. ("Selkirk Cogen"), a Delaware limited
partnership which owns and operates a 345-megawatt cogeneration facility in
Bethlehem, New York.
The Group's investments in NJ Venture, Camden Cogen, Linden Venture and
Selkirk Cogen are accounted for using the equity method of accounting as major
decisions with respect to the partnerships' operations require the consent of
the limited partners.
CT Global is a Bermuda corporation controlled by McNair whose primary
business is underwriting a portion of the insurance carried by NJ Venture,
Camden Cogen and Linden Venture.
The accompanying unaudited financial statements of the Group reflect, in the
opinion of management, all adjustments, consisting only of normal and
recurring adjustments, necessary to present fairly the Group's financial
position at March 31, 1998 and the Group's results of operations and cash
flows for the three-month periods ended March 31, 1998 and 1997. Interim
period results are not necessarily indicative of the results of operations or
cash flows for a full-year period.
F-26
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
These financial statements and the notes thereto should be read in
conjunction with the Group's audited financial statements included elsewhere
in this Prospectus.
(2) DEVELOPMENT BONUSES
In the first quarter of 1998 payments totaling $7.4 million were made to
certain individuals to "buy out" development bonuses which such individuals
were eligible to receive in subsequent periods. Such amount is included in
Operating Overhead in the Combined Statements of Income for the three months
ended March 31, 1998.
(3) COMMITMENTS AND CONTINGENCIES
A group of individuals has filed suit against several companies, including
MESC, alleging that the companies created environmental concerns in and around
two sites in Iberville Parish, Louisiana, causing personal injury and
diminished property values. At this stage of the lawsuit, MESC is not able to
estimate costs or potential liability.
There are certain other claims and legal actions pending against the Group
and its equity investees. While the outcome of such proceedings cannot be
predicted with certainty, management does not expect these matters to have a
material adverse effect on the financial condition or results of operations of
the Group.
(4) SUBSEQUENT EVENTS
In the second quarter of 1998 certain entities entered into negotiations to
make settlements to terminate existing management services and gas management
services agreements. Linden Venture and Camden Cogen will terminate management
services agreements with Linden Ltd. and Camden GPLP, respectively, and gas
management services agreements with an affiliate. Linden Ltd., Camden GPLP,
Selkirk GP Inc. and Selkirk LP will terminate management services agreements
with RCM Management Services L.P. and Selkirk GP Inc., and Selkirk LP will
terminate gas management services agreements with an affiliate. In addition,
payments will be made to "buy out" development bonuses which certain employees
are eligible to receive in subsequent periods. Such settlements will be
reflected in earnings in the period in which the negotiations are finalized.
F-27
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Cogen Technologies New Jersey Operating Partnerships:
We have audited the accompanying combined balance sheets of Cogen
Technologies New Jersey Operating Partnerships (a group of cogeneration
partnerships in which Robert C. McNair and affiliates have an interest) as of
December 31, 1997 and 1996, and the related combined statements of income,
partners' capital and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the partnerships' management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cogen Technologies New
Jersey Operating Partnerships as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
March 6, 1998
F-28
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED STATEMENTS OF INCOME
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Revenues
Electricity........................................... $456.5 $458.0 $407.6
Steam................................................. 19.2 20.0 12.0
------ ------ ------
475.7 478.0 419.6
------ ------ ------
Costs and Expenses
Fuel.................................................. 220.5 222.2 167.1
Operating and maintenance............................. 44.2 39.2 46.7
Depreciation and amortization......................... 36.1 35.9 36.0
General and administrative............................ 16.9 16.1 14.0
Taxes, other than income.............................. 1.7 2.8 3.1
------ ------ ------
319.4 316.2 266.9
------ ------ ------
Income from Operations.................................. 156.3 161.8 152.7
Other Income (Expense)
Interest and other income............................. 1.6 1.1 1.3
Interest expense...................................... (15.8) (16.8) (17.3)
------ ------ ------
Net Income.............................................. $142.1 $146.1 $136.7
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED BALANCE SHEETS
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------- -------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................................... $ 39.5 $ 29.6
Accounts receivable......................................... 44.6 52.9
Inventories................................................. 21.2 17.4
Other current assets........................................ 2.9 3.2
------- -------
108.2 103.1
------- -------
Property, Plant and Equipment, at cost........................ 826.2 821.4
Accumulated depreciation.................................... (217.9) (181.8)
------- -------
608.3 639.6
------- -------
Other Assets.................................................. 0.2 0.3
------- -------
$ 716.7 $ 743.0
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Accounts payable............................................ $ 43.8 $ 42.3
Accounts payable, affiliate................................. -- 0.5
Current maturities on long-term debt........................ 9.4 8.1
Interest payable............................................ 3.2 3.5
Other current liabilities................................... 6.1 6.3
------- -------
62.5 60.7
Long-Term Debt................................................ 152.6 162.0
Other Long-Term Liabilities................................... 3.0 3.6
Commitments and Contingencies (Note 4)........................ -- --
Partners' Capital............................................. 498.6 516.7
------- -------
$ 716.7 $ 743.0
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Operating Activities:
Net income........................................ $ 142.1 $ 146.1 $ 136.7
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 36.1 35.9 36.0
Changes in other operating assets and liabilities
Decrease (increase) in accounts receivable...... 8.3 (10.6) (2.8)
Decrease (increase) in accounts receivable,
affiliate...................................... -- -- 1.6
Decrease (increase) in inventories.............. (3.8) (1.6) 2.1
Decrease (increase) in other current assets..... 0.3 (0.4) (0.3)
Increase (decrease) in accounts payable......... 1.5 18.0 (2.8)
Increase (decrease) in accounts payable,
affiliate...................................... (0.5) (2.8) 3.2
Increase (decrease) in interest payable......... (0.3) (0.1) (0.1)
Increase (decrease) in other current
liabilities.................................... (0.2) (0.3) (0.4)
Net change in other assets and liabilities...... (0.5) (1.9) 1.2
------- ------- -------
Net Cash Provided by Operating Activities........... 183.0 182.3 174.4
------- ------- -------
Investing Activities:
Additions to property, plant and equipment........ (4.8) (2.4) (2.4)
------- ------- -------
Net Cash Used in Investing Activities............... (4.8) (2.4) (2.4)
------- ------- -------
Financing Activities:
Principal payments on long-term borrowings........ (8.1) (7.4) (6.6)
Cash distributions to partners.................... (160.2) (175.2) (165.3)
------- ------- -------
Net Cash Used in Financing Activities............... (168.3) (182.6) (171.9)
------- ------- -------
Net Increase (Decrease) in Cash and Cash
Equivalents........................................ 9.9 (2.7) 0.1
Cash and Cash Equivalents at Beginning of Year...... 29.6 32.3 32.2
------- ------- -------
Cash and Cash Equivalents at End of Year............ $ 39.5 $ 29.6 $ 32.3
======= ======= =======
Cash Payments for Interest.......................... $ 16.0 $ 16.9 $ 17.3
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED STATEMENTS OF PARTNERS' CAPITAL
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------- -------- -------
<S> <C> <C> <C>
Balance at December 31, 1994........................ $ 67.7 $506.7 $ 574.4
Net income........................................ 101.0 35.7 136.7
Distributions..................................... (106.3) (59.0) (165.3)
------- ------ -------
Balance at December 31, 1995........................ 62.4 483.4 545.8
Net income........................................ 110.8 35.3 146.1
Distributions..................................... (116.7) (58.5) (175.2)
------- ------ -------
Balance at December 31, 1996........................ 56.5 460.2 516.7
Net income........................................ 106.1 36.0 142.1
Distributions..................................... (102.3) (57.9) (160.2)
------- ------ -------
Balance at December 31, 1997........................ $ 60.3 $438.3 $ 498.6
======= ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
The combined financial statements of the Cogen Technologies New Jersey
Operating Partnerships (the "NJ Partnerships") includes (i) Cogen Technologies
NJ Venture ("NJ Venture"); (ii) Camden Cogen LP ("Camden Cogen"); and (iii)
Cogen Technologies Linden Venture, LP ("Linden Venture"). The NJ Partnerships
are engaged in the operation of natural gas-fired cogeneration facilities in
the state of New Jersey. All material transactions between the combined
entities have been eliminated.
NJ Venture, a New Jersey general partnership, owns and operates a 176-
megawatt cogeneration facility in Bayonne, New Jersey. Cogen Technologies NJ
Inc. ("NJ Inc."), a Delaware corporation, is the managing partner of NJ
Venture and provides planning, operational and financial management services.
Under the terms of NJ Venture's joint venture agreement, NJ Inc. is allocated
86.5% of NJ Venture's profits and losses and receives 86.5% of all cash
distributions.
Camden Cogen, a Delaware limited partnership, owns and operates a 146-
megawatt cogeneration facility in Camden, New Jersey. Cogen Technologies
Camden GP Limited Partnership ("Camden GPLP") is the managing partner of
Camden Cogen and provides planning, operational and financial management
services. Under the terms of Camden Cogens partnership agreement, monthly cash
distributions are allocated 99% to the limited partner and 1% to Camden GPLP
up to a specified cumulative rate of return (approximately $0.3 million to
$0.4 million per month through May 2007 and varying amounts thereafter) and
the remaining available cash for the month is allocated 99% to Camden GPLP and
1% to the limited partner. Once the limited partner has received its specified
rate of return, cash distributions will be allocated 90% to Camden GPLP and
10% to the limited partner. During 1997, 1996 and 1995 Camden GPLP received
74%, 83% and 84%, respectively, of Camden Cogen's cash distributions. Camden
Cogen's income before depreciation is allocated as follows: (i) an amount
equal to debt principal payments, 100% to the limited partner; (ii) an amount
equal to and allocated on the same basis as cash distributed; and (iii) any
remainder is generally allocated 99% to Camden GPLP and 1% to the limited
partner. Losses are allocated 100% to Camden GPLP until its capital account
equals zero and then 100% to the limited partner until its capital account
equals zero and then 100% to Camden GPLP. Depreciation is allocated 100% to
the limited partner until its capital account equals zero and then to Camden
GPLP. During 1997, 1996 and 1995 Camden GPLP was allocated 91%, 94% and 97%,
respectively, of Camden Cogen's net income.
Linden Venture, a Delaware limited partnership, owns and operates a 715-
megawatt cogeneration facility in Linden, New Jersey. Cogen Technologies
Linden Ltd. ("Linden Ltd.") is the managing partner of Linden Venture and
provides planning, operational and financial management services. Under the
terms of Linden Venture's partnership agreement, cash is distributed monthly,
1% to Linden Ltd. and 99% to the limited partner up to a specified rate of
return (approximately $4.3 million per month through September 1998,
approximately $3.0 million per month from October 1998 through September 2001
and between $4.3 million and $4.8 million per month thereafter) ("Tranche 1"),
then 99% to Linden Ltd. and 1% to the limited partner up to an amount equal to
twice the amount of Tranche 1 and the remainder 90% to Linden Ltd. and 10% to
the limited partners. During 1997, 1996 and 1995 Linden Ltd. received 59%, 60%
and 54%, respectively, of Linden Venture's cash distributions. Linden
Venture's income before depreciation is allocated to the partners on the basis
of cash distributed with any excess primarily allocated 99% to Linden Ltd.
Losses are allocated 100% to Linden Ltd. until its capital account equals zero
and then to the limited partners until their capital accounts equal zero with
any remainder allocated 100% to Linden Ltd. Depreciation up to $525.0 million
is allocated 5% to Linden Ltd. and 95% to the limited partners. All remaining
depreciation is allocated 99% to Linden Ltd. During 1997, 1996 and 1995 Linden
Ltd. was allocated 70%, 71% and 66%, respectively, of Linden Venture's net
income.
F-33
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NJ Inc., Camden GPLP and Linden Ltd. are controlled by McNair.
Cash and Cash Equivalents/Restricted Cash
All highly liquid short-term investments with original maturities of three
months or less are considered to be cash equivalents. At December 31, 1997 and
1996, $23.3 million and $22.6 million, respectively, of the NJ Partnerships'
cash was held in accounts to secure certain current liabilities.
Concentration of Credit Risk
Financial instruments which potentially subject the NJ Partnerships to
credit risk consist primarily of cash and accounts receivable. Cash accounts
are held by major financial institutions and accounts receivable are
concentrated within entities engaged in the energy industry or with related
parties. Accounts receivable are net of NJ Venture's allowance for doubtful
accounts of $0.3 million at December 31, 1997 and Linden Venture's allowance
for doubtful accounts of $1.2 million at December 31, 1996.
Inventories
Spare parts inventories at December 31, 1997 and 1996 were $16.5 million and
$12.0 million, respectively and at such date kerosene and butane inventories
were $4.7 million and $5.4 million, respectively. Inventories are valued at
average cost.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation is recorded
utilizing the straight-line method over the estimated useful life of the
facilities, which range from twenty to twenty-five years, with no salvage
value.
During the first quarter of 1996 the NJ Partnerships adopted Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of". SFAS
No.121 requires, among other things, that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The application of SFAS
No. 121 has had no impact on the NJ Partnerships' financial position or
results of operations.
Estimated costs associated with planned major maintenance activities are
accrued and charged to operating and maintenance expense on a straight-line
basis. Routine or unplanned maintenance and repairs are expensed as incurred.
Deferred Revenues
Pursuant to the power purchase agreement between Consolidated Edison Company
of New York, Inc. ("ConEd") and Linden Venture, ConEd makes prepayments to
Linden Venture for butane inventory. At December 31, 1997 and 1996 such
prepayments totaled $2.2 million and $2.9 million, respectively, and are
included in Other Long-Term Liabilities in the balance sheet. The butane
inventory is expensed and the revenue is recognized when the butane is
consumed.
Income Taxes
Income taxes with respect to the NJ Partnerships are not levied at the
partnership level but rather on the individual partners. Accordingly, no
income taxes have been recognized in the combined financial statements.
F-34
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of certain estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities, if any, and the periods in
which certain items of revenue and expense are included. Actual results may
differ from such estimates.
(2) FINANCING AND DEBT
Long-term debt at December 31, 1997 and 1996 consisted of the following (in
millions of dollars):
<TABLE>
<CAPTION>
1997 1996
----------------- -----------------
CURRENT LONG-TERM CURRENT LONG-TERM
------- --------- ------- ---------
<S> <C> <C> <C> <C>
NJ Venture
Term loan................................. 3.5 67.9 3.1 71.4
Equipment loan............................ 0.4 -- -- 0.4
--- ----- --- -----
3.9 67.9 3.1 71.8
--- ----- --- -----
Camden Cogen
Term loan-Tranche A....................... 4.6 61.5 4.2 66.1
Term loan-Tranche B....................... 0.9 23.2 0.8 24.1
--- ----- --- -----
5.5 84.7 5.0 90.2
--- ----- --- -----
9.4 152.6 8.1 162.0
=== ===== === =====
</TABLE>
Aggregate total maturities during the next five years are as follows: 1998--
$9.4 million; 1999--$10.0 million; 2000--$11.0 million; 2001--$12.1 million;
and 2002--$13.3 million.
Under the terms of a 1987 twenty-year term loan agreement with The
Prudential Insurance Company of America, NJ Venture had an outstanding
principal balance of $71.4 million at December 31, 1997. The principal bears
interest at 10.85% per annum and principal and interest are payable quarterly
through October 2008. All of NJ Venture's property, rights and interests are
pledged as collateral under the terms of this agreement.
Under the terms of a 1986 loan agreement with Bayonne Industries, NJ Venture
has an outstanding balance of $0.4 million at December 31, 1997 (including
accrued interest of $0.2 million). The principal balance and accrued interest
is payable May 22, 1998. The principal balance bears interest at the prime
rate of First National Bank of Chicago plus 1%.
Camden Cogen's Tranche A loan with a group of banks bears interest at rates
which increase over the term of the agreement from 1.0% to 1.625 % above the
three-month LIBOR rate (1.25% for the period November 3, 1998 to November 1,
2001). Principal and interest are payable quarterly through May 1, 2007.
Camden Cogen has entered into an interest rate swap agreement with General
Electric Capital Corporation which fixes the LIBOR rate at 5.945%. The swap
agreement has a notional amount equal at all times to the outstanding
principal balance of the Tranche A loan. The effect of the swap on interest
expense for the years ended December 31, 1997, 1996 and 1995 was to increase
(decrease) such expense by $0.2 million, $0.3 million and $(0.1) million,
respectively. The Tranche B loan with GECC bears interest at 11.4% with
principal and interest payable quarterly through May 1, 2009.
Under the terms of an agreement between NJ Venture and a bank, the bank has
agreed to lend to NJ Venture a principal amount not to exceed $5.0 million on
a revolving credit basis with the proceeds to be used to satisfy
F-35
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
short-term working capital requirements. Outstanding principal amounts bear
interest at 1/2% per annum below the bank's prime rate and NJ Venture must pay
a commitment fee of 1/4% on the average unused principal amount. The agreement
expires December 18, 1998. No amounts were outstanding under the terms of the
agreement at December 31, 1997 and 1996.
GECC provides standby letters of credit for Linden Venture in an amount not
to exceed $57.2 million to secure various obligations with ConEd and Bayway
Refining Company. As of December 31, 1997 and 1996 letters of credit totaling
$57.2 million and $120.7 million, respectively, were outstanding. GECC
receives a monthly fee equal to 0.75% of each outstanding letter of credit for
amounts up to $75.0 million and 1% with respect to amounts in excess of $75.0
million. Such fees totaled $0.7 million, $1.0 million and $0.8 million in
1997, 1996 and 1995, respectively.
A bank provides a letter of credit for NJ Venture to secure certain
obligations to Public Service Electric & Gas Company ("PSE&G"). As of December
31, 1997 and 1996 letters of credit in the amounts of $4.4 million and $3.9
million, respectively, were outstanding. The letter of credit expires in May
1998.
GECC provides a letter of credit for Camden Cogen to secure certain
obligations under the Tranche A loans. As of December 31, 1997 and 1996
letters of credit in the amounts of $4.8 million were outstanding. The letter
of credit expires in May 2007.
The term loan agreements of Camden Cogen and NJ Venture contain certain
restrictions that limit or prohibit, among other things, the ability to incur
indebtedness, make payments of certain indebtedness, pay distributions, make
investments, engage in transactions with affiliates, create liens, sell assets
and engage in acquisitions, mergers and consolidations.
(3) RELATED PARTY TRANSACTIONS
Camden GPLP provides planning, operational and financial management services
to Camden Cogen for a monthly fee equal to 1.5% of Camden Cogen's gross
revenues. Such fees charged to Camden Cogen in 1997, 1996 and 1995 totaled
$1.2 million, $1.2 million and $1.0 million, respectively. Linden Ltd.
provides similar services to Linden Venture for a monthly management fee equal
to 1.5% of Linden Venture's gross revenues. Such fees charged to Linden
Venture in 1997, 1996 and 1995 totaled $4.6 million, $4.5 million and $3.9
million, respectively. RCM Management Services, L.P. ("RCM Management"), which
is controlled by McNair, provides similar services to NJ Venture for a monthly
management fee equal to 1.5% of NJ Venture's gross revenues. Such fees charged
to NJ Venture in 1997, 1996 and 1995 totaled $1.4 million, $1.4 million and
$1.4 million, respectively.
Periodically Cogen Technologies Financial Services, L.P. ("Financial
Services") advances funds to the NJ Partnerships for working capital purposes.
At December 31, 1996 such amount totaled $0.5 million.
Camden Cogen and Linden Venture pay a natural gas management fee of $0.02
per thousand cubic feet of gas purchased to an affiliate. During 1997, 1996
and 1995 Camden Cogen was charged $0.2 million, $0.2 million and $0.2 million,
respectively, and Linden Venture was charged $0.7 million, $0.7 million and
$0.7 million, respectively, for such services.
NJ Venture purchases natural gas and standby electricity from PSE&G (an
affiliate of one of NJ Venture's limited partners). In 1997, 1996 and 1995
such purchases totaled $42.2 million, $39.9 million and $31.0 million,
respectively. In addition, NJ Venture pays wheeling charges to PSE&G and in
1997, 1996 and 1995 such charges totaled $1.4 million, $1.4 million and $1.5
million, respectively.
F-36
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
CT Global Insurance, Ltd. ("CT Global") , which is controlled by McNair,
provides property and general liability insurance coverage to the NJ
Partnerships. During 1997 and 1996 the NJ Partnerships paid CT Global $0.7
million and $1.7 million, respectively, for such insurance coverage.
(4) COMMITMENTS AND CONTINGENCIES
NJ Venture
NJ Venture has contracted to sell approximately 76% of its electrical
capacity to Jersey Central Power & Light Company ("JCP&L") pursuant to a 20-
year power purchase agreement which expires in 2008, with a ten-year renewal
period subject to the approval of both parties. The agreement establishes the
sales price of the electricity based on a fixed rate component plus factors
for inflation and JCP&L's cost of natural gas and retail sales prices. The
remainder of NJ Venture's output is sold to PSE&G pursuant to a 20-year power
purchase agreement which expires in 2008, with two five-year renewal periods
subject to the approval of both parties. The agreement provides for payments
to NJ Venture consisting of a capacity payment plus an energy payment which
includes a fixed component plus factors for inflation and fuel costs.
In June 1997 NJ Venture paid a termination fee of $1.2 million, which is
included in operating and maintenance expense in the combined statement of
income, to cancel an operating and maintenance agreement with another company
and signed a new twelve-year operating and maintenance agreement with General
Electric Company ("GE"). The agreement provides for all operating and routine
maintenance of the facility at direct costs plus a minimum fee ($16 thousand
per month beginning in August 1998) and the payment of bonuses if certain
operating targets are met. During 1997 NJ Venture paid $0.1 million in bonuses
under the terms of the agreement with GE.
Camden Cogen
Camden Cogen's electrical capacity is sold to PSE&G pursuant to a 20-year
power purchase agreement which expires in March 2013, with two five-year
renewal periods. The agreement provides for payments to Camden Cogen
consisting of a capacity payment plus an energy payment which includes a fixed
component plus factors for inflation and fuel costs. Camden Cogen sells steam
to Camden Paperboard Corporation pursuant to a 20-year power purchase
agreement which expires in 2010, with two five-year renewal periods subject to
the approval of both parties.
All of Camden Cogen's property, rights, titles and interests are pledged as
collateral to secure the term loan discussed in Note 2 and to secure certain
obligations under the power purchase agreement with PSE&G.
Camden Cogen has a 20-year gas service agreement with PSE&G under the terms
of which PSE&G provides firm transportation for 30,000 MMBtu of natural gas
per day.
In June 1997 Camden Cogen paid a termination fee of $1.4 million, which is
included in operating and maintenance expense in the combined statement of
income, to cancel an operating and maintenance agreement with another company
and signed a new twelve-year operating and maintenance agreement with GE. The
agreement provides for all operating and routine maintenance of the facility
at direct costs plus a minimum fee ($16 thousand per month beginning in August
1998) and the payment of bonuses if certain operating targets are met. During
1997 Camden Cogen paid $0.1 million in bonuses under the terms of the
agreement with GE.
Linden Venture
Linden Venture sells its electrical capacity to ConEd pursuant to a 25-year
power purchase agreement which expires in May 2017, with two five-year renewal
periods subject to the approval of both parties. The agreement establishes a
sales price of the electricity based primarily on capacity, fuel costs and
operating and maintenance costs.
F-37
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Linden Venture has a 25-year gas service agreement with PSE&G and
Elizabethtown Gas Company under the terms of which such companies provide firm
transportation for all of Linden Venture's natural gas requirements as well as
a portion of its natural gas supply.
In June 1997 Linden Venture paid a termination fee of $1.9 million, which is
included in operating and maintenance expense in the combined statement of
income, to cancel an operating and maintenance agreement with another company
and signed a new twelve-year operating and maintenance agreement with GE. The
agreement provides for all operating and routine maintenance of the facility
at direct costs plus a minimum fee ($31 thousand per month beginning in August
1998) and the payment of bonuses if certain operating targets are met. During
1997 Linden Venture paid $0.1 million in bonuses under the terms of the
agreement with GE.
Linden Venture has an agreement to lease the property on which its
facilities are constructed until the year 2017, with an option to extend the
lease until the year 2048. Minimum lease payments for 1998 are approximately
$401,000 and subsequent annual lease payments will be escalated by the change
in the Consumer Price Index. Lease expense during 1997, 1996 and 1995 was $0.4
million, $0.4 million and $0.4 million, respectively.
Other
There are certain claims and legal actions pending against the NJ
Partnerships. While the outcome of such proceedings cannot be predicted with
certainty, management does not expect these matters to have a material adverse
effect on the financial condition or results of operations of the NJ
Partnerships.
(5) MAJOR CUSTOMERS
The NJ Partnerships' operating revenues primarily relate to sales to three
customers pursuant to long-term contracts. The following table reflects
customers who accounted for more than 10% of the NJ Partnerships' revenues in
the years ended December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
ConEd...................................................... 60% 61% 59%
PSE&G...................................................... 21% 21% 21%
JCP&L...................................................... 15% 15% 18%
</TABLE>
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 "Disclosures About Fair Value of Financial Instruments"
requires the disclosure, to the extent practicable, of the fair value of
financial instruments which are recognized or unrecognized in the balance
sheet. The fair value disclosed herein is not representative of the amount
that could be realized or settled, nor does the fair value amount consider tax
consequences, if any, of realization or settlement. The following table
reflects the fair value of long-term debt at December 31, 1997 and 1996 (in
millions of dollars):
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Long-Term Debt
Camden Cogen.............................. 90.2 89.4 95.2 93.3
NJ Venture................................ 71.8 104.7 74.9 101.9
</TABLE>
F-38
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The fair value of fixed-rate long-term debt has been determined based on the
differential between the interest rates of long-term treasury securities of
equivalent maturities and the effective interest rates on the debt at the date
of the borrowing plus the interest rates on similar treasury securities at the
balance sheet date. With respect to floating rate debt, the carrying amount
approximates fair value due to the market-sensitive interest rate on such
debt.
The fair value of Camden Cogen's interest rate swap is estimated to be $0.6
million, the approximate amount that GECC would pay to terminate the agreement
at December 31, 1997, based on interest rates in effect at that time.
The carrying amount of current assets and liabilities are considered to be
reasonable estimates of their fair values due to their short-term nature.
(7) SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1 QTR 2 QTR 3 QTR 4 QTR YEAR
----- ----- ----- ----- ------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
1997
Revenues.................................. 124.3 109.9 117.9 123.6 475.7
Costs and expenses........................ (85.2) (74.8) (74.1) (85.3) (319.4)
Income from operations.................... 39.1 35.1 43.8 38.3 156.3
Other income (expense).................... (3.7) (3.7) (3.5) (3.3) (14.2)
Net income................................ 35.4 31.4 40.3 35.0 142.1
Gross profit(1)........................... 43.4 39.2 47.6 43.0 173.2
1996
Revenues.................................. 123.2 115.6 116.0 123.2 478.0
Costs and expenses........................ (83.1) (74.9) (73.0) (85.2) (316.2)
Income from operations.................... 40.1 40.7 43.0 38.0 161.8
Other income (expense).................... (4.0) (3.9) (3.9) (3.9) (15.7)
Net income................................ 36.1 36.8 39.1 34.1 146.1
Gross profit(1)........................... 43.8 44.8 46.8 42.5 177.9
</TABLE>
- --------
(1) Income from operations plus general and administrative expenses.
F-39
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED STATEMENTS OF INCOME (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
31,
--------------
1998 1997
------ ------
<S> <C> <C>
Revenues
Electricity................................................... $118.5 $118.4
Steam......................................................... 4.5 5.9
------ ------
123.0 124.3
------ ------
Costs and Expenses
Fuel.......................................................... 50.2 60.7
Operating and maintenance..................................... 9.1 10.5
Depreciation and amortization................................. 5.5 9.0
General and administrative.................................... 4.3 4.2
Taxes, other than income...................................... 0.6 0.8
------ ------
69.7 85.2
------ ------
Income from Operations.......................................... 53.3 39.1
Other Income (Expense)
Interest and other income..................................... 0.9 0.2
Interest expense.............................................. (3.8) (3.9)
------ ------
Net Income...................................................... $ 50.4 $ 35.4
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-40
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED BALANCE SHEETS
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
ASSETS ----------- ------------
(UNAUDITED)
<S> <C> <C>
Current Assets
Cash and cash equivalents............................ $ 33.1 $ 39.5
Accounts receivable.................................. 45.5 44.6
Inventories.......................................... 17.9 21.2
Other current assets................................. 1.4 2.9
------- -------
97.9 108.2
------- -------
Property, Plant and Equipment, at cost................. 826.3 826.2
Accumulated depreciation............................. (223.4) (217.9)
------- -------
602.9 608.3
------- -------
Other Assets........................................... 3.1 0.2
------- -------
$ 703.9 $ 716.7
======= =======
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
<S> <C> <C>
Current Liabilities
Accounts payable..................................... $ 31.8 $ 43.8
Accounts payable, affiliate.......................... 0.4 --
Current maturities on long-term debt................. 9.7 9.4
Interest payable..................................... 3.1 3.2
Other current liabilities............................ 7.3 6.1
------- -------
52.3 62.5
Long-Term Debt......................................... 150.2 152.6
Other Long-Term Liabilities............................ -- 3.0
Commitments and Contingencies (Note 2)................. -- --
Partners' Capital...................................... 501.4 498.6
------- -------
$ 703.9 $ 716.7
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
31,
--------------
1998 1997
------ ------
<S> <C> <C>
Operating Activities:
Net income................................................... $ 50.4 $ 35.4
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................... 5.5 9.0
Changes in other operating assets and liabilities
Decrease (increase) in accounts receivable.................. (0.9) 10.2
Decrease (increase) in inventories.......................... 3.3 3.6
Decrease (increase) in other current assets................. 1.5 1.6
Increase (decrease) in accounts payable..................... (12.0) (14.3)
Increase (decrease) in accounts payable, affiliate.......... 0.4 (0.1)
Increase (decrease) in interest payable..................... (0.1) (0.1)
Increase (decrease) in other current liabilities............ 1.2 (0.5)
Net change in other assets and liabilities.................. (5.9) (3.3)
------ ------
Net Cash Provided by Operating Activities...................... 43.4 41.5
------ ------
Investing Activities:
Additions to property, plant and equipment................... (0.1) (0.7)
------ ------
Net Cash Used in Investing Activities.......................... (0.1) (0.7)
------ ------
Financing Activities:
Principal payments on long-term borrowings................... (2.1) (1.9)
Net change in short-term borrowing........................... -- 1.6
Cash distributions to partners............................... (47.6) (42.6)
------ ------
Net Cash Used in Financing Activities.......................... (49.7) (42.9)
------ ------
Net Increase (Decrease) in Cash and Cash Equivalents........... (6.4) (2.1)
Cash and Cash Equivalents at Beginning of Period............... 39.5 29.6
------ ------
Cash and Cash Equivalents at End of Period..................... $ 33.1 $ 27.5
====== ======
Cash Payments for Interest..................................... $ 3.9 $ 4.2
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-42
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED STATEMENTS OF PARTNERS' CAPITAL (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------- -------- ------
<S> <C> <C> <C>
Balance at December 31, 1997.......................... $ 60.3 $438.3 $498.6
Net income.......................................... 37.2 13.2 50.4
Distributions....................................... (32.7) (14.9) (47.6)
------ ------ ------
Balance at March 31, 1998............................. $ 64.8 $436.6 $501.4
====== ====== ======
Balance at December 31, 1996.......................... $ 56.5 $460.2 $516.7
Net income.......................................... 26.5 8.9 35.4
Distributions....................................... (28.5) (14.1) (42.6)
------ ------ ------
Balance at March 31, 1997............................. $ 54.5 $455.0 $509.5
====== ====== ======
</TABLE>
F-43
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The combined financial statements of the Cogen Technologies New Jersey
Operating Partnerships (the "NJ Partnerships") includes (i) Cogen Technologies
NJ Venture ("NJ Venture"); (ii) Camden Cogen LP ("Camden Cogen"); and (iii)
Cogen Technologies Linden Venture, LP ("Linden Venture"). The NJ Partnerships
are engaged in the operation of natural gas-fired cogeneration facilities in
the state of New Jersey. All material transactions between the combined
entities have been eliminated.
Effective January 1, 1998 the NJ Partnerships made certain changes in the
estimates used for the purpose of computing depreciation. The estimated useful
life of the facilities was increased from a range of 20 to 25 years, which
coincided with the primary term of the long-term power purchase agreements
under which the NJ Partnerships sell electricity, to 30 years. In addition,
the NJ Partnerships increased the estimated salvage value of the facilities
from zero to 10%. Such changes were made to recognize the usefulness of the
facilities beyond the primary term of the power purchase agreements and the
residual value of the facilities upon the termination of operations. Such
changes resulted in an increase in earnings in the first three months of 1998
of $3.5 million.
The accompanying unaudited financial statements of the NJ Partnerships
reflect, in the opinion of management, all adjustments, consisting only of
normal and recurring adjustments, necessary to present fairly the NJ
Partnerships' financial position at March 31, 1998 and the NJ Partnerships'
results of operations and cash flows for the three-month periods ended March
31, 1998 and 1997. Interim period results are not necessarily indicative of
the results of operations or cash flows for a full-year period.
These financial statements and the notes thereto should be read in
conjunction with the NJ Partnerships' audited financial statements included
elsewhere in this Prospectus.
(2) CONTINGENCIES
There are certain claims and legal actions pending against the NJ
Partnerships. While the outcome of such proceedings cannot be predicted with
certainty, management does not expect these matters to have a material adverse
effect on the financial condition or results of operations of the NJ
Partnerships.
(3) SUBSEQUENT EVENTS
In the second quarter of 1998 Linden Venture and Camden Cogen entered into
negotiations to make settlements to terminate existing management services
agreements with Linden Ltd. and Camden GPLP, respectively, and gas management
services agreements with an affiliate. Such settlements will be reflected in
earnings in the period in which the negotiations are finalized.
F-44
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[INTERNATIONAL PROSPECTUS ALTERNATE COVER]
PROSPECTUS (Subject to Completion)
Issued , 1998
Shares
Cogen Technologies, Inc.
COMMON STOCK
--------
OF THE SHARES OF COMMON STOCK BEING OFFERED, SHARES ARE BEING
OFFERED INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE INTERNATIONAL
UNDERWRITERS AND SHARES ARE BEING OFFERED INITIALLY IN THE UNITED
STATES AND CANADA BY THE U.S. UNDERWRITERS. ALL OF THE SHARES OF COMMON
STOCK BEING OFFERED HEREBY ARE BEING SOLD BY THE SELLING STOCKHOLDERS (THE
"COMMON STOCK OFFERING"). SEE "PRINCIPAL AND SELLING STOCKHOLDERS". THE
COMPANY WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF SHARES OF
COMMON STOCK BY THE SELLING STOCKHOLDERS. PRIOR TO THE COMMON STOCK
OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON STOCK OF THE
COMPANY. IT IS CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC OFFERING
PRICE PER SHARE WILL BE BETWEEN $ AND $ . SEE "UNDERWRITERS"
FOR A DISCUSSION OF THE FACTORS CONSIDERED IN DETERMINING THE
INITIAL PUBLIC OFFERING PRICE.
--------
CONCURRENTLY WITH THE COMMON STOCK OFFERING, THE COMPANY IS OFFERING
$625.0 MILLION IN AGGREGATE PRINCIPAL AMOUNT OF % SENIOR NOTES DUE
(THE "DEBT OFFERING" AND, TOGETHER WITH THE COMMON
STOCK OFFERING, THE "OFFERINGS"). THE CLOSING OF EACH OF
THE COMMON STOCK OFFERING AND THE DEBT OFFERING ARE
CONDITIONED UPON THE CLOSING OF THE OTHER.
--------
THE COMPANY INTENDS TO APPLY TO LIST THE COMMON STOCK
ON THE NEW YORK STOCK EXCHANGE UNDER THE SYMBOL "CGT".
--------
SEE "RISK FACTORS" BEGINNING ON PAGE 12 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN RISKS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------
PRICE $ A SHARE
--------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) STOCKHOLDERS(2)
------------- -------------- ---------------
<S> <C> <C> <C>
Per Share.......................... $ $ $
Total(3)........................... $ $ $
</TABLE>
- -----
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended.
(2) Before deducting expenses payable by the Selling Stockholders, estimated
at $ . Pursuant to agreements between the Selling Stockholders and
the Company in connection with the formation of the Company, the Company
is obligated to pay its own legal, accounting, listing, printing and
other miscellaneous fees and expenses of the Common Stock Offering.
(3) The Selling Stockholders have granted to the U.S. Underwriters an
option, exercisable within 30 days of the date hereof, to purchase up to
an aggregate of additional Shares at the price to public less
underwriting discounts and commissions for the purpose of covering over-
allotments, if any. See "Principal and Selling Stockholders". If the
U.S. Underwriters exercise the option in full, the total price to
public, underwriting discounts and commissions and proceeds to the
Selling Stockholders will be $ , $ and $ , respectively. See
"Underwriters".
--------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to the approval of certain legal
matters by Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the
Underwriters. It is expected that delivery of the Shares will be made on or
about , 1998 at the office of Morgan Stanley & Co. Incorporated,
New York, N.Y., against payment therefor in immediately available funds.
--------
MORGAN STANLEY DEAN WITTER
DONALDSON, LUFKIN & JENRETTE
International
GOLDMAN SACHS INTERNATIONAL
MERRILL LYNCH INTERNATIONAL
, 1998.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the Offering are:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee................ $147,500
NASD Filing Fee.................................................... 30,500
New York Stock Exchange Listing.................................... *
Legal Fees and Expenses............................................ *
Accounting Fees and Expenses....................................... *
Printing Expenses.................................................. *
Transfer Agent and Registrar Fees.................................. *
Miscellaneous...................................................... *
--------
TOTAL............................................................ $ *
========
</TABLE>
- --------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Eighth of the Company's Certificate of Incorporation and Article X
of the Companys Bylaws provide for mandatory indemnification to at least the
extent specifically allowed by Section 145 of the General Corporation Law of
the State of Delaware (the GCL).
Pursuant to Section 145 of the GCL, the Company generally has the power to
indemnify its current and former directors, officers, employees and agents
against expenses and liabilities incurred by them in connection with any suit
to which they are, or are threatened to be made, a party by reason of their
serving in such positions so long as they acted in good faith and in a manner
in which they reasonably believed to be, or not opposed to, the best interest
of the Company, and with respect to any criminal action, they had no
reasonable cause to believe their conduct was unlawful. With respect to suits
by or in the right of the Company, however, indemnification is generally
limited to attorneys' fees and other expenses and is not available if such
person is adjudged to be liable to the Registrant unless the court determines
that indemnification is appropriate. The statute expressly provides that the
power to indemnify authorized thereby is not exclusive of any rights granted
under any bylaw, agreement, vote of stockholders or disinterested directors,
or otherwise. The Company also has the power to purchase and maintain
insurance for such persons.
The above discussion of the Company's Certificate of Incorporation and
Bylaws and Section 145 of the GCL is not intended to be exhaustive and is
qualified in its entirety by such document and statute.
Directors and Officers are insured at the Company's expense, against certain
liabilities which might arise out of their employment and which are not
subject to indemnification under the Bylaws.
Reference is made to the form of Underwriting Agreement, filed as Exhibit
1.1 hereto, which contains provisions for indemnification of the Company, its
directors, officers and any controlling persons by the Underwriters against
certain liabilities for information furnished by the Underwriters.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In connection with the organization of the Company, in May 1998 an aggregate
of 1,000 shares of Common Stock were issued to the McNair Interests and the
Minority Interests pursuant to Section 4(2) of the Securities Act of 1993, as
amended.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<C> <S>
*1.1 Form of Underwriting Agreement.
*3.1 Certificate of Incorporation.
*3.2 Bylaws.
*4.1 Form of Common Stock Certificate.
*4.2 See Exhibits 3.1 and 3.2 hereto for provisions of the Certificate
of Incorporation and Bylaws of Cogen defining the rights of the
holders of Common Stock.
*4.3 Indenture dated , between Cogen Technologies, Inc. and
, as Trustee.
*4.4 Rights Agreement dated as of , 1998, between Cogen
Technologies, Inc. and , as Rights Agent, which includes
as exhibits, the form of Right Certificate and the Summary of
Rights to Purchase Common Shares.
*5.1 Opinion of Fulbright & Jaworski L.L.P.
10.1 Power Purchase Agreement dated April 14, 1989 between Consolidated
Edison Company of New York, Inc. and Cogen Technologies, Inc.
10.2 First Amendment dated September 19, 1990 to Power Purchase
Agreement dated April 14, 1989 between Consolidated Edison Company
of New York, Inc. and Cogen Technologies, Inc.
10.3 Second Amendment dated December 22, 1993 to Power Purchase
Agreement dated April 14, 1989 between Consolidated Edison Company
of New York, Inc. and Cogen Technologies, Inc.
*10.4 Gas Service Agreement between Cogen Technologies Linden Venture,
L.P. and Public Service Electric and Gas Company and Elizabethtown
Gas Company dated July 13, 1990.
10.5 Agreement between Cogen Technologies Linden Venture, L.P. and Exxon
Corporation for the Sale of Steam dated August 1, 1990.
10.6 Backup Fuel Storage and Supply Agreement between Cogen Technologies
Linden Venture, L.P. and Exxon Corporation dated October 4, 1991.
10.7 Ground Lease Agreement between Cogen Technologies Linden Venture,
L.P. and Exxon Corporation dated August 1, 1990.
10.8 Operation and Maintenance Agreement by and between Cogen
Technologies Linden Venture, L.P. and General Electric Company
dated June 6, 1997.
10.9 Amended and Restated Term Loan Agreement, dated as of September 15,
1992, between Cogen Technologies Linden, Ltd. and State Street Bank
and Trust Company of Connecticut, National Association, as Trustee.
10.10 First Amendment, dated April 30, 1993, to the Amended and Restated
Term Loan Agreement, dated as of September 15, 1992, between Cogen
Technologies Linden, Ltd. and State Street Bank and Trust Company
of Connecticut, National Association, as Trustee.
10.11 Amended and Restated Agreement of Limited Partnership of Cogen
Technologies Linden Venture, L.P., dated as of September 15, 1992.
10.12 First Amendment, dated April 30, 1993, to the Amended and Restated
Agreement of Limited Partnership of Cogen Technologies Linden
Venture, L.P., dated as of September 15, 1992.
10.13 Agreement of Limited Partnership of Cogen Technologies Linden,
Ltd., effective as of June 28, 1989.
10.14 First Amendment, dated as of February 14, 1990, to the Agreement of
Limited Partnership of Cogen Technologies Linden, Ltd.
10.15 Second Amendment, dated as of July 31, 1990, to the Agreement of
Limited Partnership of Cogen Technologies Linden, Ltd.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
*10.16 Easement Agreement dated June 21, 1991 among Cogen Technologies
Linden Venture, L.P., Texas Eastern Cryogenics, Inc., Texas Eastern
Transmission Corporation and Houston Center Corporation.
*10.17 Amended and Restated Security Deposit Agreement and Escrow
Agreement dated as of September 17, 1992 among Cogen Technologies
Linden Venture, L.P., Cogen Technologies Linden, Ltd., State Street
Bank and Trust Company of Connecticut as Limited Partner and as
Lender and Midatlantic National Bank.
*10.18 Security Agreement dated as of February 15, 1990, between Cogen
Technologies Linden Venture, L.P. and General Electric Power
Funding Corporation.
*10.19 Assignment and Security agreement dated February 15, 1990 between
Cogen Technologies Linden, Ltd. and General Electric Power Funding
Corporation.
*10.20 Collateral Agency Agreement dated as of February 15, 1990 between
Cogen Technologies Linden, Ltd. and General Electric Power Funding
Corporation.
*10.21 Gas Supply Agreement between Cogen Technologies Linden Venture,
L.P. and Anadarko Energy Services Company dated July 1, 1997.
*10.22 Gas Supply Agreement between Cogen Technologies Linden Venture,
L.P. and The Coastal Corporation dated July 1, 1997.
*10.23 Gas Supply Agreement between Cogen Technologies Linden Venture,
L.P. and Columbia Gas Systems Corporation dated July 1, 1997.
*10.24 Gas Supply Agreement between Cogen Technologies Linden Venture,
L.P. and Sonat, Inc. dated July 1, 1997.
*10.25 Gas Supply Agreement between Cogen Technologies Linden Venture,
L.P. and Texaco Exploration and Production, Inc. dated July 1,
1997.
*10.26 Gas Supply Agreement between Cogen Technologies Linden Venture,
L.P. and Vastar Resources, Inc. dated July 1, 1997.
*10.27 Letter of Credit and Reimbursement Agreement dated as of September
17, 1992 between Cogen Technologies Linden Venture, L.P. and
General Electric Capital Corporation.
*10.28 Gas Supply Agreement between Camden Cogen, L.P. and Columbia Gas
Systems Corporation dated July 1, 1997.
*10.29 Gas Supply Agreement between Camden Cogen, L.P. and Texaco
Exploration and Production, Inc. dated July 1, 1997.
10.30 Power Purchase and Interconnection Agreement, dated April 15, 1988,
between Public Service Electric and Gas Company and Camden Cogen,
L.P.
10.31 First Amendment, dated June 12, 1990, to the Power Purchase and
Interconnection Agreement, dated April 15, 1988, between Public
Service Electric and Gas Company and Camden Cogen, L.P.
10.32 Second Amendment, dated August 31, 1990, to the Power Purchase and
Interconnection Agreement, dated April 15, 1988, between Public
Service Electric and Gas Company and Camden Cogen, L.P.
*10.33 Gas Service Agreement, dated May 15, 1991, between Camden Cogen
L.P. and Public Service Electric and Gas Company.
10.34 First Amendment, dated November 1, 1991, to the Gas Service
Agreement dated May 15, 1991 between Camden Cogen L.P. and Public
Service Electric and Gas Company.
10.35 Energy Purchase Agreement, dated December 18, 1989, between Camden
Cogen, L.P. and Camden Paperboard Corporation.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.36 Amendment and Restatement dated as of April 1, 1993 of the
Construction and Term Loan Agreement dated as of February 4, 1992
among Camden Cogen, PL.P. and General Electric Capital Corporation,
et al.
10.37 Amendment No. 1 dated as of December 22, 1993 to the Amendment and
Restated dated as of April 1, 1993 of the Construction and Term
Loan Agreement dated as of February 4, 1992 among Camden Cogen
PL.P. and General Electric Capital Corporation, et al.
10.38 Term Loan Agreement, dated as of the Conformed Agreement Date,
among Cogen Technologies Camden GP Limited Partnership and General
Electric Capital Corporation.
10.39 Amendment No. 1 dated as of April 1, 1993 to the Term Loan
Agreement, dated as of the Conformed Agreement Date, among Cogen
Technologies Camden GP Limited Partnership and General Electric
Capital Corporation.
10.40 Agreement of Limited Partnership of Cogen Technologies Camden GP
Limited Partnership, dated as of July 26, 1991.
10.41 First Amendment, dated December 1, 1991, to the Agreement of
Limited Partnership of Cogen Technologies Camden GP Limited
Partnership, dated as of July 26, 1991.
10.42 Amended and Restated Agreement of Limited Partnership of Camden
Cogen L.P., dated as of February 9, 1993.
10.43 Amendment No. 1 dated as of April 1, 1993 to the Amended and
Restated Agreement of Limited Partnership of Camden Cogen L.P.,
dated as of February 9, 1993.
10.44 Amendment No. 2 dated as of December 22, 1993 to the Amended and
Restated Agreement of Limited Partnership of Camden Cogen L.P.,
dated as of February 9, 1993.
10.45 Operation and Maintenance Agreement by and between Camden Cogen
L.P. and General Electric Company dated June 6, 1997.
*10.46 Mortgage dated February 4, 1992 between General Electric Capital
Corporation and Camden Cogen, L.P.
*10.47 Second Amended and Restated Security Deposit Agreement dated
December 22, 1993 between Bank of Tokyo Trust Company, Toronto
Dominion Bank Trust Company, Camden Cogen, L.P., General Electric
Capital Corporation and Cogen Technologies Camden GP Limited
Partnership.
*10.48 Security Agreement dated as of the Conformed Agreement Date between
General Electric Capital Corporation and Camden Cogen, L.P.
*10.49 Pledge and Security Agreement dated as of the Conformed Agreement
Date between General Electric Capital Corporation and Cogen
Technologies Camden Inc.
*10.50 General Partner Pledge Agreement dated February 4, 1992 between
General Electric Capital Corporation and Cogen Technologies Camden
Inc.
*10.51 Assignment and Security Agreement dated February 4, 1992 between
General Electric Capital Corporation and Cogen Technologies Camden
GP Limited Partnership.
*10.52 Interest Rate and Currency Exchange Agreement dated April 1, 1993
General Electric Capital Corporation and Camden Cogen, L.P.
*10.53 Gas Supply Agreement between Camden Cogen, L.P. and Anadarko Energy
Services Company dated July 1, 1997.
*10.54 Agreement for the Sale of Steam and Electricity dated June 13, 1985
between IMTT-Bayonne and Cogen Technologies NJ, Inc.
*10.55 Agreement for the Sale of Steam between Cogen Technologies NJ
Venture and Exxon Company U.S.A.
*10.56 Letter Agreement for Gas Service between Public Service Electric
and Gas Company and Cogen Technologies NJ Venture dated October 10,
1986.
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
*10.57 Water Supply Agreement between the City of Bayonne and Cogen
Technologies NJ Venture dated June 1, 1988.
*10.58 Lease Agreement between Bayonne Industries, Inc. and IMTT-Bayonne
and Cogen Technologies NJ Venture dated October 18, 1986.
*10.59 Easement from Bayonne Industries, Inc. and IMTT-Bayonne to Cogen
Technologies NJ Venture dated October 20, 1986.
10.60 Power Purchase and Operations Coordination Agreement between Public
Service Electric and Gas Company and Cogen Technologies NJ Venture
dated June 5, 1989.
10.61 Agreement for Purchase of Electric Power between Cogen Technologies
NJ Inc. and Jersey Central Power & Light Company dated October 29,
1985.
10.62 Amendment dated September 5, 1986 to Agreement for Purchase of
Electric Power between Cogen Technologies NJ Inc. and Jersey
Central Power & Light Company dated October 29, 1985.
10.63 Amendment dated August 1, 1988 to Agreement for Purchase of
Electric Power between Cogen Technologies NJ Inc. and Jersey
Central Power & Light Company dated October 28, 1985.
10.64 Operation and Maintenance Agreement by and between Cogen
Technologies NJ Venture and General Electric Company dated June 6,
1997.
10.65 Revised Transmission Service and Interconnection Agreement between
Public Service Electric and Gas Company and Cogen Technologies NJ
Venture dated April 27, 1987.
10.66 Term Loan Agreement dated as of November 1, 1987 between Cogen
Technologies NJ Venture and The Prudential Insurance Company of
America.
10.67 First Amendment dated December 15, 1988 to the Term Loan Agreement
dated as of November 1, 1987 between Cogen Technologies NJ Venture
and The Prudential Insurance Company of America.
10.68 Second Amendment dated July 31, 1996 to the Term Loan Agreement
dated as of November 1, 1987 between Cogen Technologies NJ Venture
and The Prudential Insurance Company of America.
10.69 $5,000,000 Revolving Credit Loan Agreement dated as of December 19,
1996 by and between Cogen Technologies NJ Venture and Southwest
Bank of Texas, N.A.
10.70 First Amendment dated December 19, 1997 to the $4,000,000 Revolving
Credit Loan dated as of December 19, 1996 by and between Cogen
Technologies NJ Venture and Southwest Bank of Texas, N.A.
10.71 Amended and Restated Joint Venture Agreement of Cogen Technologies
NJ Venture dated August 12, 1986.
*10.72 Option Agreement between Bayonne Industries, Inc. and Cogen
Technologies NJ, Inc. dated May 22, 1986.
*10.73 Purchase and Sale Agreement among Bayonne Industries, Inc., IMTT-
Bayonne and Cogen Technologies NJ, Inc. dated May 22, 1986.
*10.74 Steam Producing Facilities Lease Agreement between Cogen
Technologies NJ, Inc. and IMTT-Bayonne dated May 22, 1986.
*10.75 Mortgage and Security Agreement between The Prudential Insurance
Company of America and Cogen Technologies NJ Venture dated December
15, 1988.
*10.76 Security Agreement and Assignment between The Prudential Insurance
Company of America and Cogen Technologies NJ Venture dated December
15, 1988.
*10.77 Disbursement and Security Agreement between The Prudential
Insurance Company of America, Midatlantic National Bank and Cogen
Technologies NJ Venture dated December 15, 1988.
*10.78 Kerosene Fuel Storage Agreement dated May 5, 1994 between IMTT-
Bayonne and Cogen Technologies NJ Venture.
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C>
*21.1 Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP
*23.3 Consent of Fulbright & Jaworski L.L.P. (contained in Exhibit 5.1).
</TABLE>
- --------
* To be filed by amendment.
As permitted by Item 601(b)(4) of Regulation S-K, the Company has not filed
with this Registration Statement certain instruments defining the rights of
holders of long-term debt of the Company, if any, because the total amount of
securities authorized under any of such instruments does not exceed 10% of the
total assets of the Company and its subsidiaries on a consolidated basis. The
Company agrees to furnish a copy of any such agreements to the Securities and
Exchange Commission upon request.
(b) Financial Statement Schedules: None.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Company hereby undertakes to provide to the Underwriters at
the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as a part of this
Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Company pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be a part of
this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on the 22nd day of May, 1998.
Cogen Technologies, Inc.
(Registrant)
/s/ Robert C. McNair
By:__________________________________
Robert C. McNair
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C>
</TABLE>
SIGNATURE TITLE DATE
/s/ Robert C. McNair Chairman of the May 22, 1998
- ----------------------------------- Board, President,
Robert C. McNair Chief Executive
Officer and
Director (Principal
Executive Officer)
/s/Richard A. Lydecker, Jr. Senior Vice May 22, 1998
- ----------------------------------- President and Chief
Richard A. Lydecker, Jr. Financial Officer
(Principal
Financial and
Accounting Officer)
II-7
<PAGE>
INDEX TO EXHIBITS
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*1.1 Form of Underwriting Agreement.
*3.1 Certificate of Incorporation.
*3.2 Bylaws.
*4.1 Form of Common Stock Certificate.
*4.2 See Exhibits 3.1 and 3.2 hereto for provisions of the Certificate
of Incorporation and Bylaws of Cogen defining the rights of the
holders of Common Stock.
*4.3 Indenture dated , between Cogen Technologies, Inc. and
, as Trustee.
*4.4 Rights Agreement dated as of , 1998, between Cogen
Technologies, Inc. and , as Rights Agent, which includes
as exhibits, the form of Right Certificate and the Summary of
Rights to Purchase Common Shares.
*5.1 Opinion of Fulbright & Jaworski L.L.P.
10.1 Power Purchase Agreement dated April 14, 1989 between Consolidated
Edison Company of New York, Inc. and Cogen Technologies, Inc.
10.2 First Amendment dated September 19, 1990 to Power Purchase
Agreement dated April 14, 1989 between Consolidated Edison Company
of New York, Inc. and Cogen Technologies, Inc.
10.3 Second Amendment dated December 22, 1993 to Power Purchase
Agreement dated April 14, 1989 between Consolidated Edison Company
of New York, Inc. and Cogen Technologies, Inc.
*10.4 Gas Service Agreement between Cogen Technologies Linden Venture,
L.P. and Public Service Electric and Gas Company and Elizabethtown
Gas Company dated July 13, 1990.
10.5 Agreement between Cogen Technologies Linden Venture, L.P. and Exxon
Corporation for the Sale of Steam dated August 1, 1990.
10.6 Backup Fuel Storage and Supply Agreement between Cogen Technologies
Linden Venture, L.P. and Exxon Corporation dated October 4, 1991.
10.7 Ground Lease Agreement between Cogen Technologies Linden Venture,
L.P. and Exxon Corporation dated August 1, 1990.
10.8 Operation and Maintenance Agreement by and between Cogen
Technologies Linden Venture, L.P. and General Electric Company
dated June 6, 1997.
10.9 Amended and Restated Term Loan Agreement, dated as of September 15,
1992, between Cogen Technologies Linden, Ltd. and State Street Bank
and Trust Company of Connecticut, National Association, as Trustee.
10.10 First Amendment, dated April 30, 1993, to the Amended and Restated
Term Loan Agreement, dated as of September 15, 1992, between Cogen
Technologies Linden, Ltd. and State Street Bank and Trust Company
of Connecticut, National Association, as Trustee.
10.11 Amended and Restated Agreement of Limited Partnership of Cogen
Technologies Linden Venture, L.P., dated as of September 15, 1992.
10.12 First Amendment, dated April 30, 1993, to the Amended and Restated
Agreement of Limited Partnership of Cogen Technologies Linden
Venture, L.P., dated as of September 15, 1992.
10.13 Agreement of Limited Partnership of Cogen Technologies Linden,
Ltd., effective as of June 28, 1989.
10.14 First Amendment, dated as of February 14, 1990, to the Agreement of
Limited Partnership of Cogen Technologies Linden, Ltd.
10.15 Second Amendment, dated as of July 31, 1990, to the Agreement of
Limited Partnership of Cogen Technologies Linden, Ltd.
*10.16 Easement Agreement dated June 21, 1991 among Cogen Technologies
Linden Venture, L.P., Texas Eastern Cryogenics, Inc., Texas Eastern
Transmission Corporation and Houston Center Corporation.
</TABLE>
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<TABLE>
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*10.17 Amended and Restated Security Deposit Agreement and Escrow
Agreement dated as of September 17, 1992 among Cogen Technologies
Linden Venture, L.P., Cogen Technologies Linden, Ltd., State Street
Bank and Trust Company of Connecticut as Limited Partner and as
Lender and Midatlantic National Bank.
*10.18 Security Agreement dated as of February 15, 1990, between Cogen
Technologies Linden Venture, L.P. and General Electric Power
Funding Corporation.
*10.19 Assignment and Security agreement dated February 15, 1990 between
Cogen Technologies Linden, Ltd. and General Electric Power Funding
Corporation.
*10.20 Collateral Agency Agreement dated as of February 15, 1990 between
Cogen Technologies Linden, Ltd. and General Electric Power Funding
Corporation.
*10.21 Gas Supply Agreement between Cogen Technologies Linden Venture,
L.P. and Anadarko Energy Services Company dated July 1, 1997.
*10.22 Gas Supply Agreement between Cogen Technologies Linden Venture,
L.P. and The Coastal Corporation dated July 1, 1997.
*10.23 Gas Supply Agreement between Cogen Technologies Linden Venture,
L.P. and Columbia Gas Systems Corporation dated July 1, 1997.
*10.24 Gas Supply Agreement between Cogen Technologies Linden Venture,
L.P. and Sonat, Inc. dated July 1, 1997.
*10.25 Gas Supply Agreement between Cogen Technologies Linden Venture,
L.P. and Texaco Exploration and Production, Inc. dated July 1,
1997.
*10.26 Gas Supply Agreement between Cogen Technologies Linden Venture,
L.P. and Vastar Resources, Inc. dated July 1, 1997.
*10.27 Letter of Credit and Reimbursement Agreement dated as of September
17, 1992 between Cogen Technologies Linden Venture, L.P. and
General Electric Capital Corporation.
*10.28 Gas Supply Agreement between Camden Cogen, L.P. and Columbia Gas
Systems Corporation dated July 1, 1997.
*10.29 Gas Supply Agreement between Camden Cogen, L.P. and Texaco
Exploration and Production, Inc. dated July 1, 1997.
10.30 Power Purchase and Interconnection Agreement, dated April 15, 1988,
between Public Service Electric and Gas Company and Camden Cogen,
L.P.
10.31 First Amendment, dated June 12, 1990, to the Power Purchase and
Interconnection Agreement, dated April 15, 1988, between Public
Service Electric and Gas Company and Camden Cogen, L.P.
10.32 Second Amendment, dated August 31, 1990, to the Power Purchase and
Interconnection Agreement, dated April 15, 1988, between Public
Service Electric and Gas Company and Camden Cogen, L.P.
*10.33 Gas Service Agreement, dated May 15, 1991, between Camden Cogen
L.P. and Public Service Electric and Gas Company.
10.34 First Amendment, dated November 1, 1991, to the Gas Service
Agreement dated May 15, 1991 between Camden Cogen L.P. and Public
Service Electric and Gas Company.
10.35 Energy Purchase Agreement, dated December 18, 1989, between Camden
Cogen, L.P. and Camden Paperboard Corporation.
10.36 Amendment and Restatement dated as of April 1, 1993 of the
Construction and Term Loan Agreement dated as of February 4, 1992
among Camden Cogen, PL.P. and General Electric Capital Corporation,
et al.
10.37 Amendment No. 1 dated as of December 22, 1993 to the Amendment and
Restated dated as of April 1, 1993 of the Construction and Term
Loan Agreement dated as of February 4, 1992 among Camden Cogen
PL.P. and General Electric Capital Corporation, et al.
</TABLE>
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10.38 Term Loan Agreement, dated as of the Conformed Agreement Date,
among Cogen Technologies Camden GP Limited Partnership and General
Electric Capital Corporation.
10.39 Amendment No. 1 dated as of April 1, 1993 to the Term Loan
Agreement, dated as of the Conformed Agreement Date, among Cogen
Technologies Camden GP Limited Partnership and General Electric
Capital Corporation.
10.40 Agreement of Limited Partnership of Cogen Technologies Camden GP
Limited Partnership, dated as of July 26, 1991.
10.41 First Amendment, dated December 1, 1991, to the Agreement of
Limited Partnership of Cogen Technologies Camden GP Limited
Partnership, dated as of July 26, 1991.
10.42 Amended and Restated Agreement of Limited Partnership of Camden
Cogen L.P., dated as of February 9, 1993.
10.43 Amendment No. 1 dated as of April 1, 1993 to the Amended and
Restated Agreement of Limited Partnership of Camden Cogen L.P.,
dated as of February 9, 1993.
10.44 Amendment No. 2 dated as of December 22, 1993 to the Amended and
Restated Agreement of Limited Partnership of Camden Cogen L.P.,
dated as of February 9, 1993.
10.45 Operation and Maintenance Agreement by and between Camden Cogen
L.P. and General Electric Company dated June 6, 1997.
*10.46 Mortgage dated February 4, 1992 between General Electric Capital
Corporation and Camden Cogen, L.P.
*10.47 Second Amended and Restated Security Deposit Agreement dated
December 22, 1993 between Bank of Tokyo Trust Company, Toronto
Dominion Bank Trust Company, Camden Cogen, L.P., General Electric
Capital Corporation and Cogen Technologies Camden GP Limited
Partnership.
*10.48 Security Agreement dated as of the Conformed Agreement Date between
General Electric Capital Corporation and Camden Cogen, L.P.
*10.49 Pledge and Security Agreement dated as of the Conformed Agreement
Date between General Electric Capital Corporation and Cogen
Technologies Camden Inc.
*10.50 General Partner Pledge Agreement dated February 4, 1992 between
General Electric Capital Corporation and Cogen Technologies Camden
Inc.
*10.51 Assignment and Security Agreement dated February 4, 1992 between
General Electric Capital Corporation and Cogen Technologies Camden
GP Limited Partnership.
*10.52 Interest Rate and Currency Exchange Agreement dated April 1, 1993
General Electric Capital Corporation and Camden Cogen, L.P.
*10.53 Gas Supply Agreement between Camden Cogen, L.P. and Anadarko Energy
Services Company dated July 1, 1997.
*10.54 Agreement for the Sale of Steam and Electricity dated June 13, 1985
between IMTT-Bayonne and Cogen Technologies NJ, Inc.
*10.55 Agreement for the Sale of Steam between Cogen Technologies NJ
Venture and Exxon Company U.S.A.
*10.56 Letter Agreement for Gas Service between Public Service Electric
and Gas Company and Cogen Technologies NJ Venture dated October 10,
1986.
*10.57 Water Supply Agreement between the City of Bayonne and Cogen
Technologies NJ Venture dated June 1, 1988.
*10.58 Lease Agreement between Bayonne Industries, Inc. and IMTT-Bayonne
and Cogen Technologies NJ Venture dated October 18, 1986.
*10.59 Easement from Bayonne Industries, Inc. and IMTT-Bayonne to Cogen
Technologies NJ Venture dated October 20, 1986.
</TABLE>
<PAGE>
<TABLE>
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10.60 Power Purchase and Operations Coordination Agreement between Public
Service Electric and Gas Company and Cogen Technologies NJ Venture
dated June 5, 1989.
10.61 Agreement for Purchase of Electric Power between Cogen Technologies
NJ Inc. and Jersey Central Power & Light Company dated October 29,
1985.
10.62 Amendment dated September 5, 1986 to Agreement for Purchase of
Electric Power between Cogen Technologies NJ Inc. and Jersey
Central Power & Light Company dated October 29, 1985.
10.63 Amendment dated August 1, 1988 to Agreement for Purchase of
Electric Power between Cogen Technologies NJ Inc. and Jersey
Central Power & Light Company dated October 28, 1985.
10.64 Operation and Maintenance Agreement by and between Cogen
Technologies NJ Venture and General Electric Company dated June 6,
1997.
10.65 Revised Transmission Service and Interconnection Agreement between
Public Service Electric and Gas Company and Cogen Technologies NJ
Venture dated April 27, 1987.
10.66 Term Loan Agreement dated as of November 1, 1987 between Cogen
Technologies NJ Venture and The Prudential Insurance Company of
America.
10.67 First Amendment dated December 15, 1988 to the Term Loan Agreement
dated as of November 1, 1987 between Cogen Technologies NJ Venture
and The Prudential Insurance Company of America.
10.68 Second Amendment dated July 31, 1996 to the Term Loan Agreement
dated as of November 1, 1987 between Cogen Technologies NJ Venture
and The Prudential Insurance Company of America.
10.69 $5,000,000 Revolving Credit Loan Agreement dated as of December 19,
1996 by and between Cogen Technologies NJ Venture and Southwest
Bank of Texas, N.A.
10.70 First Amendment dated December 19, 1997 to the $4,000,000 Revolving
Credit Loan dated as of December 19, 1996 by and between Cogen
Technologies NJ Venture and Southwest Bank of Texas, N.A.
10.71 Amended and Restated Joint Venture Agreement of Cogen Technologies
NJ Venture dated August 12, 1986.
*10.72 Option Agreement between Bayonne Industries, Inc. and Cogen
Technologies NJ, Inc. dated May 22, 1986.
*10.73 Purchase and Sale Agreement among Bayonne Industries, Inc., IMTT-
Bayonne and Cogen Technologies NJ, Inc. dated May 22, 1986.
*10.74 Steam Producing Facilities Lease Agreement between Cogen
Technologies NJ, Inc. and IMTT-Bayonne dated May 22, 1986.
*10.75 Mortgage and Security Agreement between The Prudential Insurance
Company of America and Cogen Technologies NJ Venture dated December
15, 1988.
*10.76 Security Agreement and Assignment between The Prudential Insurance
Company of America and Cogen Technologies NJ Venture dated December
15, 1988.
*10.77 Disbursement and Security Agreement between The Prudential
Insurance Company of America, Midatlantic National Bank and Cogen
Technologies NJ Venture dated December 15, 1988.
*10.78 Kerosene Fuel Storage Agreement dated May 5, 1994 between IMTT-
Bayonne and Cogen Technologies NJ Venture.
*21.1 Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP
*23.3 Consent of Fulbright & Jaworski L.L.P. (contained in Exhibit 5.1).
</TABLE>
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* To be filed by amendment.
<PAGE>
EXHIBIT 10.1
POWER PURCHASE AGREEMENT
between
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
and
COGEN TECHNOLOGIES, INC.
(LINDEN, NEW JERSEY)
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS.................................................. 2
ARTICLE 2
TERM
2.1 Base Term................................................ 6
2.2 Renewal of Agreement..................................... 6
2.3 PSC Approval of Agreement................................ 7
ARTICLE 3
DELIVERY AND PURCHASE
3.1 Basic Obligations........................................ 8
3.2 Exceptions from Buyer's Obligation....................... 9
3.3 Interconnection.......................................... 9
ARTICLE 4
RATES FOR ELECTRICITY SOLD TO BUYER
4.1 Definitions.............................................. 10
4.2 Initial Delivery Rates................................... 12
4.3 Rates During Base Term................................... 12
4.4 Renewal Rates............................................ 15
4.5 Rates During Periods of Curtailment...................... 16
4.6 Fuel Component Determination............................. 17
4.7 Alternate Fuel........................................... 18
4.8 Dispute Resolution....................................... 18
ARTICLE 5
SECURITY
5.1 Letter of Credit......................................... 18
5.2 Other Forms of Security.................................. 20
ARTICLE 6
PAYMENT
6.1 General.................................................. 20
6.2 Preparation of Statement................................. 21
6.3 Dispute.................................................. 21
6.4 Interest................................................. 22
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<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 7
METERING
7.1 Measurement.............................................. 23
7.2 Testing of Meters........................................ 23
7.3 Adjustments.............................................. 24
7.4 Additional Meters........................................ 25
7.5 Monitoring Equipment..................................... 25
ARTICLE 8
PROCEDURES FOR INTERCONNECTION AND
INSTALLATION OF INTERCONNECTION FACILITIES
8.1 General.................................................. 26
8.2 Procedures............................................... 26
8.3 Seller's Responsibility.................................. 27
8.4 Buyer's Responsibility................................... 28
8.5 Payment Terms............................................ 28
8.6 Annual Reimbursement..................................... 29
ARTICLE 9
REARRANGEMENT, RELOCATION, RETIREMENT OR
ABANDONMENT OF BUYER'S FACILITIES
9.1 Relocation or Rearrangement.............................. 29
9.2 Retirement or Abandonment................................ 30
ARTICLE 10
SUSPENSION OF BUYER'S OBLIGATION AND
DISCONNECTION OF PLANT FROM BUYER'S SYSTEM
10.1 Temporary Suspension of Buyer's Obligation to
Accept Electricity....................................... 31
10.2 Disconnection............................................. 31
10.3 Restoration of Service and Reimbursement of Costs......... 32
ARTICLE 11
COORDINATION OF PLANT AND SYSTEM MAINTENANCE
11.1 Initial Operation Coordination.......................... 32
11.2 Operation Coordination.................................. 33
11.3 Maintenance Coordination by Seller...................... 35
11.4 Maintenance Coordination by Buyer....................... 36
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<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 12
QUALIFICATION UNDER FEDERAL LAW
12.1 Initial Certification................................... 36
12.2 Subsequent Notification................................. 36
12.3 Loss of Qualifying Status............................... 37
ARTICLE 13
DEPENDABLE MAXIMUM NET CAPABILITY (DMNC)
13.1 Plant Capability........................................ 39
13.2 Expected Deliveries to Buyer............................ 42
ARTICLE 14
TERMINATION PRIOR TO INITIAL OPERATION
14.1 Events of Termination................................... 42
14.2 Milestone Deposits...................................... 44
ARTICLE 15
BREACH OF CONTRACT, TERMINATION, AND REMEDIES
15.1 Breach.................................................. 45
15.2 Termination............................................. 47
15.3 Cure by Lender.......................................... 48
15.4 Remedies................................................ 48
ARTICLE 16
SPECIFIC PERFORMANCE......................................... 49
ARTICLE 17
RIGHT TO OPERATE............................................. 49
ARTICLE 18
INDEMNIFICATION AND INSURANCE
18.1 Indemnification......................................... 50
18.2 Insurance............................................... 52
18.3 Self-Insurance.......................................... 53
ARTICLE 19
ACCESS AND NONINTERFERENCE
19.1 Access.................................................. 53
19.2 Noninterference......................................... 54
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<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 20
FORCE MAJEURE
20.1 Definition............................................. 54
20.2 Effect of Force Majeure................................ 54
ARTICLE 21
ASSIGNMENT OR TRANSFER
21.1 General.............................................. 56
21.2 Permitted Assignments................................ 56
21.3 Other Assignments.................................... 56
21.4 Sale of Plant........................................ 57
21.5 Novation............................................. 57
ARTICLE 22
REPRESENTATIONS AND WARRANTIES
22.1 Seller's Representations............................... 58
22.2 Buyer's Representations................................ 59
ARTICLE 23
AMENDMENTS, APPROVAL OF AMENDMENTS........................... 60
ARTICLE 24
MISCELLANEOUS PROVISIONS
24.1 Binding Effect......................................... 60
24.2 Counterparts........................................... 60
24.3 Notices................................................ 61
24.4 Prior Agreements Superseded............................ 61
24.5 Applicable Law......................................... 61
24.6 Specific Waiver........................................ 61
24.7 Waiver................................................. 62
Appendix A: Plant Description
Appendix B: Avoided Capacity Cost Projections
Appendix C: Security
-iv-
<PAGE>
POWER PURCHASE AGREEMENT
between
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
and
COGEN TECHNOLOGIES, INC.
WHEREAS, Consolidated Edison Company of New York, Inc. ("Buyer") is a
corporation organized under the Transportation Corporations Law of the State of
New York and is authorized by its Certificate of Incorporation and by the State
of New York to engage in the production, transmission, sale and distribution of
electricity for heat, light and power to the public;
WHEREAS, Cogen Technologies, Inc. ("Seller"), a Texas corporation, proposes
to construct or have constructed, to own, lease or otherwise have a possessory
interest in, and to operate a cogeneration facility in Linden, New Jersey (see
Appendix A) and to deliver Electricity to the electric system of Buyer;
WHEREAS, the Plant will be a "qualifying facility" under the Public Utility
Regulatory Policies Act of 1978 ("PURPA") and as defined in the rules and
regulations issued pursuant to such law;
and
WHEREAS, Seller desires to sell Electricity generated by the Plant to Buyer
pursuant to the rates, terms and conditions set forth in this Agreement, and
Buyer agrees to purchase Electricity generated by the Plant on the terms and
conditions set forth herein;
<PAGE>
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NOW, THEREFORE, in consideration of the foregoing and the promises and
covenants hereinafter set forth, the sufficiency of which each Party
acknowledges, Buyer and Seller agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement:
1.1 The term "Agreement" means this contract, including all appendices
attached hereto and amendments to this contract that may be made from time to
time.
1.2 The term "Annual Period" means any one of a succession of consecutive
twelve-month periods, the first of which shall begin on the Date of Initial
Commercial Operation.
1.3 The term "Commercial Operation" means the production of Electricity by
Seller at the Plant, upon the completion of testing of the Plant.
1.4 The term "Date of Initial Commercial Operation" means the day which
begins at 12:01 A.M. on the first day of the month which immediately follows the
date Seller designates in writing as the initial date of Commercial Operation of
the Plant.
1.5 The terms "Deliver", "Delivery" and "Delivered" mean to actually
deliver or to make available Electricity, actual delivery or availability of
Electricity, or actually delivered or available Electricity, as the case may be,
for sale to Buyer at
<PAGE>
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the Point of Interconnection, other than Electricity subject to pricing under
Article 4.5.
1.6 The term "DMNC" means the Dependable Maximum Net Capability of the
Plant determined pursuant to Article 13.1.
1.7 The term "Direct Interconnection" means a direct interconnection
between the Plant and Buyer's electric system.
1.8 The term "Electricity" means capacity, expressed in kilowatts MW"), and
energy, expressed in kilowatt hours MWW'), generated or available to be
generated by the Plant for sale to Buyer, as three-phase alternating current
with a nominal frequency of 60 hertz and, in the case of a Direct
Interconnection, a nominal voltage of 345,000 volts and at a minimum power
factor of 0.85.
1.9 The term "Fuel" means Natural Gas or any other fuel, including fuel
oil.
1.10 The term "Indirect Interconnection" means the interconnection of the
Plant to Buyer's electric system through the electric system of the Intervening
Utility.
1.11 The term "Initial Delivery Date" means the day that Seller first
actually delivers Electricity to Buyer, which date shall precede the Date of
Initial Commercial Operation.
1.12 The term "Intervening Utility" means the Public Service Electric and
Gas Company, and any of its successors or assigns.
<PAGE>
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1.13 The term "Lender" means any person lending money to Seller for the
construction, operation, maintenance, repair, or alteration of Seller's Plant,
any person providing funds for the refinancing or taking-out of any such loans,
and the nominees or designees of any such persons.
1.14 The term "MW" means megawatt.
1.15 The term "Natural Gas" means natural gas or any other gaseous fuel,
such as butane, propane, or liquified natural gas.
1.16 The term "Off-Peak Periods" means all other hours of the week
exclusive of On-Peak Periods.
1.17 The term "On-Peak Periods" means the period from 8:00 A.M. to 10:00
P.M. (Eastern Time) Monday through Friday, fifty-two (52) weeks per year.
1.18 The term "Party" or "Parties" means one or both of the Consolidated
Edison Company of New York, Inc., a New York corporation, or Cogen Technologies,
Inc., a Texas corporation, together with any successor or assign of either.
1.19 The term "person" means an individual, corporation or other legal
entity.
1.20 The term "Plant" means the cogeneration facility and all appurtenant
structures and equipment, including Seller's electrical and steam
interconnection facilities, and real property interests owned, leased, or
subleased by Seller in Linden, New Jersey, for the purposes of producing steam
and
<PAGE>
-5-
generating electricity. The Plant currently is designed to have a power
production capacity, net of auxiliary Plant loads and expected Plant electric
deliveries to steam customers, of approximately 440 MW. However, Seller may
redesignate such capacity of the Plant as any lower value or any higher value up
to 539 MW, or any higher value up to 594 MW in the event that Seller desires to
include in this Agreement the capacity currently specified in the power purchase
agreement between Buyer and Seller with regard to Seller's proposed plant
located in Bayonne, New Jersey, provided that Seller gives Buyer notice of such
redesignated capacity within six (6) months of the PSC's approval of this
Agreement pursuant to Article 2.3. Any such redesignation shall not require
Seller's Plant to have the capacity so designated but shall determine the
amounts due under Article 14.
1.21 The term "Point of Interconnection" means: (i) in the case of a Direct
Interconnection, the point of physical connection of the Plant to the Buyer's
transmission system; or (ii) in the case of an Indirect Interconnection, the
point of physical connection of the Plant to the Intervening Utility's
transmission system.
1.22 The term "PSC" means the Public Service Commission of the State of New
York or any successor governmental entity exercising jurisdiction over the rates
and operations of Buyer in the State of New York.
<PAGE>
-6-
1.23 The term "Qualifying Facility" means a "qualifying cogeneration
facility" as defined in Section 3(18) of the Federal Power Act and the
regulations thereunder.
ARTICLE 2
TERM
2.1 Base Term. This Agreement shall become effective when fully executed
and approved by the PSC and shall remain in full force and effect for a period
of twenty-five (25) Annual Periods from the Date of Initial Commercial Operation
("Base Term") and any additional Annual Periods pursuant to Article 2.2, subject
to termination in accordance with Articles 14 and 15 of this Agreement.
Applicable provisions of this Agreement shall continue in effect after the date
of termination of this Agreement only to the extent necessary to provide for
final billings and adjustments related to the period prior to such date of
termination or as may be otherwise applicable after such date.
2.2 Renewal of Agreement. This Agreement shall be automatically renewed for
two periods of five (5) Annual Periods each, the first of which will commence
with the expiration of the Base Term, unless either Party elects to terminate
this Agreement at the expiration of the Base Term or at the expiration of the
first five-year renewal term. Such termination shall be valid only if the
terminating Party provides notice of its intent to
<PAGE>
-7-
terminate to the other Party at least five (5) full years prior to the
expiration of the applicable term.
2.3 PSC Approval of Agreement. Each Party to this Agreement acknowledges
that this Agreement is subject to approval by the PSC. Upon execution of this
Agreement, Buyer shall promptly submit this Agreement to the PSC for approval
and for authorization to recover all payments for the purchase of Electricity
under this Agreement through Buyer's fuel adjustment clause. If the PSC, in
approving this Agreement, orders any material change to this Agreement, or
imposes any condition upon such approval, any Party which, in its sole judgment,
is adversely affected by such change or condition may terminate this Agreement,
without any liability or further obligation to the other Party, by serving
written notice to the other Party within thirty (30) days from the date the PSC
orders such change or condition. Failure to give such notice shall constitute
acceptance of the change or condition imposed by the PSC. In the event that such
notice is served, the Parties agree to negotiate in good faith to agree upon a
mutually satisfactory amendment to this Agreement and to resubmit this
Agreement, as so amended, for any necessary further approval. In the event the
PSC, in its approval of this Agreement under this Article 2.3, does not
expressly authorize full recovery by Buyer, through its fuel adjustment clause,
of any payments made by Buyer to Seller under
<PAGE>
-8-
this Agreement, then this Agreement shall become null and void immediately
without either Party becoming liable to the other. In the event the PSC
conditions its authorization of full recovery by Buyer, through its fuel
adjustment clause, of payments made by Buyer to Seller under this Agreement,
this Agreement shall become effective only upon the written agreement of the
Parties to accept such conditions.
ARTICLE 3
DELIVERY AND PURCHASE
3.1 Basic obligations. During the term of this Agreement, Seller shall
deliver and sell to Buyer and Buyer shall accept and purchase from Seller,
subject to the terms and conditions of this Agreement, all the Electricity up to
the power production capacity produced by the Plant net of the electric energy
and capacity used to operate auxiliary equipment in the Plant and net of the
electric energy and capacity (including electric energy and capacity equivalent
used as steam) used by steam customers supplied by the Plant. Seller shall,
within six (6) months of the PSC's approval of this Agreement pursuant to
Article 2.3, designate the maximum amount of electric energy and capacity used
by such steam customers (including electric energy and capacity equivalent used
as steam).
<PAGE>
-9-
3.2 Exceptions from Buyer's Obligation.
(A) Buyer's obligation to accept and pay for Electricity from Seller
shall be suspended:
(1) during any period in which Seller fails to satisfy
conditions, imposed on Seller by the PSC in its approval of this Agreement
under Article 2.3, to full recovery by Buyer, through its fuel adjustment
clause, of payments made by Buyer to Seller under this Agreement; and
(2) during any period in which Seller fails to comply with the
requirements specified in Articles 18.2 and 18.3 (relating to insurance).
(B) Buyer's obligation to accept Electricity from Seller shall be
suspended:
(1) during such periods and under such conditions as shall be
established by the PSC in Case 88-E-081; and
(2) pursuant to Article 10 of this Agreement (relating to
suspension).
3.3 Interconnection. Subject to Article 8.1, Seller shall
use a Direct Interconnection.
<PAGE>
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ARTICLE 4
RATES FOR ELECTRICITY SOLD TO BUYER
4.1 Definitions. For purposes of this Agreement:
(A) The term "Fixed Component" means an amount equal to 1.8553 cents per
kWh.
(B) The term "Fuel Component" for a month means an amount equal to the sum
of all costs incurred in such month by Seller with respect to Fuel acquired for
use in the Plant (including Fuel commodity, transportation, and storage costs
and any costs related thereto) multiplied by a fraction, the numerator of which
is the kWh actually delivered to Buyer in such month and the denominator of
which is the total kWh actually delivered by the Plant in such month.
(C) The term "Fuel Component Ceiling" for an Annual Period means an amount
equal to 2.634 cents per kWh multiplied by:
(1) a fraction, the numerator of which is equal to Buyer's actual
weighted average Natural Gas costs per MMBtu at the higher heating value
(including Natural Gas commodity, transportation, and storage costs and any
costs related thereto) for such Annual Period, and the denominator of which
is equal to Buyer's actual weighted average Natural Gas costs per
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MMBtu at the higher heating value (including Natural Gas commodity,
transportation, and storage costs and any costs related thereto and
excluding all direct or indirect costs, charges, surcharges, liabilities,
payments, or obligations incurred by, accrued by, reserved by, deferred by,
or billed to Buyer during calendar year 1989 attributable to any take or
pay buy out or buy down costs, however designated, of Buyer or Buyer's
suppliers or transporters) for calendar year 1989; times
(2) the kWh actually delivered by Seller to Buyer during such Annual
Period.
Buyer shall provide Seller with a statement of its actual weighted average
Natural Gas costs (including Natural Gas commodity, transportation, and storage
costs) by the fifth (5th) day of each month or as soon thereafter as available
to Buyer.
(D) The term "0 & M Component" for a month means an amount equal to 0.9
cents per kWh multiplied by the Inflation Factor for such month.
(E) The term "Inflation Factor" for a month means the latest CPI available
at the end of such month divided by the CPI for December, 1988.
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(F) The term "CPI" means the Consumer Price Index for All Urban Consumers
for the New York-Northern New Jersey Area as computed by the United States
Department of Labor, Bureau of Labor Statistics (or if such index shall no
longer be published, such other index as the Parties shall reasonably determine
to be most nearly comparable to such index for the Metropolitan New York Area).
4.2 Initial Delivery Rates. From the Initial Delivery Date until the Date of
Initial Commercial Operation, Buyer shall pay Seller for the Electricity
actually delivered to Buyer at a rate which is the Buyer's avoided energy costs
(i) as may be specified in the applicable tariff in effect at the time of such
deliveries, or (ii) if such tariff is not in effect, as may otherwise be
available. Such rate shall not include any avoided generation or transmission
capacity costs. 4.3 Rates During Base Term.
(A) From the Date of Initial Commercial Operation of the Plant until
the end of the twenty-fifth (25th) Annual Period, Buyer shall pay Seller for
Electricity Delivered to Buyer in each month the sum of the following amounts:
(1) an amount equal to the Fixed Component multiplied by the kWh
Delivered during such month, but in no event greater than the amount
determined under Article 4.3(B)(1) and (2);
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(2) the Fuel Component for such month; and
(3) an amount equal to the 0 & M Component multiplied by the kWh
Delivered during such month, but in no event greater than the amount
determined under Article 4.3(B)(3) and (4).
(B) (1) With regard to the total amount to be paid under Articles
4.3(A)(1) and 4.5(A) with regard to the Fixed Component, Seller may not receive
in any month more than an amount equal to the Fixed Component multiplied by: (a)
eighty-five percent (85%) of the DMNC applicable to such month; and (b) the
number of total hours in such month.
(2) To the extent that the amount of Seller's Delivered kWh plus
the curtailed kWh subject to Article 4.5 during the twelve-month period
preceding a month (or any shorter period as applicable during the first
Annual Period) is in excess of an amount equal to eighty-five percent (85%)
of the DMNC applicable to such month multiplied by the total hours in the
preceding twelve-month period (or any shorter period as applicable during
the first Annual Period), such excess kWh shall be considered Delivered for
purposes of Article 4.3(A)(1) in such month (except if such month is June,
July, August, or September) so as to result in additional payments to
Seller during such month attributable to the Fixed Component up to the
limitation provided in Article 4.3(B)(1).
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(3) With regard to the total amount to be paid under Articles
4.3(A)(3) and 4.5(B) with regard to the 0 & M Component, Seller may not receive
in any month more than an amount equal to the 0 & M Component multiplied by: (a)
ninety percent (90%) of the DMNC applicable to such month; and (b) the number of
total hours in such month.
(4) To the extent that the amount of Seller's Delivered kWh plus the
curtailed kWh subject to Article 4.5 during the twelve-month period preceding a
month (or any shorter period as applicable during the first Annual Period) is in
excess of an amount equal to ninety percent (90%) of the DMNC applicable to such
month multiplied by the total hours in the preceding twelve-month period (or any
shorter period as applicable during the first Annual Period), such excess kWh
shall be considered Delivered for purposes of Article 4.3(A)(3) in such month
(except if such month is June, July, August, or September) so as to result in
additional payments to Seller during such month attributable to the 0 & M
Component up to the limitation provided in Article 4.3(B)(3).
(C) (1) within thirty (30) days of the end of each Annual Period,
Buyer shall determine:
(a) the revenues that were received by
Seller during such Annual Period solely attributable to the
Fuel Component less all costs that are Buyer's
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responsibility under Article 11.2(D) and all costs incurred and documented
by Seller related to the supply of Fuel during periods of curtailment in
such Annual Period pursuant to Article 4.5 or when Electricity was
available and not actually delivered as a result of Buyer's actions not
authorized under this Agreement; and
(b) an amount equal to the Fuel Component Ceiling for such Annual
Period.
(2) To the extent that Seller's revenues determined under Article
4.3(C)(1)(a):
(a) are less than the amount determined under Article
4.3(C)(1)(b), Buyer shall pay to Seller for fifty percent (50%) of the
difference in twelve (12) equal monthly payments; or
(b) are greater than the amount determined under Article
4.3(C)(1)(b), Seller shall reimburse Buyer for one-hundred percent (100%)
of such difference in twelve (12) equal monthly payments.
4.4 Renewal Rates. From the end of the twenty-fifth (25th) Annual Period
through the end of any renewal term pursuant to Article 2.2, Buyer shall pay
Seller for Electricity Delivered to Buyer at a rate equal to the higher of:
(A) ninety percent (90%) of the avoided capacity cost projections for
On-Peak Periods as shown in Appendix B and
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Buyer's avoided energy costs (i) as may be specified in the applicable
tariff in effect at the time of such Deliveries, or (ii) if such tariff is
not in effect, as may otherwise be available (separated into rates for
On-Peak Periods and Off-Peak Periods); or
(B) one-hundred ten percent (110%) of the amounts determined under
Article 4.3(A)(2) and (3), without regard to Article 4.3(C).
4.5 Rates During Periods of Curtailment. In the case of any event specified
in Articles 3.2(B), 10, 11.2, or 20 in which Buyer's action authorized by, or
non-performance excused by, such Articles causes Seller to operate at a level
less than one hundred percent (100%) of Seller's DMNC, Buyer shall pay Seller
for any curtailed capacity at a rate which is the sum of:
(A) the Fixed Component multiplied by the kWh curtailed, subject to
Article 4.3(B)(1) and (2); and
(B) the 0 & M Component multiplied by the kWh curtailed, subject to
Article 4.3(B)(3) and (4), unless Buyer shows that such curtailed capacity would
not have been available for delivery in the absence of Buyer's curtailment. In
the case of an Indirect Interconnection, Seller's capacity shall be deemed
unavailable for delivery if the transmission services of the Intervening Utility
necessary to deliver Electricity to Buyer are unavailable.
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4.6 Fuel Component Determination.
(A) Seller shall provide Buyer within five (5) days after the end of
the month either a statement of the actual costs with respect to the Fuel
Component for the preceding month or an estimate of such costs (if the actual
costs are not yet available to Seller). To the extent that an estimate is
provided and used for purposes of determination of the Fuel Component in any
month, Seller shall provide Buyer a statement of Seller's actual costs as soon
as available to Seller. Buyer or Seller, as the case may be, shall make the
appropriate adjustment in the next month's bill.
(B) To the extent that Seller incurs costs related to the Fuel
Component that requires prepayment of costs or payment of capital costs, Seller
shall include such costs in the Fuel Component amortized on a ratable basis,
including interest on any unrecovered balance at the rate specified in Article
6.4.
(C) To the extent that Seller is incurring costs for Fuel, including
Fuel commodity, transportation, and storage services, for more than the Plant's
use, Seller shall equitably allocate such costs.
(D) Buyer shall have the right, upon reasonable notice and during
normal business hours, to examine the records of Seller related solely to the
determination of the Fuel Component.
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4.7 Alternate Fuel. Seller agrees to use best efforts to change to a
substitute primary fuel which is less expensive than the natural gas it was
otherwise intending to use as the primary fuel at any time during the term of
this Agreement, provided that such less expensive fuel can be burned in the
Plant under applicable environmental and other laws and regulations and such
burning does not otherwise adversely affect the Plant's operations.
4.8 Dispute Resolution. Any dispute between Buyer and Seller under this
Article 4 shall be subject to arbitration by the PSC in accordance with
procedures similar to those set forth in 16 NYCRR Part 12.
ARTICLE 5
SECURITY
5.1 Letter of Credit.
(A) Seller shall provide security in the form of a letter of credit in
the amounts and at the times set forth in Appendix C. The amounts set forth in
Appendix C shall not be subject to escalation or subsequent adjustment, except
if the capacity is redesignated pursuant to Article 1.20, in which case the
amounts in Appendix C will be adjusted on a pro rata basis. Upon termination by
reason of Seller's breach of this Agreement or Seller's termination under
Article 12.3(B), Buyer shall have
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the right to the amounts secured by the letter of credit only to the extent that
the Present Worth of payments for Deliveries and curtailed kWh subject to
pricing under Article 4.5 is greater than the Present Worth of LRAC plus
interest at the rate of eleven percent (11%) from the Date of Initial Commercial
operation to the date of termination on any difference in such amounts.
(B) For purposes of Article 5.1(A):
(1) The term "LRAC" means the long run avoided costs of energy
and capacity calculated using:
(a) avoided capacity cost projections for On-Peak Periods as
shown in Appendix B; and
(b) the actual avoided energy costs for the On-Peak Periods
and Off-Peak Periods of each Annual Period which occurred prior
to the date of such calculation, based upon a tariff in effect
designed to reflect current avoided energy costs or PSC-approved
data reflecting current avoided energy costs if such data is
more current than the tariff or if the tariff is not in effect.
(2) The term "Present Worth" means the cumulative present worth
as calculated to the Date of Initial Commercial Operation using an
eleven percent (11%) discount rate and, with respect to any Deliveries
and
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curtailed kWh subject to pricing under Article 4.5, shall reflect the
difference between rates for On-Peak Periods and Off-Peak Periods.
(3) The term "Present Worth of LRAC" means the cumulative present
worth of LRAC as calculated to the Date of Initial Commercial
Operation using an eleven percent (11%) discount rate based upon
Deliveries and curtailed kWh subject to pricing under Article 4.5 up
to the time of termination of this Agreement.
5.2 Other Forms of Security. Seller may propose other forms of security
with respect to the amounts specified in Appendix C as may be adjusted under
Article 5.1, which other forms may include insurance, performance bonds or
corporate guarantees or any combination thereof. Buyer may, in its sole
discretion, agree to any such proposal in lieu of the security required in
Article 5.1.
ARTICLE 6
PAYMENT
6.1 General. Buyer shall pay Seller, upon Seller's written notice of the
name and address of its bank, by electronic transfer of funds to Seller's bank
on or before the twentieth (20th) day of each month for the Electricity
Delivered to or curtailed by Buyer during the preceding month, according to
rates applicable under this Agreement.
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6.2 Preparation of Statement.
(A) In the case of a Direct Interconnection, Buyer shall read the
meters at the end of each calendar month in accordance with Article 7. Along
with the payment under Article 6.1, Buyer shall enclose a statement explaining
the basis of the calculation of the payment amount, including the applicable
rate, the total Electricity Delivered and curtailed and any interest charges.
(B) In the case of an Indirect Interconnection, Seller shall prepare
and submit a bill to Buyer on or before the fifth (5th) day of each month. If
Seller's bill is received after the due date for such bill, the due date of the
payment shall be extended by a corresponding number of days. Seller shall
enclose along with each bill a statement explaining how the bill was calculated.
(C) Neither Party shall be precluded from making claims for
adjustments on account of subsequently discovered errors.
6.3 Dispute.
(A) Upon receipt of any statement, the Party receiving such statement
shall examine the accompanying statement to ensure that it has been calculated
correctly, and shall promptly notify the other Party of any errors therein which
the receiving Party in good faith believes have been made along with the facts
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providing the basis for such belief. The other Party will promptly review the
receiving Party's complaint.
(B) If the Parties are unable to agree upon a settlement of the
contested portion of any statement or bill, after the Parties have availed
themselves of their rights to meter testing as provided in Article 7, the
dispute shall be settled in accordance with procedures of the PSC similar to
those set forth in 16 NYCRR Part 12 for the resolution of disputes. The
existence of a dispute with regard to any payment due shall not relieve either
Party of any obligation to pay any uncontested amounts due under this Agreement
or from fulfilling any other obligation under this Agreement.
6.4 Interest. If either Party shall fail to make any payment required by
this Agreement when due, including contested portions of bills, or if Buyer
makes an overpayment requiring a refund by Seller (other than related to the
Fuel Component Ceiling), the amount due shall bear interest, from the due date
of the payment or the date on which the overpayment was made until the date of
payment, at a rate equal to 200 basis points over the prime lending rate in
effect during the period of nonpayment or overpayment, as quoted to substantial
commercial customers by Chase Manhattan Bank, N.A., or its successors.
Remittance agreed to be received by mail will be accepted without interest
charges if such payment was mailed on or before the due
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date. If the due date of any payment falls on a Sunday or legal holiday, the
next business day shall be the last day on which payment can be mailed or paid
without interest charges being assessed.
ARTICLE 7
METERING
7.1 Measurement. In the case of a Direct Interconnection, Electricity will
be measured by electric meters and associated equipment of a type approved by
the PSC, which meters and equipment shall be installed on Buyer's side of the
Point of Interconnection, and owned, installed, operated and maintained by Buyer
at Seller's expense. Such meters shall be of a type to record hourly readings
and shall be capable of being read by both Buyer and Seller. The Seller shall,
at its own expense, furnish and provide for the installation and maintenance of
mounting facilities for such meters and associated equipment.
7.2 Testing of Meters. In the case of a Direct Interconnection, the
metering equipment shall be sealed and the seals shall be broken only upon
occasions when the meters are to be inspected, tested or adjusted, and
representatives of the Seller shall be afforded reasonable opportunity to be
present upon such occasions. Periodic tests of such metering equipment, at
intervals not to exceed those prescribed by the PSC's
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regulations for comparable meters, will be made by Buyer at Seller's expense and
additional tests will be made at any reasonable time upon request by the Seller.
If a test of the metering equipment is made at the request of the Seller with
the result that such metering equipment is found to be registering correctly or
within plus or minus two percent (2%), the Seller shall bear the expense of such
test; provided that if such test shows an error greater than plus or minus two
percent M), then Buyer shall bear the expense of such test unless such error was
caused by Seller. All meters shall be adjusted as close as practical to one
hundred percent (100%) accuracy at the time of installation and testing and any
subsequent adjustment.
7.3 Adjustments. If any of the metering equipment tests provided for in
Article 7.2 disclose that the error for such equipment exceeds plus or minus two
percent (2%), then one-half (1/2) of the readings of such metering equipment
taken during the billing periods since the last test of such equipment was made
will be adjusted, either upward or downward, to correct for such error, unless
there is verifiable information available upon which a more accurate adjustment
can be made, including readings from Seller-installed or, in the case of an
Indirect Interconnection, Buyer-installed, meters. Any correction in billing
resulting from such correction in meter readings shall be made over a reasonable
period of time, to be agreed upon by the
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Parties, but in no event over a period greater than the three (3) succeeding
billing periods after the inaccuracy is verified, and such correction when made
shall, in the absence of bad faith, fraud, or intentional wrongdoing, constitute
a complete and final settlement of any claim arising between the Parties hereto
out of such inaccuracy of the metering equipment.
7.4 Additional Meters. in the case of a Direct Interconnection, Seller
shall have the right to install its own meters and shall maintain them according
to standards prescribed by 16 NYCRR Part 92. In the event Seller's meters are
used under Article 7.3 and Seller's metering point is on the low-voltage side of
the transformer, an adjustment for transmission and transformation losses will
be made to such meter readings.
7.5 Monitoring Equipment. Prior to commencement of Commercial Operation,
Seller shall install, to specifications provided by Buyer and at Seller's
expense, adequate metering and telephone equipment to transmit to Buyer's Energy
Control Center information that will allow Buyer to monitor Seller's generation
of Electricity, including equipment to provide Buyer continuous (every 15
seconds) telemetry of real power, reactive power, voltage, breaker and switch
status, such communication channel(s) as required to transmit such data to
Buyer, and receiving equipment at Buyer's end of the communication channel(s).
Seller shall pay the monthly charges associated with such communication
channel(s).
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ARTICLE 8
PROCEDURES FOR INTERCONNECTION AND
INSTALLATION OF INTERCONNECTION FACILITIES
8.1 General. Seller shall use a Direct Interconnection, unless a Direct
Interconnection is not feasible or the costs to Seller are substantially in
excess of the costs Seller would incur in providing Electricity through an
Indirect Interconnection.
8.2 Procedures.
(A) In the case of a Direct Interconnection, interconnection of the
Seller's Plant with Buyer's electric system shall be governed by the
requirements and conditions contained in Buyer's Specification EO-2115
(interconnections) and Specification EO-4133 (operation and maintenance), as
amended to the date of this Agreement, which is incorporated herein by reference
and with which terms and conditions the Parties hereby agree to be bound. If the
Seller and Buyer are unable to agree on application procedures, information
requirements, schedules and deadlines, or interconnection costs, equipment or
procedures, or compliance with the foregoing, either Party may petition the PSC
to resolve the dispute, subject to judicial review. Buyer shall not, by reason
of review, inspection, or approval of the Plant or any equipment related
thereto, or failure to review, inspect, or approve the same, be responsible for
the strength,
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details of design, adequacy or capacity of the Plant. Buyer hereby disclaims all
warranties, and shall not be liable, with respect to any of the foregoing.
(B) In the case of an Indirect Interconnection, Seller shall deliver
the Electricity to the Intervening Utility and shall schedule the delivery of
Electricity by the Intervening Utility at the Point of Interconnection for the
account of Seller.
8.3 Seller's Responsibility. Seller shall:
(A) at its cost and expense, construct, install, own and maintain the
interconnection facilities as required for Seller to deliver Electricity
from Seller's Plant at the Point of Interconnection;
(B) in the case of an Indirect Interconnection, pay the Intervening
Utility all charges for the scheduling and transmission of Electricity by
the Intervening Utility including transmission losses, if any, to the point
of physical connection between the Intervening Utility's system and Buyer's
electric system; and
(C) reimburse Buyer for the costs and expenses incurred in connection
with the installation of the Dedicated Facilities by Buyer under Article
8.4, provided that reimbursement shall not exceed an amount specified to
Seller within sixty (60) days of the date of execution of this Agreement.
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8.4 Buyer's Responsibility. Buyer shall design, construct, and install
additional facilities on Buyer's side of the Point of Interconnection solely for
the receipt of Electricity by Buyer (herein referred to as "Dedicated
Facilities"). All Dedicated Facilities shall remain the property of Buyer. Buyer
shall submit a schedule for installation of such facilities within thirty (30)
days of PSC approval of this Agreement. Subject to receipt of all prepayments
due from Seller under Article 8.5, Buyer shall complete the installation of any
Dedicated Facilities necessary to permit actual deliveries of Electricity prior
to Seller's scheduled Initial Delivery Date of June 1, 1992 or twenty-four (24)
months after this Agreement is effective under Article 2.1, whichever last
occurs.
8.5 Payment Terms. Seller shall prepay to Buyer the cost of any such
facilities that Buyer must order and shall make payments in advance each month
for all other estimated costs and expenses scheduled to be incurred by Buyer
during the next succeeding month in connection with the installation of the
Dedicated Facilities, less ten percent (10%) retainage by Seller until
completion of the Dedicated Facilities. Upon completion of the Dedicated
Facilities, the actual and estimated costs and expenses incurred in connection
with the Dedicated Facilities shall be compared and the difference between them
shall be promptly paid by or reimbursed to Seller as appropriate.
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8.6 Annual Reimbursement. During the term of this Agreement, on an annual
basis, Seller shall reimburse Buyer for expenses incurred by Buyer for the
operation and maintenance of the Dedicated Facilities at the rate specified in
Buyer's applicable tariff. In no event shall Seller be required in any Annual
Period to reimburse Buyer in amounts greater than nine percent (9%) of the
capital costs incurred by Buyer for the construction of the Dedicated
Facilities. An explanation of such expenses shall accompany each bill submitted
by Buyer. Either Party may petition the PSC to resolve disputes relating to such
bills, subject to judicial review.
ARTICLE 9
REARRANGEMENT, RELOCATION, RETIREMENT OR
ABANDONMENT OF BUYER'S FACILITIES
9.1 Relocation or Rearrangement. If, at some future time, Buyer determines
it necessary to relocate or rearrange its system to which the Plant is directly
connected or indirectly connected through the Intervening Utility, Buyer shall
advise Seller one year in advance in writing, explaining the proposed relocation
or rearrangement of Buyer's system. If such relocation or rearrangement is
ordered or required by governmental authority, Buyer shall give prior notice to
Seller equal in time to the notice given Buyer by such governmental authority,
to the extent
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possible. Buyer will indicate the expenditure required for new facilities
proposed to reestablish the connection which the Buyer would not have incurred
but for the Seller's actual delivery of Electricity to the Buyer's electric
system. Seller will have the option of reimbursing Buyer for the cost of these
new facilities (which shall be Dedicated Facilities) or of providing its own
reasonable alternative interconnection to Buyer's system, provided that such
alternative interconnection is approved by Buyer.
9.2 Retirement or Abandonment. If, at some future time, Buyer determines it
necessary to retire or abandon any facilities to which the Plant is directly
connected or indirectly connected through the Intervening Utility, Buyer shall
advise Seller, at least one year in advance, in writing, indicating Buyer's
annual cost of facilities required exclusively to accommodate the output of the
Plant. Seller shall then have the option of paying Buyer for these annual costs
or of providing alternate interconnection of Buyer's system acceptable to Buyer.
Such alternate may be the purchase by Seller of Buyer's existing facilities,
which have been retired in place, at the price set for such purchase in
accordance with the PSC's final determination in Case 29318 or, if not so set,
at a price to be negotiated by the Parties. In the event Seller elects to pay
Buyer the annual charges associated with such facilities, said charges shall be
recomputed as of January 1 of every year.
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ARTICLE 10
SUSPENSION OF BUYER'S OBLIGATION AND
DISCONNECTION OF PLANT FROM BUYER'S SYSTEM
10.1 Temporary Suspension of Buyer's Obligation to Accept Electricity.
Buyer's obligation to accept (but not its obligation pursuant to Article 4 to
pay for) Electricity generated by the Plant shall be suspended for any period of
time during which Buyer's system is physically unable to accept such Electricity
for reasons of repair, relocation or rearrangement of Buyer's system to which
the Plant is directly connected or indirectly connected through the Intervening
Utility, connection of other customers or generators of electricity, system
emergency or safety. Neither Party shall be liable for any indirect loss
incurred as a result of Buyer's inability to accept Electricity generated by the
Plant during such period.
10.2 Disconnection. If necessary, and solely for reasons set forth in
Article 10.1, Buyer may direct that the generating facility of the Plant be
disconnected from Buyer's system. Buyer shall give advance notice, as
circumstances permit, of the need for such disconnection to employees of Seller
designated from time to time by Seller to receive such notice. Upon receipt of
notice directing disconnection, Seller shall carry out the required action
without undue delay. Where circumstances do not permit such advance notice to
Seller or Seller's employees,
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including circumstances in which Seller's Plant is unstaffed, or where Seller
fails to carry out the required action, Buyer may disconnect the generating
facility of the Plant from Buyer's system.
10.3 Restoration of Service and Reimbursement of Costs.
(A) During any period of disconnection, Buyer and Seller shall
endeavor to restore the interconnection as promptly as is reasonably possible.
(B) Seller shall bear any extraordinary cost reasonably incurred by
Buyer as a result of any such suspension, disconnection or reconnection under
this Article 10. An extraordinary cost is a cost that would not be incurred by
Buyer absent the existence of the Plant; provided, however, that such
extraordinary cost shall not include any incremental expenses incurred by Buyer
for the operation and maintenance of Dedicated Facilities which are reimbursed
by Seller pursuant to Article 8 or for the benefit of other Qualifying
Facilities.
ARTICLE 11
COORDINATION OF PLANT AND SYSTEM MAINTE14ANCE
11.1 Initial Operation Coordination. Seller shall notify Buyer in writing,
at least thirty (30) days prior to the anticipated Initial Delivery Date, of the
expected date when Electricity will first be actually delivered to Buyer. After
the
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Initial Delivery Date, Seller shall promptly notify Buyer of its intention to
cease for forty-eight (48) hours or more actual deliveries from the Plant to
Buyer for any reason.
11.2 Operation Coordination.
(A) Not later than the end of any month which begins after the Date of
Initial Commercial Operation, Seller shall furnish to Buyer a schedule showing
Seller's expected actual deliveries to Buyer on an hourly basis for the
following month.
(B) Beginning with the Date of Initial Commercial Operation, Buyer may
request:
(1) by giving Seller at least four (4) hours prior notice, that
Seller curtail actual deliveries down to an output level not less than
eighty-two percent (82%) of the DMNC;
(2) by giving Seller at least twenty-four (24) hours prior
notice, during the first fifteen (15) Annual Periods of the Base Term, that
Seller curtail actual deliveries during any Weekend Period down to an
output level not less than forty-seven percent (47%) of the DMNC, provided
that Buyer may not request such curtailment more than once in any Weekend
Period; and
(3) by giving Seller at least twenty-four (24) hours prior
notice, during the last ten (10) Annual Periods of the Base Term, that
Seller curtail actual deliveries down
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to an output level not less than forty-seven percent (47%) of the DMNC,
provided that Buyer may not exceed in any such Annual Period a ratio of one
(1) curtailment request under this Article 11.2(B)(3) for each fifty (50)
hours of Plant operation not subject to a request under this Article
11.2(B)(3).
(C) For purposes of Article 11.2(B), the term "Weekend Period" means
the period from 10:00 p.m. Friday through 8:00 a.m. Monday (Eastern Time).
(D) If Buyer requests any actual deliveries in excess of that which
Seller was otherwise intending to supply, to the extent Seller is capable of
actually delivering additional Electricity and such delivery is consistent with
other obligations of Seller as determined by Seller, Seller shall accommodate
such request to the maximum extent practicable. Buyer shall bear any additional
costs or expenses incurred by Seller.
(E) Seller agrees to design the Plant to be capable of start-up
without any outside power if there is a Direct Interconnection with Buyer.
(F) Seller shall not voluntarily disconnect from Buyer's electric
system in any emergency situation on Buyer's electric system, so long as such
emergency does not present an imminent threat to Seller's Plant or steam
customers.
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11.3 Maintenance Coordination by Seller.
(A) Seller shall use reasonable efforts to coordinate with Buyer the
scheduling of any planned maintenance of the Plant, in order to ensure the sound
operation of the Plant and Buyer's system. Without prior approval of Buyer,
Seller shall not schedule planned outages of more than three days (including two
weekend days) in duration during the months of June through September except in
emergencies and in situations in which failure to maintain the Plant would, in
Seller's judgement, result in an unplanned outage. In such cases, Seller shall
give Buyer as much notice as possible. Seller shall provide to Buyer in writing
an annual schedule of expected maintenance outage periods (including expected
commencement date and duration) one year in advance of such periods and a notice
within fourteen (14) days of making any changes to such schedule. In addition,
Seller shall notify Buyer of the expected duration of a forced outage within
forty-eight (48) hours of its occurrence and provide to Buyer annually a written
three-year forecast of planned major overhauls.
(B) Beginning with the commencement of the sixteenth (16th) Annual
Period until the termination of this Agreement, Seller shall have and maintain
either: M an operation and maintenance agreement with a third person covering
major maintenance; or (ii) if Seller is performing maintenance of the
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Plant itself, an escrow account sufficient to cover scheduled major Plant
overhauls as recommended by manufacturers of major equipment in the Plant.
11.4 Maintenance Coordination by Buyer. Buyer shall use reasonable efforts
to coordinate with Seller the scheduling of any planned maintenance of Buyer' s
facilities necessary to receive Electricity directly or indirectly from the
Plant and to schedule such maintenance during times when Seller has scheduled
maintenance of the Plant.
ARTICLE 12
QUALIFICATION UNDER FEDERAL LAW
12.1 Initial Certification. Seller shall, within thirty (30) days prior to
commencement of the Initial Delivery Date, and at such other times as requested
by Buyer in writing, certify to Buyer, and, if requested by Buyer, deliver to
Buyer evidence satisfactory to Buyer, as to whether the Plant is a Qualifying
Facility.
12.2 Subsequent Notification. Seller shall notify Buyer in writing, within
ten (10) days after Seller receives information or becomes aware, that the Plant
has temporarily or permanently ceased, or will cease, to be a Qualifying
Facility. Buyer may request such additional information, and request, after
reasonable notice, reasonable access to the Plant, to the extent
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necessary to satisfy Buyer that the Plant continues to be a Qualifying Facility.
12.3 Loss of Qualifying Status.
(A) Notwithstanding the provisions of Article 4, in the event that,
during the term of this Agreement, the Plant temporarily or permanently ceases
to be a Qualifying Facility, then the rates to be paid to Seller for Electricity
shall be equal to ninety percent (90%) of the rate that would otherwise be
applicable pursuant to Article 4.
(B) As soon as practical after the Plant ceases to be a Qualifying
Facility, Seller agrees, if required under federal law, to file with the Federal
Energy Regulatory Commission ("FERC") the rate provided for herein; provided,
however, that if FERC approves or authorizes a rate other than the rate provided
for herein, the Parties agree to request FERC to apply such rate prospectively
from the date of its decision and to apply the rate provided for herein prior to
such date. Seller may terminate this Agreement without any further obligation or
liability of one Party to the other Party except as provided in Article 5.1 and
Article 12.3(C) if, as a result of ceasing to be a Qualifying Facility,
continued performance under this Agreement would result in Seller, or any person
having an ownership interest in Seller, becoming subject to regulation under the
Public Utility Holding Company Act of 1935 ("PUHCA"). Seller will use best
efforts to avoid being subject to regulation under PUHCA.
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(C) (1) Prior to making any sales of electric energy and capacity from
the Plant committed to Buyer under this Agreement subsequent to a termination
under Article 12.3(B), Buyer shall have the right of first refusal to purchase
the Electricity under the terms of this Agreement for the remainder of the Base
Term, except if such purchase would result in Seller, or any person having an
ownership interest in Seller, becoming subject to regulation under PUHCA. If
Seller makes sales of electric energy and capacity from the Plant that would
have been otherwise committed to Buyer under this Agreement to any person other
than Buyer subsequent to a termination under Article 12.3(B), Seller shall pay
to Buyer as Buyer's sole measure of damages the difference between the revenues
Seller would have received pursuant to Article 4 (notwithstanding anything in
Article 12.3(A) and (B) to the contrary) and any higher amount of revenues
Seller receives as a result of such sales during the remainder of the Base Term.
(2) Subsequent to a termination under Article 12.3(B), Seller
shall have the right until the end of the Base Term to reinstate this Agreement
and deliver and sell Electricity to Buyer pursuant to the terms and conditions
of this Agreement, if reinstatement of this Agreement does not materially
adversely affect Buyer. It shall not be deemed to materially adversely affect
Buyer if reinstatement of this
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Agreement is requested within twelve (12) months of a termination under Article
12.3(B).
ARTICLE 13
DEPENDABLE MAXIMUM NET CAPABILITY (DMNC)
13.1 Plant Capability. The DMNC of the Plant available for delivery to
Buyer shall be determined in accordance with this Article 13.1:
(A) As soon as practicable after the Plant goes into Commercial
Operation, and every June thereafter, a capability test shall be conducted
to determine the DMNC of the Plant in accordance with the New York Power
Pool Methods and Procedures 2-10. The DMNC shall be the sustained maximum
net output of the Plant averaged over a four-hour period, adjusted to the
average ambient temperature experienced at the Plant at the time of Buyer's
summer peaks during the previous four summers, less the electric capacity
committed by Seller to its steam customers. If, during the DMNC test, the
Plant's steam sendout to Seller's thermal customer for any hour is less than
the maximum hourly steam sendout committed by Seller to such customer during
the period June I to September 15, and if such reduction of steam sendout
results in a higher DMNC than would have resulted without such reduction,
then the maximum net
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electric output of the Plant for such hour used to calculate the DMNC shall be
reduced to reflect the reduction of steam sendout during such hour.
(B) Notification that Seller intends to perform the test must be given to
Buyer at least forty-eight (48) hours prior to commencement of the test and
shall specify the hours during which the test will be conducted. Buyer shall
have the right to have one or more of its representatives observe such tests.
Within ten (10) days after conducting the capability tests, Seller shall provide
to Buyer the results of such tests, including kWh meter readings and copies of
actual log sheets verifying the net output of the Plant and a curve of the net
output compared to ambient temperature.
(C) Until the first capability test, capacity payments to Seller shall be
based on a DMNC equal to the capacity designated or redesignated under Article
1.20. If the first capability test results in a DMNC of other than such amount,
the prior capacity payments shall be recalculated by substituting the actual
DMNC for the assumed amount. Adjustments in payments shall be made within thirty
(30) days from the capability test.
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(D) Seller shall use its best efforts to conduct the DMNC test during the
month of June, or as soon thereafter as practicable, but in no event shall the
DMNC test be conducted after September 15. Payments to Seller under Article 4
for each twelve-month period beginning June 1 shall be based on the DMNC of the
Plant determined pursuant to the capability test conducted during June 1 to
September 15 of such twelve-month period. If necessary, such payments shall be
based on the DMNC determined during the prior twelve-month period, with
adjustments in payments to be made within thirty (30) days after the DMNC test
is performed for the current period.
(E) Seller shall also conduct an annual winter capability test of the
Plant, between November I and April 15, to determine the sustained maximum net
output of the Plant available for delivery to Buyer, averaged over a four-hour
period, adjusted to the average ambient temperature experienced at the Plant at
the time of Buyer's winter peaks during the previous four winters. Buyer's right
to receive prior notice of such tests, to observe such tests, and to receive the
results of such tests, shall be the same as provided above for the DMNC tests.
However, the results of the annual winter capability tests may be used solely
for informational purposes and shall not be used to
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calculate payments due by Buyer to Seller under this Agreement or for any
purposes for which DMNC is otherwise used under this Agreement.
13.2 Expected Deliveries to Buyer. Not later than May 1 of each Annual
Period, Seller shall provide Buyer with an estimate of the expected average
maximum actual deliveries (expressed in kw) to Buyer during the On-Peak Periods
of the immediately succeeding summer season.
ARTICLE 14
TERMINATION PRIOR TO INITIAL OPERATION
14.1 Events of Termination. Upon the occurrence of any one of the following
events, either Party may terminate this Agreement, upon written notice to the
other Party within sixty (60) days of the occurrence of such event, without any
further obligation or liability of one Party to the other Party, except as
provided in Article 14.2:
(A) Seller's failure, within thirty (30) months after final approval
of this Agreement by the PSC, either to commence material construction of
the Plant or to have executed an enforceable contract for the delivery of
major Plant equipment and/or machinery; provided, however, that Buyer shall
grant Seller up to twelve (12) month-by-month extensions of this deadline
upon W a showing by Seller
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that it is diligently pursuing commencement of construction, and (ii) the
posting by Seller of an additional deposit in the amount of $.10 per kW per
month;
(B) Seller's failure to commence Commercial Operation of the Plant within
sixty (60) months after final approval of this Agreement by the PSC, unless such
failure is due solely to Buyer's failure to complete installation of facilities
necessary to permit actual deliveries of Electricity pursuant to Article 8.4 and
provided, however, that Buyer shall grant Seller up to twelve (12) month-by-
month extensions of this deadline upon M a showing by Seller that it is
diligently pursuing commencement of Commercial Operation and Commercial
Operation can reasonably be expected to commence within seventy-two (72) months
after final approval of this Agreement by the PSC, and (ii) the forfeiture by
Seller of an amount equal to $.10 per kW per month;
(C) Seller's failure to post with Buyer:
(1) an initial deposit of four dollars ($4.00) per kW designated
pursuant to Article 1.20 within six (6) months of the approval of this
Agreement by the PSC;
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(2) an additional deposit of six dollars ($6.00) per kW designated
pursuant to Article 1.20 within one (1) year of the posting of the initial
deposit; and
(3) an additional deposit of five dollars ($5.00) per kW designated
pursuant to Article 1.20 within thirty (30) months after approval of this
Agreement by the PSC.
Such deposits shall be posted either in cash or by an irrevocable letter of
credit, for a term ending not earlier than the milestone date of Commercial
Operation from a financial institution rated at least "AA"; and
(D) in the case of an Indirect Interconnection, Seller's failure to execute
a letter of intent with the Intervening Utility to provide transmission
services within twelve (12) months after Seller notifies Buyer, which
notification shall be within twelve (12) months of final PSC approval of this
Agreement, that a Direct Interconnection will not be used or Seller's failure
to execute a wheeling agreement with the Intervening Utility at least six (6)
months prior to the Date of Initial Commercial Operation.
14.2 Milestone Deposits. Cash deposits specified in Article 14.1 shall be
held by Buyer in escrow and invested in, at Seller's option, either Certificates
of Deposit or U.S. Treasury Bills with terms ending no later than the milestone
date of
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Commercial operation. The deposits, together with interest thereon, will be
refunded by Buyer to Seller upon Commercial Operation. To the extent that
Commercial operation occurs prior to the date a deposit is required as specified
above, Seller shall not be required to make such deposit. Seller will forfeit
deposits posted, but not the interest accrued thereon, in the event this
Agreement is terminated pursuant to the provisions of this Article 14.
ARTICLE 15
BREACH OF CONTRACT, TERMINATION, AND REMEDIES
15.1 Breach. A breach of this Agreement shall be deemed to exist upon the
occurrence of any one or more of the following events:
(A) Failure by either Party to pay any amount due under this Agreement
which continues for a period of thirty (30) days after notice of such non-
payment;
(B) Failure by Seller, during a period of one-hundred twenty (120)
days after the Plant has ceased to operate, to use good faith efforts to
resume actual delivery of Electricity to Buyer pursuant to this Agreement;
(C) Failure by either Party to substantially perform any material
obligation under this Agreement, which failure continues for sixty (60)
days after notice of such
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nonperformance; provided, however, that this Agreement shall not terminate if
such Party diligently commences to cure such failure within such sixty (60) day
period and for so long as such Party diligently continues such efforts;
(D) By order of a court of competent jurisdiction, a receiver or liquidator
or trustee of either Party, or of a substantial part of the assets of either
Party, shall be appointed, and such receiver or liquidator or trustee shall not
have been discharged within a period of sixty (60) days; or by decree of such a
court, a Party shall be adjudicated bankrupt or insolvent or a substantial part
of the assets of such Party shall have been sequestered, and such decree shall
have continued undischarged and unstayed for a period of sixty (60) days after
the entry therof; or a petition to declare bankruptcy or to reorganize a Party
pursuant to any of the provisions of the Federal Bankruptcy Code, as it now
exists or as it may hereafter be amended, or pursuant to any other similar state
statute applicable to such Party, as now or hereafter in effect, shall be filed
against such Party and shall not be dismissed within sixty (60) days after such
filing; or
(E) Either Party shall file a voluntary petition in bankruptcy under any
provision of any federal or state bankruptcy law or shall consent to the filing
of any
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bankruptcy or reorganization petition against it under any similar law;
or, without limitation of the generality of the foregoing, a Party shall
file a petition or answer or consent seeking relief or assisting in
seeking relief in a proceeding under any of the provisions of the
Federal Bankruptcy Code, as it now exists or as it may hereafter be
amended, or pursuant to any other similar state statute applicable to
such Party, as now or hereafter in effect, or an answer admitting the
material allegations of a petition filed against it in such a
proceeding; or a Party shall make an assignment for the benefit of its
creditors; or a Party shall admit in writing its inability to pay its
debts generally as they become due; or a Party shall consent to the
appointment of a receiver or receivers, or trustee or trustees, or
liquidator or liquidators of it or of all or a substantial part of its
assets.
15.2 Termination. If either Party claims that the other Party has
breached this Agreement, as defined in Article 15.1, it shall provide such other
Party with written notice thereof. If, within fifteen (15) days of the service
of such notice, such other Party disputes in writing that a breach by it has
occurred, either Party may bring such dispute to the PSC for resolution
according to the PSC's Rules of Procedure, and this Agreement shall not be
terminated by the Party claiming the breach prior to
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such resolution by the PSC; provided, however, that the Party claiming the
breach may petition the PSC for summary dismissal of the petition to resolve the
dispute on the ground that the dispute is not bona fide.
15.3 Cure by Lender. Buyer shall have no right to terminate this Agreement
unless Buyer has provided any Lender notice of a breach specified above at the
same time as Buyer has provided notice to Seller pursuant to Article 15.2, to
the extent that Seller gives Buyer actual notice of appropriate contact persons
and addresses. Any such Lender shall have the same right to cure such a breach
as Seller, which right shall remain in effect for an additional thirty (30) days
after the last day Seller could have cured such breach. In the case of a breach
due to an event specified in Articles 15.1(D) or 15.1(E), Buyer shall have no
right to terminate this Agreement if Lender has diligently commenced and is
diligently continuing to exercise its remedies under any financing documents.
15.4 Remedies. In the event the Party alleged to be in breach fails to cure
and the dispute has not been brought to the PSC within the time period described
in Article 15.2, or the PSC determines that a breach has occurred and the
breaching Party does not cure such breach within the time period specified
above, or, to the extent it cannot be cured in such time period, the breaching
Party has not diligently commenced to cure such breach
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within such time period, or has commenced such cure but does not diligently
continue such efforts thereafter, this Agreement may be terminated by the non-
breaching Party. Upon such termination, the non-breaching Party shall be
entitled to such damages as are available at law and equity, except that neither
Party shall be liable for any punitive, special or consequential damages by
reason of a breach of this Agreement.
ARTICLE 16
SPECIFIC PERFORMANCE
Without regard to the requirements or provisions of Article 15 or any other
provision of this Agreement, in addition to any of the rights and/or remedies
referred to in this Agreement, either Party shall have the right to institute an
action against the other Party in any court to obtain specific performance by
such other Party of any of such other Party's obligations under this Agreement.
ARTICLE 17
RIGHT TO OPERATE
If Seller shall permanently cease to operate the Plant prior to the end of
the term of this Agreement, and if operation of the Plant is not assumed by a
Lender, any steam customer of the Plant, or their successors or assigns, Buyer
shall have the right
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to operate the Plant for part or the remainder of the term of this Agreement as
long as Buyer assumes all of Seller's obligations with regard to the Plant,
including any lease or sublease obligations or any obligations to any Lender.
ARTICLE 18
INDEMNIFICATION AND INSURANCE
18.1 Indemnification.
(A) Each Party shall indemnify, save harmless and defend the other,
its trustees, agents, officers, directors and employees, against all claims,
demands, judgments and associated costs and expenses, related to property
damage, bodily injuries or death suffered by third persons resulting from any
act or failure to act by such Party related to this Agreement.
(B) Each Party hereto shall promptly furnish the other Party with
written notification (but in no event later than ten (10) days prior to the time
any response is required by law) after such Party becomes aware of any event or
circumstance which might give rise to such indemnification.
(C) At the indemnified Party's request, the indemnifying Party shall
defend any suit asserting a claim covered by this indemnity and shall pay all
costs and expenses (including reasonable attorney's fees and expenses) that may
be incurred in enforcing this indemnity. The indemnified Party may,
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at its own expense, retain separate counsel and participate in the defense of
any such suit or action. The indemnifying Party shall not compromise or settle a
claim hereunder without the prior written consent of the indemnified Party;
provided, however, that in the event such consent shall be withheld, then the
liability of the indemnifying Party shall be limited to the aggregate of the
amount of the proposed compromise or settlement, the amount of counsel fees and
expenses outstanding at the time such consent shall have been withheld, and the
amount of any outstanding claim against which indemnification applies and which
is not covered by the proposed compromise or settlement (together with all costs
and expenses associated with such outstanding claim). Thereafter, the Party
withholding such consent shall hold harmless and reimburse the indemnifying
Party, upon demand, for the amount of any additional liability, counsel fees and
expenses incurred by the indemnifying Party over and above the amounts described
above after the time such consent shall have been withheld.
(D) To the extent one Party disputes its obligation to indemnify the
other Party, it shall not be considered a breach of this Agreement for such
Party to fail to perform under Article 18.1(C) until such time as such Party is
determined to have the obligation to indemnify under Article 18.1(A).
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18.2 Insurance.
(A) Seller, with respect to the Plant, and Buyer, each at its own cost
and expense, shall maintain and keep in full force and effect:
(1) General comprehensive bodily injury and property damage
insurance of at least five million dollars ($5,000,000) per occurrence for
bodily injury and at least one million dollars ($1,000,000) per occurrence
for property damage for damages resulting from the operations of Buyer or
Seller, as the case may be; and
(2) Statutory workers' compensation insurance and employer's
liability insurance.
(B) Seller shall maintain and keep in full force and effect insurance
against loss or damage to the Plant in amounts not less than the actual full
replacement value of the Plant.
(C) Seller shall cause Buyer to be named as an additional insured on
such insurance policy with regard to comprehensive bodily injury and property
damage insurance for acts and/or omissions that are solely and directly caused
by Seller.
(D) Should either Party not be able to acquire coverage in a manner or
amounts specified at reasonable rates, such Party shall obtain such amount of
coverage as is commercially available.
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(E) Seller shall arrange to have its insurance carriers send Buyer a
copy of all notices affecting Seller's insurance coverages required under this
Article 18.
18.3 Self-Insurance.
(A) Buyer reserves the right to self-insure either all or any portion
of the foregoing coverages.
(B) Upon a showing satisfactory to Buyer that Seller has sufficient
net worth or other assets in place to self-insure for purposes of Article 18.2,
Seller shall have the right to self-insure either all or any portion of the
foregoing coverages so long as there is no material decrease in such net worth
or assets which renders the same insufficient for purposes of self-insurance.
ARTICLE 19
ACCESS AND NONINTERFERENCE
19.1 Access. To the extent Seller owns any facility in which Buyer has
placed its equipment, Seller grants to Buyer (including Buyer's duly authorized
agents and representatives) for the term of this Agreement a right to access
consistent with the terms of any ground lease obligations of Seller, at all
reasonable hours, and, in an emergency immediately upon request, to such
facility to construct, install, operate, maintain, repair, replace, inspect and
remove Buyer's equipment and
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facilities consistent with Buyer's obligations and rights under this Agreement
and Seller shall execute such documents as may be reasonably required to enable
Buyer to record such right of access.
19.2 Noninterference. Each Party agrees that it will not construct any
facilities or structures or engage in any activities that will materially
interfere with the rights granted to the other Party under this Agreement,
subject to the provisions of Article 9 (rearrangement).
ARTICLE 20
FORCE MAJEURE
20.1 Definition. The term "force majeure" as used herein, shall include but
not be limited to acts of God, fires, floods, storms, strikes, labor disputes,
riots, insurrections, acts of war (whether declared or otherwise), acts of
governmental, regulatory, or judicial bodies, or any other causes beyond the
reasonable control of and without the fault or negligence of the Party claiming
force majeure.
20.2 Effect of Force Majeure. If either Party because of force majeure is
rendered wholly or partly unable to perform any of its obligations under this
Agreement, except for the obligation to make payments of money, that Party shall
be excused from whatever performance is affected by the force majeure to the
extent so affected, provided that:
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(A) the non-performing Party, within fourteen (14) days after it becomes
aware or should have become aware that it would be unable to perform, gives the
other Party written notice describing the particulars of the occurrence;
(B) the suspension of performance is of no greater scope and of no longer
duration than is required by the force majeure;
(C) no obligations of either Party which arose before the occurrence
causing the suspension of performance are excused as a result of the occurrence;
and
(D) the non-performing Party endeavors to remedy its inability to perform.
This paragraph (D) shall not require the settlement of any strike, walkout,
lockout or other labor dispute on terms which, in the sole judgment of the Party
involved in the dispute, are contrary to its interest. It is understood and
agreed that the settlement of strikes, walkouts, lockouts or other labor
disputes shall be entirely within the discretion of the Party having the
difficulty.
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ARTICLE 21
ASSIGNMENT OR TRANSFER
21.1 General. Except as otherwise provided in this Article 21, neither this
Agreement nor any rights hereunder may be assigned or transferred, by operation
of law or otherwise, by either Party without the prior written consent of the
other Party.
21.2 Permitted Assignments. Upon thirty (30) days prior written notice to
Buyer, Seller may, without the consent of Buyer, assign this Agreement to a
Lender, to an entity controlling, controlled by, or under common control with
Seller ("Affiliate"), or to a partnership in which Seller or an Affiliate is a
partner, provided that such assignment shall not relieve Seller of its
obligations under this Agreement. Such prior notice to Buyer shall specify the
entity to whom payments under Article 6 are to be made subsequent to the
effective date of the assignment.
21.3 Other Assignments. If Seller has not been notified in writing by Buyer
that Seller is in breach of this Agreement under Article 15, Seller may also
assign this Agreement without the consent of Buyer, subject to the following
conditions. Seller shall provide at least thirty (30) days prior to the
effective date of the proposed assignment an assignment and assumption
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agreement duly executed by the Seller and the assignee providing that the
assignee unconditionally assumes, and agrees to be bound by, all of the terms
and conditions of this Agreement, and whereby the assignee makes certain
additional representations and warranties as appropriate for assignee as
contained in Article 22.1.
21.4 Sale of Plant. If the Plant is sold to any person, this Agreement
shall be assigned to the purchaser in accordance with this Article 21 and the
purchaser shall unconditionally assume Seller's obligations hereunder as a
condition to the effectiveness of the sale. Seller agrees to execute such
documents as may be reasonably required to enable Buyer to record notice that
this Agreement must be assigned to, and assumed by, any purchaser of the Plant
as a condition of transfer of legal title to the Plant.
21.5 Novation. No assignment by Seller, including an assignment permitted
to be made without consent of Buyer, shall result in a novation of this
Agreement unless Buyer consents in writing to such novation.
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ARTICLE 22
REPRESENTATIONS AND WARRANTIES
22.1 Seller's Representations. Seller makes the following representations
and warranties as the basis for the benefits and obligations contained in this
Agreement:
(A) Seller represents that it is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and will
be qualified to do business under the laws of the States of New York and
New Jersey not later than the Initial Delivery Date and has the corporate
power and corporate authority to own its properties, to carry on its
business as now being conducted, to enter into this Agreement and carry out
all obligations on its part to be performed under and pursuant to this
Agreement.
(B) Seller represents and warrants that, to the best of Seller's
knowledge, information and belief available on the Date of Initial
Commercial Operation, Seller will be in compliance with all laws, judicial
and administrative orders, rules and regulations, with respect to the
ownership, lease or possession and operation of the Plant, including the
following: all requirements to obtain and comply with the conditions of any
applicable certificates,
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licenses, permits and governmental approvals, including all applicable
environmental requirements. Seller will use best efforts to maintain the
Plant's Qualifying Facility status throughout the term of this Agreement.
(C) Seller represents and warrants that all corporate, partnership or
other organizational consents and authorizations required for Seller to
execute and deliver this Agreement have been obtained.
22.2 Buyer's Representations. Buyer makes the following representations and
warranties as the basis for the benefits and obligations contained in this
Agreement:
(A) Buyer represents and warrants that it is a corporation duly
organized, validly existing and qualified to do business under the laws of
the State of New York, is in good standing under its certificate of
incorporation and the laws of the State of New York, and has the corporate
power and authority to own its properties, to carry on its electric utility
business as now being conducted, to enter into this Agreement and the
transactions contemplated hereby, and to perform and carry out all
obligations on its part to be performed under and pursuant to this
Agreement. Buyer further warrants that this Agreement shall be binding for
the term hereof on the Buyer and its successors and assigns.
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(B) Buyer represents and warrants that action required on its part to
execute and deliver this Agreement has been completed.
(C) Buyer represents and warrants that all corporate, partnership or other
organizational consents and authorizations required for Buyer to execute and
deliver this Agreement have been obtained.
ARTICLE 23
AMENDMENTS, APPROVAL OF AMENDMENTS
This Agreement shall not be amended unless such amendment is in writing and
signed by the Parties. Any such amendment shall not become effective as to the
Parties or their successors until such amendment is accepted or approved by the
PSC.
ARTICLE 24
MISCELLANEOUS PROVISIONS
24.1 Binding Effect. This Agreement shall inure to the benefit of and shall
be binding upon the Parties and their respective successors and assigns.
24.2 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and
the same instrument.
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24.3 Notices. Where notice is required by this Agreement, all notices,
certificates or other communications hereunder shall be in writing and shall be
deemed given when mailed by United States registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
(A) To Seller:
at 1600 Smith Street
Suite 5000
Houston, TX 77002
Attention: Robert C. McNair
(B) To Buyer:
at 4 Irving Place
New York, New York 10003
Attention: Vice President-Planning
and Inter-Utility Affairs
or to such other and different person or address as may be designated by the
Parties.
24.4 Prior Agreements Superseded. This Agreement shall completely and fully
supersede all other prior understandings or agreements, both written and oral,
between the Parties relating to the subject matter hereof.
24.5 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
24.6 Specific Waiver. Seller hereby waives any right it may have under law
to any minimum payment for Electricity under this Agreement and Buyer hereby
waives any right it may have to
<PAGE>
-62-
refuse, by reason of any maximum price requirement under law, to make payments
for Electricity under this Agreement at the rates specified herein.
24.7 Waiver. No delay or omission in the exercise of any right under this
Agreement shall impair any such right or shall be taken, construed or considered
as a waiver or relinquishment thereof, but any such right may be exercised from
time to time and as often as may be deemed expedient. In the event that any
agreement or covenant herein shall be breached and thereafter waived, such
waiver shall be limited to the particular breach so waived and shall not be
deemed to waive any other breach hereunder.
<PAGE>
-63-
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
executed by their proper officers thereunto duly authorized as of the date
written below.
CONSOLIDATED EDISON COMPANY OF
NEW YORK, INC.
By: /s/ William A. Harkins
------------------------------
Name: William A. Harkins
----------------------------
Title: Vice President
---------------------------
Dated: 4/14/89
---------------------------
COGEN TECHNOLOGIES, INC.
By: /s/ Robert C. McNair
------------------------------
Name: Robert C. McNair
----------------------------
Title: President
---------------------------
Dated: 4/14/89
---------------------------
<PAGE>
EXHIBIT 10.2
FIRST AMENDMENT TO POWER PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO POWER PURCHASE AGREEMENT (the "Amendment"),
made and entered into as of the 17th day of September 1990, by and between
Cogen Technologies Linden Venture, L.P. ("Seller"), and Consolidated Edison
Company of New York, Inc. ("Buyer"), constitutes an amendment to the Power
Purchase Agreement, dated April 14, 1989 (the "Agreement"), between Buyer and
Cogen Technologies, Inc., as assigned to Seller by Cogen Technologies Linden,
Ltd., assignee of Cogen Technologies, Inc.
W I T N E S S E T H :
WHEREAS, Buyer and Cogen Technologies, Inc. previously entered into the
Agreement for the purchase by Buyer of the capacity and energy to be produced by
a gas-fired cogeneration plant and appurtenant facilities to be constructed in
Linden, New Jersey (the "Plant");
WHEREAS, Cogen Technologies, Inc. assigned all of its rights, titles
and interest in, to and under the Agreement to Cogen Technologies Linden, Ltd.
and Cogen Technologies Linden, Ltd. assumed all of the liabilities and
obligations of Cogen Technologies, Inc. under the Agreement, which assignment
and assumption became effective, with Buyer's consent, August 3, 1989;
<PAGE>
WHEREAS, Cogen Technologies Linden, Ltd. assigned all of its rights,
titles and interests in, to and under the Agreement to Seller and Seller assumed
all of the liabilities and obligations of Cogen Technologies Linden, Ltd. under
the Agreement, which assignment and assumption became effective, with Buyer's
consent, December 22, 1989;
WHEREAS, the effectiveness of the Agreement was made subject to the
approval of the Agreement by the New York Public Service Commission (the "PSC")
and its authorization for the recovery by Buyer from its ratepayers of all
payments made by Buyer under the Agreement through Buyer's fuel adjustment
clause;
WHEREAS, by Letter-Order dated and effective September 12, 1989 (the
"Order"), the PSC approved the Agreement for the recovery by Buyer from its
ratepayers of all direct purchase costs incurred by Buyer pursuant to the
Agreement through Buyer's fuel adjustment clause subject to certain
modifications to the Agreement and other conditions as set forth in the order;
and
WHEREAS, pursuant to the terms of Article 2.3 of the Agreement which,
in pertinent part, provides that the Agreement shall become effective only upon
the written agreement of the parties to accept all conditions imposed by the PSC
upon its authorization of full recovery by Buyer, through its fuel
2
<PAGE>
adjustment clause, of payments made by Buyer to Seller under the Agreement,
Buyer and Seller desire to amend the Agreement to incorporate therein all of the
changes and conditions set forth in the PSC's Order;
NOW, THEREFORE, in consideration of the foregoing and the promises and
covenants hereinafter set forth, Buyer and Seller agree to amend the Agreement
as follows:
FIRST. Subject to approval or acceptance by the PSC of this Amendment,
the parties hereby accept the conditions imposed by the PSC upon its
authorization of full recovery by Buyer, through its fuel adjustment clause, of
payments made by Buyer to Seller under the Agreement, as set forth in the PSC's
September 12, 1989 Order.
SECOND. Article 5.1 is deleted in its entirety and replaced with the
following:
"5.1 Letter of Credit.
(A) On or before July 1 following the Date of Initial Commercial
Operation, and on or before July 1 in each year thereafter, Seller
shall provide Buyer with security in the form of an irrevocable letter
of credit in an amount equal to the lesser of (1) the amount set forth
in Appendix C for the year preceding the year in which the security is
3
<PAGE>
posted (based on the year in which the Date of Initial Commercial
Operation occurs), or (2) the excess, as of December 31 of the
preceding year, of the Present Worth of payments due by Buyer to Seller
for Deliveries and curtailed kWh subject to pricing under Article 4.5
over the Present Worth of LRAC, plus cumulative interest accruing at an
annual rate of eleven percent (11%) from the Date of Initial Commercial
Operation on the outstanding balance of any such excess. The amounts
set forth in Appendix C shall not be subject to escalation or
subsequent adjustment. Upon termination of this Agreement prior to its
expiration by reason of Seller's breach of this Agreement or Seller's
termination under Article 12.3(B), Buyer shall have the right to retain
the amounts secured by the letter of credit only to the extent that the
Present Worth of payments by Buyer to Seller for Deliveries and
curtailed kWh subject to pricing under Article 4.5 is greater, as of
the date of termination, than the Present Worth of LRAC as of such
date,
4
<PAGE>
plus cumulative interest accruing at an annual rate of eleven percent
(11%) from the Date of Initial Commercial Operation to the date of
termination on the outstanding balance of any such excess.
(B) For purposes of Article 5.1(A):
(1) The term "LRAC" means the Buyer's long run avoided costs
of energy and capacity at the time of any Deliveries or curtailment
periods subject to pricing under Article 4.5 calculated using:
(a) Buyer's avoided capacity cost projections for On-
Peak Periods as shown in Appendix B; and
(b) Buyer's actual avoided energy costs for the On-Peak
Periods and Off-Peak Periods, based upon a tariff then in effect
designed to reflect the then current avoided energy costs or PSC-
approved data reflecting the then current avoided energy costs if such
data is more current than the tariff or if the tariff is not in effect.
(2) The term "Present Worth" means the cumulative present
worth as calculated to
5
<PAGE>
the Date of Initial Commercial Operation using an eleven percent (11%)
discount rate.
(3) The term "Present Worth of LRAC" means the cumulative
present worth of LRAC as calculated to the Date of Initial Commercial
operation using an eleven percent (11%) discount rate based upon
Deliveries and curtailed.kWh subject to pricing under Article 4.5 and
reflecting the difference between avoided cost rates for On-Peak
Periods and Off-Peak Periods."
THIRD. The first sentence of Article 14.1 of the Agreement is deleted
and replaced with the following sentence: "Upon the occurrence of any one of the
following events, Buyer may terminate this Agreement, upon written notice to
Seller within sixty (60) days of the occurrence of such event, without any
further obligation or liability of one party to the other, except as provided in
Article 14.2:"
FOURTH. Appendix C of the Agreement is deleted in its entirety and
replaced with Attachment A to this Amendment.
FIFTH. Seller shall, at least 30 days prior to the Initial Delivery
Date, certify to Buyer that Seller has, in full
6
<PAGE>
satisfaction of the condition imposed by the PSC upon its approval of the
Agreement, filed with the PSC all appropriate environmental permits.
SIXTH. All terms and conditions of the Agreement not expressly amended
herein shall remain in full force and effect.
SEVENTH. Buyer and Seller acknowledge that this Amendment is subject
to approval or acceptance by the PSC. Upon execution of this Amendment, Buyer
shall promptly submit this Amendment to the PSC for approval or acceptance. If
the PSC, in approving or accepting this Amendment, requires any change to this
Amendment and/or imposes any condition upon such approval or acceptance, either
party may petition the PSC for rehearing of such requirement and/or condition.
If neither party petitions the PSC for rehearing within thirty (30) days, or
upon a final PSC determination of a petition for rehearing, the parties shall
promptly execute an amendment to this Amendment evidencing their acceptance of
any change and/or condition imposed by the PSC and Buyer shall, if necessary,
resubmit this Amendment, as so amended, to the PSC for approval or acceptance.
7
<PAGE>
IN WITNESS WHEREOF the Buyer and Seller have caused this Amendment be
executed by their proper officers thereunto duly authorized as of the date first
written above.
CONSOLIDATED EDISON COMPANY COGEN TECHNOLOGIES LINDEN
OF NEW YORK, INC. VENTURE, L.P.
By: Cogen Technologies Linden
Ltd., its General Partner
By: Cogen Technologies, Inc.,
its General Partner
By: /s/ William A. Harkins By: /s/ Robert C. McNair
-------------------------- --------------------------------
Name: William A. Harkins Name: Robert C. McNair
Title: Vice President Title: President
8
<PAGE>
EXHIBIT 10.3
SECOND AMENDMENT TO POWER PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO POWER PURCHASE AGREEMENT (the "Second
Amendment"), made and entered into as of the 22nd day of December, 1993, by and
between Cogen Technologies Linden Venture, L.P. ("Seller"), and Consolidated
Edison Company of New York, Inc. ("Buyer"), constitutes an amendment to the
Power Purchase Agreement, dated April 14, 1989, between Buyer and Cogen
Technologies, Inc., as assigned to Seller by Cogen Technologies Linden, Ltd.,
assignee of Cogen Technologies, Inc., as amended by the First Amendment to Power
Purchase Agreement between Buyer and Seller, dated September 17, 1990 (the Power
Purchase Agreement and the First Amendment to Power Purchase Agreement referred
to herein together as the "Agreement").
W I T N E S S E T H :
WHEREAS, Buyer and Seller previously entered into the Agreement for
the purchase by Buyer of the capacityand energy to be produced by a gas-fired
cogeneration plant and appurtenant facilities to be constructed in Linden, New
Jersey (the "Plant");
WHEREAS, the "Date of Initial Commercial operation" of the Plant (as
such term is defined in Article 1.4 of the Agreement) occurred on May 1, 1992;
WHEREAS, since the Date of Initial Commercial Operation certain
matters not adequately addressed by the Agreement have arisen which Buyer and
Seller desire to address in the form of an amendment to the Agreement;
WHEREAS, Seller is willing to add greater flexibility to the schedule
pursuant to which the Plant may be dispatched by
1
<PAGE>
Buyer in exchange for Buyer's waiver of any rights Buyer may have under either
Federal or State law to refuse to accept "Electricity" (as defined in Article
1.8 of the Agreement) from Seller; and
WHEREAS, Buyer and Seller desire to amend the Agreement in order to
provide greater certainty with regard to their respective rights and obligations
thereunder.
NOW, THEREFORE, in consideration of the foregoing and the promises and
covenants hereinafter set forth, Buyer and Seller agree to amend the Agreement
as follows:
FIRST. The Table of Contents is amended by deleting "8.6 Annual
Reimbursement" therefrom, by inserting "11.5 Voltage Support" immediately under
"11.4 maintenance Coordination by Buyer", and by inserting "24.8 Service"
immediately under "24.7 Waiver".
SECOND. The following is inserted as Article 1.2(A):
" 1.2(A) The term "Buyer's Interconnection Facilities" means: (i) all real
property interests related to the Dedicated Facilities, and (ii) that portion of
the Dedicated Facilities from the Point of Interconnection to the physical
interconnection of the Direct Interconnection at Buyer's Goethals Substation
other than the real property interests related to the Dedicated Facilities."
THIRD. The following is inserted as Article 1.4(A):
" 1.4(A) The term "Dedicated Facilities" means the additional facilities on
Buyer's side of the Point of Interconnection (including at locations other than
Buyer's Goethals Substation) specifically acquired,
2
<PAGE>
constructed, and/or installed for the receipt of Electricity by Buyer,
including, without limitation, the towers, circuit breakers, transformers,
remotelylocated protection devices, and associated equipment, but not including
any Series Reactors."
FOURTH. Article 1.9 is amended by inserting immediately after "fuel
oil" the following:
", and steam generated by a source external to the Plant"
FIFTH. Article 1.13 is amended by inserting
immediately after "such persons" the following:
"; provided, Buyer shall have received written notice of such person.
Buyer hereby acknowledges that it has received notice that State
Street Bank and Trust Company of Connecticut, National Association (as
"Owner Trustee"), is the "Lender" for purposes of this Agreement,
unless a substitute is designated pursuant to the Recognition
Agreement dated September 20, 1991 among Buyer, Seller, State Street
Bank and Trust Company of Connecticut, National Association (as "Owner
Trustee"), and Union Bank of Switzerland, New York Branch (as
"Agent")"
SIXTH. Article 1.20 is amended by deleting the last three sentences
thereof and by inserting at the end of the first sentence thereof the following:
"The Plant does not include equipment that may be installed at the
Plant site after June 1, 1993 for the purpose of generating electric
power and selling such
3
<PAGE>
power to any party other than Buyer, provided such equipment is
electrically isolated from the Plant except for purposes of receiving
startup or emergency backup power. In addition, the Plant does not
include any facilities, structures, or equipment on Buyer's side of
the Point of Interconnection."
SEVENTH. Article 1.21 is amended by inserting immediately after
"Buyer's transmission system" the following:
"which point is at the legal boundary between the State of New Jersey
and the State of New York, as such boundary now exists or as it may be
redetermined by competent authority"
EIGHTH. The following is inserted as Article 1.24:
" 1.24 The term "Series Reactors" means reactors installed at Buyer's
Gowanus Substation designed to have the capability to reduce short
circuit duties on Buyer's transmission system imposed, in part, by the
Plant, which, but for the Agreement, Buyer would not have installed."
NINTH. Article 2.1 is amended by inserting immediately after
"applicable after such date" the following:
", provided, however, that Seller's option under Article 8.3(E), and
Buyer's obligations related thereto, shall survive the expiration of
this Agreement"
TENTH. Article 3.2(B) is deleted in its entirety and the following is
inserted in lieu thereof:
4
<PAGE>
" (B) Buyer's obligation to accept Electricity from Seller shall
be suspended pursuant to Article 10 of this Agreement (relating to
suspension).
(C) Buyer hereby waives any rights it may have now or hereafter
under either Federal or State law, pursuant to 18 C.F.R. (S)
292.304(f), its successor, or otherwise, whether established by the
PSC in Case 88-E-081, Case 92-E-0814, or otherwise, to refuse to
accept and pay for Electricity from Seller except as specifically
provided under this Agreement."
ELEVENTH. Article 3.3 is amended by inserting at the end thereof the
following:
"Title to Electricity sold to Buyer, and any risk of loss of such
Electricity, shall pass from Seller to Buyer at the Point of
Interconnection. Measurement of Electricity delivered under this
Agreement shall be pursuant to Article 7.1."
TWELFTH. Article 4.1(B) is amended by inserting
": (i)" immediately after "means" in the first line thereof, and
inserting immediately after "Plant in such month" in the last
line thereof the following:
"; and (ii) the Steam Component"
THIRTEENTH. Article 4.1(E) and Article 4.1(F) are redesignated as
Article 4.1(G) and Article 4.1(H) respectively. The following is added as
Article 4.1(E) and Article 4.1(F):
(E) The term "Incremental 0 & M Component" for an Annual
Period means an amount equal to one hundred and eighty thousand
dollars ($180,000) for
5
<PAGE>
the Annual Period commencing on May 1, 1993, which amount shall
be multiplied each Annual Period thereafter by a fraction, the
numerator of which is the then latest CPI available at the end of
the prior Annual Period, and the denominator of which is the CPI
for April, 1993.
(F) The term "Steam Component" for a month means:
(1) an amount equal to the average cost per British
thermal unit ("Btu") of all Fuel consumed by the Plant in
such month, exclusive of steam generated by a source
external to the Plant; times
(2) the total Btu's contained in all steam generated
by a source external to the Plant and delivered to the
Plant during such month, net of the Btu content of
demineralized water feed to the Plant attributable for the
same mass flow rate."
FOURTEENTH. Article 4.3(B)(2) is amended by inserting
at the end thereof the following:
"Seller shall receive a credit of 240,000 kWh for each
and every time that Buyer requests that Seller curtail
actual deliveries pursuant to Article 11.2(B)(3)(a)
within such twelve-month period, such that such
240,000 kWh shall be considered Delivered for purposes
of Article 4.3(A)(1) in such month so as to result in
additional payments to Seller during such month
attributable to the Fixed Component up to the
6
<PAGE>
limitation-provided in Article 4.3(B)(1); provided, however,
that Buyer's curtailment pursuant to Article 11.2(B)(3)(a)
during the months of October through May shall not be credited
for the months June, July, August, or September."
FIFTEENTH. Article 4.3(B)(4) is amended by inserting
at the end thereof the following:
"Seller shall receive a credit of 240,000 kWh for each
and every time that Buyer requests that Seller curtail
actual deliveries pursuant to Article 11.2(B)(3)(a)
within such twelve-month period, such that such
240,000 kWh shall be considered Delivered for purposes
of Article 4.3(A)(3) in such month so as to result in
additional payments to Seller during such month
attributable to the 0 & M Component up to the
limitation provided in Article 4.3(B)(3); provided,
however, that Buyer's curtailment pursuant to
Article 11.2(B)(3)(a) during the months of October
through May shall not be credited for the months June,
July, August, or September."
SIXTEENTH. Article 4.3(C)(1)(a) is amended by deleting "Article
11.2(D)" therefrom and inserting in lieu thereof "Article 11.2(E)".
7
<PAGE>
SEVENTEENTH. The following is inserted as Article 4.3(D):
" (D) Commencing on May 1, 1993 and each Annual Period thereafter,
Buyer shall pay Seller the Incremental 0 & M Component. The initial
payment of the Incremental 0 & M Component shall be due on or before
July 1, 1993, and the payment of the Incremental 0 & M Component for
each Annual Period thereafter shall be due on or before the twentieth
(20th) day of the first month of each such Annual Period. Buyer's
obligation to pay Seller the Incremental 0 & M Component shall
terminate in the event Buyer provides Seller with written notice, at
least thirty (30) days prior to the commencement of the following
Annual Period, that Buyer waives its rights of curtailment under
Article 11.2(B)(3)(a) beginning with the commencement of such
following Annual Period; provided, however, that Buyer may withdraw
such waiver upon written notice to Seller, at least twelve (12) months
prior to the commencement of any Annual Period, that Buyer reassumes
the obligation to pay Seller the Incremental 0 & M Component beginning
with the commencement of such Annual Period."
EIGHTEENTH. Article 4.5 is amended by deleting the last sentence
thereof and inserting in lieu thereof the following:
"Seller's capacity shall be deemed unavailable for delivery if Buyer's
Interconnection Facilities necessary to deliver Electricity to Buyer
are
8
<PAGE>
unavailable, except if such unavailability is due to Buyer's failure
to diligently perform its obligations under this Agreement."
NINETEENTH. Article 6.1 is amended by inserting "(A)" immediately
prior to "Buyer shall pay" in the first line thereof, and by inserting the
following as Article 6.1(B):
" (B) (1) Buyer shall have the right to off set against any payment
owed by Buyer under this Article 6 the following expenses:
(a) annual expenses related to the operation and
maintenance of the Dedicated Facilities (other than Buyer's
Interconnection Facilities) at the rate specified in Buyer's
applicable tariff; provided, that in no event shall Buyer be
entitled in any Annual Period to off-set amounts described in
this Article 6.1(B)(1)(a) greater than nine percent (9%) of the
capital costs incurred for the construction of the Dedicated
Facilities (exclusive of Buyer's Interconnection Facilities) as
such capital costs are determined for New York City real property
tax purposes for each tax year beginning in July of such Annual
Period. The Parties acknowledge that, as of December 1, 1993, the
total capital costs incurred for the construction of the
Dedicated Facilities subject to this Article 6.1(B)(1)(a) is
fifteen million
9
<PAGE>
three hundred and twenty-two thousand dollars ($15,322,000).
(b) expenses incurred by Buyer for operation and maintenance
(including repair or replacement) of Buyer's Interconnection
Facilities, namely:
(i) any labor, material or third party costs
reasonably incurred with respect to Buyer's Interconnection
Facilities, including the performance of Buyer's obligations
under the agreements listed in paragraphs (i) through (iv)
of the Assignment and Conveyance dated December 22, 1993
between Buyer and Seller;
(ii) Buyer's annual comprehensive public liability
insurance costs covering Buyer's Interconnection Facilities;
(iii) annual real property taxes applicable or
assessed against Buyer's Interconnection Facilities, the
term "real property taxes" as used herein meaning all taxes
and assessments levied, assessed, or imposed at any time by
the City of New York, or by any other governmental
authority, upon or against Buyer's Interconnection
Facilities relating to the ownership, use or occupancy of
Buyer's Interconnection Facilities; and
10
<PAGE>
(iv) costs, expenses, losses or liabilities
reasonably incurred related to Buyer's Interconnection
Facilities to which Buyer is subject or which Buyer may
sustain solely by reason of (A) Buyer's performance of its
obligations under this Agreement and under the Assignment
and Conveyance dated December 22, 1993 between Buyer and
Seller, or (B) Buyer's acquisition (free of any mortgage,
mechanic or materialmen liens), ownership, use, or occupancy
of Buyer's Interconnection Facilities related to carrying
out its obligations under this Agreement and under the
Assignment and Conveyance dated December 22, 1993 between
Buyer and Seller (all such costs, expenses, losses or
liabilities herein referred to collectively as "Costs").
Such Costs include Costs arising under, or of complying
with, any environmental laws or regulations including
expenses for response to or remediation of any spill or leak
into the Arthur Kill or other areas, and reasonable
attorneys fees related to such Costs.
(2) Buyer shall have the right to off-set expenses described
in Article 6.1(B)(1)(a), Article 6.1(B)(1)(b)(ii) , and Article 6.1(B)(1)(b)
(iii), plus any taxes or charges payable by Buyer relating to such off-set,
beginning in
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<PAGE>
the month of June in each Annual Period, and the expenses described in Article
6.1(B)(1)(b)(i) and Costs described in Article 6.1(B)(1)(b)(iv), plus any taxes
or charges payable by Buyer relating to such off-set, beginning in the month
following the date such expenses are incurred. At the time of such off-set,
Buyer shall provide Seller with invoices and supporting documentation regarding
any expenses described in Article 6.1(B)(1).
(3) To the extent that the amounts Buyer may off-set under
Article 6.1(B)(1) are in excess of any payment owed by Buyer under this Article
6, Seller shall pay Buyer the amount of such excess, within thirty (30) days of
Seller's receipt of Buyer's invoice and supporting documentation under Article
6.1(B)(2) and Buyer's statement under Article 6.2(A).
(4) To the extent that any Costs described in Article 6.1(B)(1)
(b)(iv) may be incurred by Buyer, as a condition of exercising its right to set-
off such Costs under this Article 6.1(B), Buyer shall:
(a) promptly furnish Seller with reasonably prompt written
notification after Buyer becomes aware of any event or
circumstance which might give rise to the incurrence by Buyer of
any such Costs;
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<PAGE>
(b) permit Seller to participate in the defense of any suit
asserting a claim that would cause Buyer to incur any such
Costs; and
(c) not compromise or settle a claim that would cause it to
incur any such Costs without the prior written consent of
Seller, unless in the reasonable opinion of Buyer such claim may
involve the possibility of imposition of a criminal penalty on
Buyer."
TWENTIETH. Article 7.1 is amended by deleting "Point of
Interconnection" therefrom and inserting in lieu thereof "physical
interconnection of the Direct Interconnection at Buyer's Goethals Substation",
and by deleting the last sentence thereof.
TWENTY-FIRST. Article 7.4 is amended by inserting to the point of
physical interconnection of the Direct Interconnection at Buyer's Goethals
Substation" immediately after "transformation losses" in the second sentence
thereof.
TWENTY-SECOND. Article 8.3(B) is amended by deleting the word "and" at
the end thereof; Article 8.3(C) is deleted in its entirety; and the following is
inserted in lieu thereof:
" (C) reimburse Buyer for the costs and expenses incurred in
connection with the installation of the Dedicated Facilities by
Buyer under Article 8.4(A);
(D) reimburse Buyer for fifty percent (50%) of the costs and
expenses incurred with the purchase and installation of any
Series Reactors
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<PAGE>
installed by Buyer, within thirty (30) days of receipt by Seller
of any invoice indicating that such Series Reactors have been
delivered to Buyer, provided that in no event shall Seller's
liability under this Article 8.3(D) exceed two million dollars
($2,000,000);
(E) have the option, after termination of this Agreement
due to a default by Buyer, or after expiration of the later of
the Base Term or any renewal term under Article 2.2, to utilize
Buyer's Interconnection Facilities for purposes of making
deliveries of electric power to Buyer's transmission system for
an annual fee of ten dollars ($10) plus any costs described in
Article 6.1(B)(1)(b), provided that: (i) Seller provides Buyer
with written notice of its intent to exercise such option at
least ninety (90) days prior to such expiration; (ii) the option
described in this Article 8.3(E) shall not be exercised after
April 30, 2091; (iii) Buyer's ownership interest in Buyer's
Interconnection Facilities shall not in any way interfere with
Seller's use of the Buyer's Interconnection Facilities for
purposes of making deliveries of electric power to Buyer's
transmission system during any period in which Seller has
exercised the option described in this Article 8.3(E); and (iv)
unless requested by Seller and agreed to by the Parties at a
reasonable rate as may be
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<PAGE>
determined by the Parties, Seller's exercise of the option
described in this Article 8.3(E) shall not require Buyer to
purchase or deliver to others Seller's electric power, shall not
require Buyer to operate and maintain the Dedicated Facilities
(other than Buyer's Interconnection Facilities), and shall not
in any way restrict Buyer's use of the Dedicated Facilities
(other than Buyer's Interconnection Facilities) for any purpose;
and
(F) with regard to Buyer's Interconnection Facilities, have
the option to perform the obligations of Buyer under the
agreements listed in paragraphs (i) through (iv) of the
Assignment and Conveyance dated December 22, 1993 between Buyer
and Seller, upon Buyer's failure to perform such obligations
after notice by Seller to Buyer giving Buyer reasonable
opportunity to perform thereunder under the circumstances."
TWENTY-THIRD. Article 8.4 is deleted in its entirety and the following
is inserted in lieu thereof:
" 8.4 Buyer's Responsibility.
(A) Buyer shall design, construct, acquire, install,
operate and maintain (subject to Article 8.3(F)), and own the Dedicated
Facilities. All Dedicated Facilities shall remain the property of Buyer.
Buyer shall provide Seller with adequate access to Buyer's
Interconnection Facilities in the event Seller exercises its option
pursuant to Article 8.3(F). The Parties shall cooperate with each other
regarding
15
<PAGE>
the coordination of the operation and maintenance of Buyer's
Interconnection Facilities with the operation and maintenance activities
of Seller with regard to the electrical interconnection facilities from
the Plant to the Point of Interconnection. The Parties agree to enter
into coordination procedures as soon as practicable after January 1,
1994.
(B) Buyer's ownership interest in Buyer's Interconnection
Facilities shall not in any way interfere with Seller's Deliveries of
Electricity from the Plant to Buyer. Without the prior written consent
of Seller, Buyer shall not utilize Buyer's Interconnection Facilities
for any purpose other than for activities related to this Agreement. If
Buyer, or anyone acting by, through, or under Buyer, utilizes Buyer's
Interconnection Facilities for any purpose other than for activities
related to this Agreement, Buyer shall pay Seller an amount which shall
reflect the value of such use or uses, and any costs described in
Article 6.1(B)(1)(b) related to the Buyer's Interconnection Facilities
shall be immediately reduced, on an equitable basis reflecting such
other use or uses, and any dispute between the Parties regarding such
payment or reduction shall be subject to arbitration by the PSC in
accordance with procedures similar to those set forth in 16 NYCRR Part
12.
(C) Buyer shall keep and maintain comprehensive public liability
insurance covering Buyer's Interconnection Facilities consistent with
the
16
<PAGE>
insurance coverages Buyer otherwise maintains for such type of property.
Such insurance shall be included in Buyer's program of annual insurance
coverage and the costs shall be pro-rated to Buyer's Interconnection
Facilities. Buyer shall provide Seller with sufficient information
regarding the basis for such proration. Upon Seller's request, Buyer
shall obtain additional insurance coverage for Buyer's interconnection
Facilities with Seller named as an additional insured on any such
policy, provided that Seller reimburses Buyer for any such additional
coverage."
TWENTY-FOURTH. Article 8.5 is amended by deleting "such facilities"
in the second line thereof and inserting "of the Dedicated Facilities" in lieu
thereof.
TWENTY-FIFTH. Article 8.6 is deleted in its entirety.
TWENTY-SIXTH. Article 9.2 is amended by deleting "at the price set
for such purchase in accordance with the PSC's final determination in Case 29318
or, if not set," therefrom.
TWENTY-SEVENTH. Article 11.2(B)(3) is deleted in its entirety and the
following is inserted in lieu thereof:
" (3) by giving Seller at least: (a) twelve (12) hours prior notice,
that Seller curtail actual deliveries for an eight (8) hour period
which falls within 10:00 p.m. and 8:00 a.m. (Eastern Time) of any
Weeknight Period down to an output level of 150 MW below eighty-
two
17
<PAGE>
percent (82%) of the DMNC, provided that Buyer may not request
such curtailment more than one hundred (100) times during any
Annual Period, provided further that Buyer shall use its best
efforts to schedule such curtailment for any week by noon
(Eastern Time) on the Sunday of such week, and
(b) twenty-four (24) hours prior notice, during
the last ten (10) Annual Periods of the Base Term, that Seller
curtail actual deliveries down to an output level not less than
forty-seven percent (47%) of the DMNC, provided that Buyer may
not exceed in any such Annual Period a ratio of one (1)
curtailment request under this Article 11.2(B)(3)(b) for each
fifty (50) hours of Plant operation not subject to a request
under this Article 11.2(B)(3)(b)."
TWENTY-EIGHTH. Article 11.2(C) is deleted in its entirety. Article
11.2(D), Article 11.2(E), and Article 11.2(F) are redesignated as Article
11.2(E), Article 11.2(F), and Article 11.2(G), respectively. The following is
inserted as Article 11.2(C) and Article 11.2(D):
" (C) Beginning on October 1, 1993, during any period in which:
(1) Buyer has otherwise requested that Seller curtail
actual deliveries pursuant to Article 11.2(B)(2), and
18
<PAGE>
(2) when the outdoor temperature at the Plant is at or
below 25 degrees Fahrenheit, Seller may increase its actual
deliveries to Buyer up to an output level not more than 150 MW
below eighty-two percent (82%) of the DMNC.
(D) For purposes of Article 11.2(B):
(1) the term "Weeknight Period" means any Off-Peak
Period commencing on any Monday, Tuesday, Wednesday, or Thursday
that does not fall within any weekend Period;
(2) the term "Weekend Period" means the period from
10:00 p.m. Friday through 8:00 a.m. the following Monday
(Eastern Time), including: (a) any Holiday occurring on either a
Friday or Monday, such that any Holiday occurring on a Friday
shall cause the Weekend Period to commence at 10:00 p.m.
(Eastern Time) on the Thursday immediately preceding such
Holiday, and any Holiday occurring on a Monday shall cause the
Weekend Period to end at 8:00 a.m. (Eastern Time) on the Tuesday
immediately following such Holiday; and (b) the Holidays of New
Year's Day, Independence Day, Thanksgiving, and Christmas when
such Holidays occur on either a Thursday or a Tuesday, and shall
include the Monday immediately preceding such Holiday (in the
case where such Holiday occurs on a Tuesday), or the Friday
immediately following such Holiday (in the case where such
Holiday occurs on a Thursday), such
19
<PAGE>
that any such Holiday occurring on a Thursday shall cause the
weekend Period to commence at 10:00 p.m. (Eastern Time) on the
Wednesday immediately preceding such Holiday, and any such
Holiday occurring on a Tuesday shall cause the Weekend Period
to end at 8:00 a.m. (Eastern Time) on the Wednesday immediately
following such Holiday; and
(3) the term "Holiday" means any of the following days
as are officially observed in the State of New York: (i) New
Year's Day, (ii) Martin Luther King, Jr.'s Birthday, (iii)
President's Day, (iv) Memorial Day, (v) Independence Day, (vi)
Labor Day, (vii) Columbus Day, (viii) Veteran's Day, (ix)
Thanksgiving, and (x) Christmas."
TWENTY-NINTH. The following is inserted as Article 11.5:
" 11.5 Voltage Support. Seller shall provide
voltage support to Buyer's electric system at the Point
of Interconnection, to be measured at Buyer's Goethals
Substation, as shall be requested by Buyer from time to
time, to the extent of 0.90 lagging to 0.96 leading,
and shall use best efforts to provide such voltage
support to the extent of 0.85 lagging to 0.95 leading,
which best efforts shall not require Seller to incur
any additional expense or revenue loss. Seller will
conduct further study of the physical ability and
associated cost of providing additional voltage support
20
<PAGE>
to Buyer's electric system at the Point of Interconnection,
to be measured at Buyer's Goethals Substation, to the extent
of 0.85 lagging to 0.85 leading, and will report to Buyer with
the results of such study upon Seller's completion and
review of such study. Seller shall not be obligated hereunder
to take any action based upon the results of such study."
THIRTIETH. Article 13.1(A) is deleted in its entirety and the
following is inserted in lieu thereof:
" (A) Recognizing that the DMNC for the first Annual Period has been
determined to be 637.7 MW, Buyer received a credit of one million
three hundred and fifty thousand dollars ($1,350,000) against
amounts of Electricity purchased from the Plant during the first
Annual Period. Beginning with the second Annual Period, AND for
every Annual Period thereafter, the DMNC shall be determined as
follows:
(1) At such times as are specified in Article 13.1(D),
a capability test shall be conducted to determine the DMNC of
the Plant in accordance with the applicable procedures of the
then-current New York Power Pool's "Uniform method for Rating
Generating Capability." Such procedures are currently designated
as MP 2-11. The DMNC shall be the sustained maximum net output
of the Plant as metered at Buyer's Goethals Substation averaged
over a four (4) hour period,
21
<PAGE>
adjusted to reflect: (a) the average ambient temperature
experienced at the Plant at the time of Buyer's summer peaks
during the previous four (4) summers, and (b) the four (4) hour
average minimum steam sendout from the Plant to Seller's thermal
customers during the On-Peak Periods for the period June 1
through September 15 in the twelve (12) months for which the
DMNC is being determined, using a conversion rate where for each
50 lbs. of water flowing through the steam turbine and
thereafter being exported as steam, the kW capacity of the steam
turbine will be increased by 1 kW.
(2) The four (4) hour average minimum steam sendout to
Seller's thermal customers during On-Peak Periods for the period
of June 1 through September 15 shall be determined by excluding
any hours in which: (i) there is no steam sendout to Seller's
thermal customers; (ii) a purchaser of steam from the Plant
experienced an equipment outage, whether planned or unplanned,
for any reason other than economic considerations, which reduced
by 50,000 lbs./hr. or more the amount of steam from the Plant
that would otherwise have been delivered to Seller's thermal
customers; (iii) the Plant experienced an outage, whether
planned or unplanned, which
22
<PAGE>
reduced by 50,000 lbs./hr. or more the amount of steam from the
Plant that would otherwise have been delivered to Seller's
thermal customers; or (iv) Buyer suspended or curtailed its
purchases of Electricity under the terms and conditions of this
Agreement, which reduced by 50,000 lbs./hr. or more the amount
of steam from the Plant that would otherwise have been delivered
to Seller's thermal customers. Until the actual average steam
sendout is determined for each June 1 to September 15 period,
capacity payments to Seller shall be based on the actual average
steam sendout determined for such period in the prior year. If
the actual average steam sendout as determined at the end of
such period is different from the assumed amount, the DMNC shall
be adjusted to reflect the actual average steam sendout and
appropriate adjustments in payments shall be made within thirty
(30) days of such determination.
(3) Seller shall maintain, for the period of June 1
through September 15, records of steam sendout to Seller's
thermal customers which Seller shall make available to Buyer
for purposes of paragraph (2) above.
(4) in the event the DMNC for any period as determined
in this Article 13.1(A) exceeds 645 MW, then the DMNC for such
period
23
<PAGE>
shall be deemed to be 645 MW for purposes of this Agreement."
THIRTY-FIRST. Article 18.2(A) is amended by inserting immediately
before "Seller" in the first line thereof "Unless expressly provided otherwise
in this Agreement,".
THIRTY-SECOND. Article 22.1(A) is amended by deleting "States of New
York and" therefrom and inserting "State of" in lieu thereof.
THIRTY-THIRD. Article 23 is amended by deleting "not become effective
as to the Parties or their successors until such amendment is accepted or
approved by the PSC" therefrom and inserting in lieu thereof the following:
"require the prior written consent of the Lender pursuant to the
Recognition Agreement dated September 20, 1991 among Buyer, Seller,
State Street Band and Trust Company of Connecticut, National
Association (as "Owner Trustee"), and Union Bank of Switzerland, New
York Branch (as "Agent")"
THIRTY-FOURTH. Article 24.3 is deleted in its entirety and the
following is inserted in lieu thereof:
" (A) To Seller:
at 1600 Smith Street
Suite 5000
Houston, TX 77002
Attention: Robert C. McNair
President and CEO
copy to Cogen Technologies Linden Venture, L.P.
Two Tower Center
20th Floor
East Brunswick, NJ 08816
Attention: Ragan T. Phillips
Vice President
24
<PAGE>
copy to Van Ness, Feldman & Curtis, P.C.
1050 Thomas Jefferson St., N.W.
Seventh Floor
Washington, D.C. 20007
Attention: Ross D. Ain, Esq.
Partner
copy to State Street Bank and Trust Company
750 Main Street
Hartford, Connecticut 06103
Attention: Corporate Trust Department
copy to General Electric Power Funding Corporation
One River Road
Building Two, Room 741
Schenectady, New York 12345
Attention: Vice President - Investments
copy to General Electric Capital Corporation - T&IFC
1600 Summer Street, 6th Floor
Stamford, Connecticut 06927
Attention: Vice President - Energy Project operations
(B) To Buyer:
at 4 Irving Place
New York, New York 10003
Attention: Vice President-Planning
and Inter-Utility Affairs
copy to 4 Irving Place
New York, New York 10003
Attention: Vice President,
System Operations
copy to 4 Irving Place
New York, New York 10003
Attention: Chanoch Lubling, Esq.
Asst. General Counsel"
THIRTY-FIFTH. The following is inserted as Article 24.8:
" 24.8 Service. Seller hereby irrevocably submits to the
jurisdiction of the courts of the State of New York with regard
to any controversy arising out of or relating to this Agreement.
Seller agrees that service of process on Seller in relation to
such jurisdiction
25
<PAGE>
may be made, at the option of Buyer, either by registered
or certified mail addressed to Seller at the address shown
in Article 24.3 or at the address of any office actually
maintained by Seller, or by actual personal delivery to
Seller. Such service shall be deemed to be sufficient when
jurisdiction would not lie because of the lack of a basis
to serve process in the manner otherwise provided by law.
In any case, however, process may be served as stated above
whether or not it may be properly served in a different manner."
THIRTY-SIXTH. Appendix A is deleted in its entirety and Appendix A
hereto is inserted in lieu thereof.
THIRTY-SEVENTH. The Parties acknowledge that Buyer and Seller have
each performed certain obligations set forth in the Agreement and do not, by
this Amendment, wish to raise questions with regard to such performance.
THIRTY-EIGHTH. All terms and conditions of the Agreement not
expressly amended herein shall remain in full force and effect.
THIRTY-NINTH. This Amendment supplements the Agreement, and
supersedes any and all prior understandings between the Parties with regard to
the subject matters herein. The letter agreements between the Parties dated
April 9, 1992 and March 26, 1993 are hereby superseded and do not have any force
and effect.
26
<PAGE>
FORTIETH. All corporate action required for Buyer and Seller to
execute, deliver, and perform their respective obligations under this Amendment
and the Agreement as amended hereby have been completed, and no approval by the
Public Service Commission of the State of New York is required for Buyer to
execute, deliver, and perform its obligations under this Amendment and the
Agreement as amended hereby.
FORTY-FIRST. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF the Buyer and Seller have caused this Second
Amendment to be executed by their proper officers thereunto duly authorized as
of the date first written above.
CONSOLIDATED EDISON COMPANY COGEN TECHNOLOGIES LINDEN
OF NEW YORK, INC. VENTURE, L.P.
By: Cogen Technologies Linden
Ltd., its General Partner
By: Cogen Technologies, Inc.,
its General Partner
By: /s/ William A. Harkins By: /s/ Nadeem Babar
--------------------------- -------------------------------
William A. Harkins Nadeem Babar
Vice President Vice President
27
<PAGE>
EXHIBIT 10.5
AGREEMENT
BETWEEN
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
(d/b/a COGEN TECHNOLOGIES LINDEN VENTURE, LIMITED PARTNERSHIP)
AND
EXXON CORPORATION
FOR THE SALE OF STEAM
AUGUST 1, 1990
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
RECITALS.................................................. 1
ARTICLE 1
DEFINITIONS
1.1 "Affiliate"......................................... 3
1.2 "Agreement"......................................... 3
1.3 "Annual Period"..................................... 3
1.4 "Base Term"......................................... 4
1.5 "Btu"............................................... 4
1.6 "Cogeneration Facility" ............................ 4
1.7 "Commercial Operation".............................. 4
1.8 "Date of Initial Commercial Operation".............. 4
1.9 "Demised Premises".................................. 4
1.10 "Exxon's Complex".................................. 4
1.11 "Exxon's External Steam Requirements".............. 5
1.12 "Exxon's Marketing Terminal"....................... 5
1.13 "Exxon's Property"................................. 5
1.14 "Exxon's Technology Center"........................ 5
1.15 "Financier"........................................ 5
1.16 "Force Majeure".................................... 6
1.17 "Governmental Authorizations"...................... 6
1.18 "Ground Lease"..................................... 7
1.19 "Ground Lease Agreement"........................... 7
1.20 "Improvements Removal Period"...................... 7
1.21 "K lbs."........................................... 7
1.22 "Party"............................................ 7
1.23 "Points of Delivery of Steam"...................... 7
1.24 "psig"............................................. 7
1.25 "Steam"............................................ 7
1.26 "Steam Interconnection Facilities"................. 7
1.27 "Weighted Average Cost of Gas"..................... 8
ARTICLE 2
TERM
2.1 Base Term of Agreement............................. 8
2.2 Renewal of Agreement............................... 8
2.3 Delay in Initial Commercial Operation.............. 9
2.4 Cut-Off Date....................................... 12
</TABLE>
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TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE 3
SALE OF STEAM
3.1 General............................................ 13
3.2 Reduced Deliveries................................. 16
3.3 Routine Scheduling................................. 18
3.4 Quality of Steam................................... 18
3.5 Sales During Testing............................... 19
3.6 Points of Delivery................................. 19
ARTICLE 4
COST OF STEAM
4.1 Monthly Steam Charge............................... 19
4.2 Annual Steam Adjustment............................ 19
4.3 Monthly Initial Steam Commitment Credit............ 20
4.4 Annual Initial Steam Commitment Credit Adjustment.. 20
4.5 Cumulative Adjustments and Credits................. 20
ARTICLE 5
OTHER RIGHTS AND OBLIGATIONS OF PARTIES
5.1 Rights and Obligations of Cogen.................... 21
5.2 Rights and Obligations of Exxon.................... 22
ARTICLE 6
MEASUREMENT AND METERING
6.1 Units of Measurement............................... 23
6.2 Cogen's Measuring Equipment........................ 23
6.3 Exxon's Measuring Equipment........................ 23
6.4 Alternative Means of Measurement................... 24
6.5 Testing and Corrections............................ 24
A. Testing......................................... 24
B. Costs of Testing................................ 25
C. Corrections of measuring Equipment.............. 25
6.6 Maintenance........................................ 26
6.7 Measurement/Notice................................. 26
ARTICLE 7
BILLING AND RECORDS
7.1 Billing............................................ 27
A. Monthly Bill to Exxon............................ 27
B. Annual Adjustments............................... 27
C. Other Adjustments................................ 28
7.2 Payment and Penalties.............................. 28
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TABLE OF CONTENTS
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<S> <C>
A. Payment.......................................... 28
B. Interest......................................... 28
7.3 Disputes........................................... 29
7.4 Records............................................ 29
ARTICLE 8
TAXES.................................................. 30
ARTICLE 9
AUTHORITY
9.1 Authority of Exxon................................. 30
9.2 Authority of Cogen................................. 30
ARTICLE 10
FORCE MAJEURE
10.1 Definition........................................ 31
10.2 Burden of Proof................................... 32
10.3 Condition......................................... 32
10.4 Labor Disputes.................................... 33
10.5 Termination for Force Majeure..................... 33
10.6 Cogen's Right to Temporary Cure................... 33
ARTICLE 11
BREACH OF CONTRACT AND TERMINATION
11.1 Exxon's Right to Terminate........................ 36
11.2 Cogen's Right to Terminate........................ 37
11.3 Automatic Termination............................. 39
11.4 Notice to the Financier, Lenders and Mortgagees... 40
11.5 Effective Date of Termination..................... 42
11.6 Transition........................................ 44
ARTICLE 12
LIABILITY
12.1 Limitation on Liability for Damages............... 45
12.2 Damages........................................... 47
12.3 Specific Performance.............................. 48
ARTICLE 13
NONWAIVER.............................................. 48
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TABLE OF CONTENTS
<TABLE>
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ARTICLE 14
NOTICE AND SERVICE
<S> <C>
14.1 Notice............................................ 49
14.2 Date of Service................................... 49
14.3 Addresses......................................... 50
ARTICLE 15
AMENDMENTS............................................. 50
ARTICLE 16
SUCCESSORS AND ASSIGNS
16.1 Assignment by Exxon............................... 50
16.2 Assignment by Cogen............................... 51
16.3 Continuing obligations............................ 52
16.4 Ground Lease Agreement............................ 52
16.5 Transfers of Part of Exxon's Complex.............. 53
16.6 Selected Transfers................................ 56
16.7 Rights of the Financier and Other Lenders......... 56
16.8 Status Certificates............................... 63
ARTICLE 17
CHOICE OF LAW.......................................... 64
ARTICLE 18
RENEGOTIATION.......................................... 64
ARTICLE 19
CONSENT NOT TO BE UNREASONABLY WITHHELD................ 64
ARTICLE 20
OTHER AGREEMENTS....................................... 65
ARTICLE 21
CAPTIONS............................................... 65
ARTICLE 22
COUNTERPARTS........................................... 65
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<TABLE>
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EXHIBIT A
<S> <C>
PART 1: CALCULATION OF MONTHLY STEAM CHARGE............ 67
PART 2: CALCULATION OF ANNUAL STEAM ADJUSTMENT......... 68
PART 3: CALCULATION OF MONTHLY INITIAL STEAM
COMMITMENT CREDIT.............................. 69
PART 4: CALCULATION OF ANNUAL INITIAL STEAM
COMMITMENT CREDIT ADJUSTMENT................... 70
EXHIBIT B
DESCRIPTION OF POINTS OF DELIVERY OF STEAM............. 73
EXHIBIT C
PRO FORMA MONTHLY INVOICE.............................. 74
EXHIBIT D
EXISTING PROCESS STEAM SOURCES AT EXXON'S COMPLEX...... 80
EXHIBIT E
EXAMPLE OF PRO RATA ALLOCATION OF STEAM................ 82
EXHIBIT F
PORTIONS OF EXXON'S COMPLEX NOT SUBJECT TO PRO RATA
ALLOCATION............................................ 85
EXHIBIT G-1
ASSUMPTION AGREEMENT................................... 86
EXHIBIT G-2
ASSUMPTION AGREEMENT................................... 88
EXHIBIT G-3
ASSUMPTION AGREEMENT................................... 90
EXHIBIT H
CONSENT TO ASSIGNMENT.................................. 93
EXHIBIT I
RECOGNITION AGREEMENT.................................. 97
</TABLE>
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<PAGE>
AGREEMENT
BETWEEN
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
(d/b/a COGEN TECHNOLOGIES LINDEN VENTURE, LIMITED PARTNERSHIP)
AND
EXXON CORPORATION
FOR THE SALE OF STEAM
This AGREEMENT is made and entered into effective August 1, 1990, by and
between Cogen Technologies Linden Venture, L.P., doing business in New Jersey as
Cogen Technologies Linden Venture, Limited Partnership ("Cogen"), a Delaware
limited partnership, and Exxon Corporation ("Exxon"), a New Jersey corporation
(collectively "Parties").
RECITALS
WHEREAS, Cogen Technologies, Inc., has entered into a Power Purchase
Agreement dated April 14, 1989 ("Power Purchase Agreement") with Consolidated
Edison Company of New York, Inc. ("Consolidated Edison"), under which Cogen
Technologies, Inc. proposes to sell to Consolidated Edison electricity from a
cogeneration facility ("Cogeneration Facility") to be located in Linden, New
Jersey. The Power Purchase Agreement was approved by the Public Service
Commission of the State of New York and became effective in September, 1989 and
has been assigned to Cogen. The Cogeneration Facility is contemplated, but not
required, to be a qualifying cogeneration facility as defined in Section 3(18)
of the Federal Power Act and the regulations thereunder. Cogen and Consolidated
Edison contemplate that the Power Purchase Agreement will remain in force for
twenty-five (25) years from the "Date of
<PAGE>
-2-
Initial Commercial Operation" (as defined in Article 1.8 below) and possibly for
two (2) additional five (5) year renewal terms;
WHEREAS, Exxon, operating through its division Exxon Company U.S.A., owns,
operates and maintains its Bayway Refinery and, operating through Exxon Chemical
Americas, a division of Exxon Chemical Company, a division of Exxon, owns,
operates and maintains its Bayway Chemical Plant. The Bayway Refinery and Bayway
Chemical Plant (collectively "Exxon's Complex") are located on "Exxon's
Property" (as defined in Article 1.13 below) in Linden, New Jersey.
Additionally, Exxon owns, operates and maintains its Linden marketing terminal
("Exxon's Marketing Terminal") and a technology center ("Exxon's Technology
Center") in Linden, New Jersey. Exxon's Complex, Exxon's Marketing Terminal, and
Exxon's Technology Center utilize steam for industrial purposes;
WHEREAS, Cogen desires to construct, own, operate, and maintain the
Cogeneration Facility on part of the land on which Exxon's Bayway Refinery is
located and to lease from Exxon the "Demised Premises' (as defined in Article
1.9 below) upon which the Cogeneration Facility will be located. Exxon is
willing to lease the Demised Premises to Cogen and to grant Cogen such easements
and rights-of-way as are reasonably necessary for the construction, operation,
maintenance, repair, replacement, and removal of the Cogeneration Facility and
related improvements in partial consideration of Cogen's contemporaneously
entering into
<PAGE>
-3-
this Agreement for the sale of steam to Exxon from the Cogeneration Facility for
use at Exxon's Complex, Exxon's Marketing Terminal, and Exxon's Technology
Center. The parties to this Agreement and the "Ground Lease Agreement" (as
defined in Article 1.19 below) acknowledge and agree that both such agreements
are interdependent, as provided in both such agreements;
WHEREAS, the Parties desire to set forth in writing their respective rights
and obligations with respect to the matters set forth above;
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
The following terms when used herein shall have the following meanings:
1.1 "Affiliate" means a corporation or other entity that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, another corporation or other entity.
1.2 "Agreement" means this contract, including all exhibits and amendments
thereto that may be made from time to time.
1.3 "Annual Period" means any one of a succession of consecutive twelve
(12) month periods, the first of which shall begin on the Date of Initial
Commercial Operation.
<PAGE>
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1.4 "Base Term" of this Agreement has the meaning set forth in Article
2.1.
1.5 "Btu" means British Thermal Unit.
1.6 "Cogeneration Facility" means the cogeneration facility to be
constructed by Cogen on the Demised Premises. The Cogeneration Facility excludes
the cogeneration unit which might be installed by Exxon on the Demised Premises,
as more fully described in Section 7.1 of the Ground Lease Agreement.
1.7 "Commercial Operation" means the production of electricity by Cogen at
the Cogeneration Facility upon the completion of such testing of the
Cogeneration Facility as Cogen determines is required by prudent electrical
practices, and the supply of Steam at the Points of Delivery of Steam.
1.8 "Date of Initial Commercial Operation" means the first day of the
month which immediately follows the date Cogen designates in writing to
Consolidated Edison as the initial date of Commercial Operation of its
Cogeneration Facility.
1.9 "Demised Premises" means those two parcels of land which total
approximately 12.77 acres on the site of Exxon Company, U.S.A.'s Bayway Refinery
and which are to be leased to Cogen pursuant to the Ground Lease Agreement, as
described more particularly in Article 1 and Exhibit B of the Ground Lease
Agreement.
1.10 "Exxon's Complex" means Exxon Company, U.S.A.'s Bayway Refinery and
Exxon Chemical America's Bayway Chemical Plant, both
<PAGE>
-5-
located at Linden, New Jersey. Exxon's Complex excludes Exxon's Marketing
Terminal and Exxon's Technology Center.
1.11 "Exxon's External Steam Requirements" means the quantity of steam used
by Exxon to operate Exxon's Complex, Exxon's Marketing Terminal, and Exxon's
Technology Center over and above those quantities provided by Exxon's internal
sources identified in Exhibit D.
1.12 "Exxon's Marketing Terminal" means Exxon's Linden marketing terminal
located in Linden, New Jersey.
1.13 "Exxon's Property" means the land upon which Exxon's Complex is
located, as described more particularly in Article 1 and Exhibit A of the Ground
Lease Agreement.
1.14 "Exxon's Technology Center" means Exxon's Linden Technology Center,
located at Linden, New Jersey.
1.15 "Financier" initially means General Electric Power Funding Corporation
(as construction lender or as agent for itself and other construction lenders),
and may also mean any other entity subsequently extending credit to Cogen for
the construction, operation, maintenance, repair, replacement, or removal of the
Cogeneration Facility and other "Improvements" (as defined in Article 1 of the
Ground Lease Agreement), or any entity subsequently providing funds for the
refinancing or taking-out of such loans, and the nominees or designees of any
such entities; provided that, at no time will Exxon be obligated to recognize
more than one such entity as the Financier to whom
<PAGE>
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duties are owed, or rights are granted, under this Agreement and the Ground
Lease Agreement. The Parties anticipate that after General Electric Power
Funding Corporation is the Financier, a specific designated Affiliate of General
Electric Power Funding Corporation will become the Financier and that such
designated Affiliate will also become a limited partner in Cogen. Exxon will
recognize as the Financier for purposes of this Agreement and the Ground Lease
Agreement (i) General Electric Power Funding Corporation, until such time as
General Electric Power Funding Corporation notifies Exxon in writing that such
designated Affiliate should be considered to be the Financier, and (ii)
thereafter, the designated Affiliate, until such time as such designated
Affiliate notifies Exxon in writing that Cogen has the right to designate
another entity as the Financier, and (iii) thereafter, such other entity as
Cogen may designate in writing from time to time. Exxon will not be required to
recognize as the Financier any partner of Cogen other than such designated
Affiliate of General Electric Power Funding Corporation.
1.16 "Force Majeure" has the meaning set forth in Article 10.1.
1.17 "Governmental Authorizations" means any and all licenses, permits,
certificates and other authorizations required by applicable federal, state, or
local law.
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1.18 "Ground Lease" means the creation of a leasehold estate in the Demised
Premises, as set forth in Article 1 of the Ground Lease Agreement.
1.19 "Ground Lease Agreement" means the agreement of even date herewith
between Cogen and Exxon for the lease of the Demised Premises to Cogen,
including all exhibits and amendments thereto that may be made from time to
time.
1.20 "Improvements Removal Period" means that part of the term of the
Ground Lease for the removal of certain "Improvements" (as defined in Article 1
of the Ground Lease Agreement), including the Cogeneration Facility, as set
forth in Article 1 of the Ground Lease Agreement.
1.21 "K lbs." means 1,000 pounds of steam mass.
1.22 "Party" means Cogen or Exxon, as the case may be, and its permitted
successors and assigns.
1.23 "Points of Delivery of Steam" means the points where Cogen's steam
supply system connects to Exxon's steam pipeline at Exxon's existing steam
headers, as indicated on Exhibit B.
1.24 "psig" means pound per square inch gauge.
1.25 "Steam" means steam delivered to Exxon by Cogen, as measured at
Cogen's meters at the Points of Delivery of Steam.
1.26 "Steam Interconnection Facilities" means Cogen's facilities required
for the delivery of Steam to the Points of Delivery of Steam, including service
stop valves, meter stop valves, primary and secondary service pressure reducing
valves,
<PAGE>
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meter supports, protection devices, meters, pipe systems, pipelines, venting,
and other facilities required to connect the Cogeneration Facility to the Points
of Delivery of Steam in order to effectuate the purposes of this Agreement.
1.27 "Weighted Average Cost of Gas" means the average cost of natural gas
of Consolidated Edison and Public Service Electric and Gas Company (or their
successors) based upon volumes of natural gas purchased by such utilities during
the month in question as set forth in Consolidated Edison's Operating and
Financial Report filed monthly with the Public Service Commission of the State
of New York, and as set forth in Public Service Electric and Gas Company's
Commodity Charge Applicable to Cogeneration Interruptible Service filed monthly
with the State of New Jersey Board of Public Utilities.
ARTICLE 2
TERM
2.1 Base Term of Agreement. This Agreement shall be effective August 1,
1990 and will continue until the Date of Initial Commercial Operation and
thereafter for an additional period of twenty-five (25) Annual Periods
(collectively the "Base Term"), unless sooner terminated in accordance with the
terms of this Agreement.
2.2 Renewal of Agreement. This Agreement shall be automatically renewed for
two (2) periods of five (5) additional Annual Periods each, commencing with the
expiration of the Base
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Term pursuant to Article 2.1, unless either Party elects to terminate this
Agreement at the expiration of the Base Term or at the expiration of the first
five (5) year renewal term. Termination by Exxon shall be valid only if Exxon
provides Cogen written notice of its intent to terminate at least five and one-
half (5 1/2) years prior to the expiration of the Base Term or at least five and
one-half (5 1/2) years prior to the expiration of the first five (5) year
renewal term, as the case may be. Termination by Cogen shall be valid only if
Cogen provides Exxon written notice of its intent to terminate at least four (4)
years prior to the expiration of the Base Term or at least four (4) years prior
to the expiration of the first five (5) year renewal term, as the case may be.
2.3 Delay in Initial Commercial Operation.
A. Subject to Article 2.3B, Exxon may terminate this Agreement by
giving Cogen and the Financier identified in Article 11.4 at least thirty (30)
days' prior written notice if Cogen has not commenced Commercial Operation by
July 1, 1993; provided that this date for the commencement of Commercial
Operation shall be extended to January 1, 1994 to the extent that the failure to
commence Commercial Operation is caused by Force Majeure impacting Cogen, and
provided that this date for the commencement of Commercial Operation shall be
extended to January 1, 1998 to the extent that the failure to commence
Commercial Operation is caused by Force Majeure impacting Exxon.
<PAGE>
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If Cogen fails to commence Commercial Operation by the applicable date in the
preceding sentence, Exxon may give its written notice terminating this Agreement
on or after thirty (30) days before such applicable date, and the termination
shall be effective thirty (30) days after Exxon gives such notice, or on such
later date as is given in such notice, subject to Article 2.3B.
B. Cogen, at its option, may prevent Exxon from terminating this
Agreement pursuant to Article 2.3A, and will be in compliance with this
Agreement, by:
(i) supplying Steam from temporary boilers or otherwise to Exxon's
Complex, Exxon's Marketing Terminal, and Exxon's Technology
Center in an amount, quality, and at a cost as provided in
Articles 3 and 4; or
(ii) paying to Exxon the cost of procurement and installation by Exxon
of temporary boilers to supply steam to Exxon's Complex, Exxon's
Marketing Terminal, and Exxon's Technology Center in an amount
and quality as provided in Article 3 and paying Exxon any
difference between the cost to Exxon of generating such steam and
the cost Exxon would have incurred in buying Steam under Articles
3 and 4, provided that this option shall not apply unless Exxon
is reasonably able to procure, install, and operate such
temporary boilers; or
<PAGE>
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(iii) paying to Exxon any difference between Exxon's cost for steam
purchased from Public Service Electric and Gas Company (or its
successor) and the cost Exxon would have incurred in buying Steam
under Articles 3 and 4,
from the applicable date for the commencement of Commercial Operation as
described in Article 2.3A until Cogen commences Commercial Operation, or until
twenty-four (24) months after Cogen gives Exxon written notice that Cogen does
not intend to continue pursuant to subparagraph (i), (ii), or (iii) above. If
Cogen elects to continue the Agreement in force by implementing one of the
alternatives described in subparagraph (i), (ii), or (iii) above, it must give
Exxon at least ninety (90) days' prior written notice to that effect and such
notice must specify which alternative Cogen elects. In the event that Cogen
subsequently gives Exxon such written notice that it does not intend to continue
pursuant to subparagraph (i), (ii), or (iii) above, the termination of this
Agreement pursuant to Article 2.3A shall be effective twenty-four (24) months
after Cogen gives Exxon such written notice.
C. For purposes of determining the cost which Exxon would have
incurred in buying Steam under Articles 3 and 4, the cost of Cogen's fuel for
the Exhibit A calculations shall conclusively be deemed to be the Weighted
Average Cost of Gas. Additionally, the cost which Exxon would have incurred in
buying
<PAGE>
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Steam under Articles 3 and 4 shall include payments or credits to Exxon for the
annual steam adjustment, monthly initial steam commitment credit, and annual
initial steam commitment credit adjustment.
D. If Cogen implements the alternative described in subparagraph (i)
of Article 2.3B and provides Steam to Exxon from temporary boilers or otherwise,
all the provisions of this Agreement shall apply to the provision of such Steam
to Exxon as if such Steam were being provided after the Date of Initial
Commercial Operation.
E. Failure by Cogen to commence Commercial Operation by the
applicable date set forth in Article 2.3A, or implementation by Cogen of one of
the alternatives described in subparagraph (i), (ii), or (iii) of Article 2.3B
and subsequent termination of this Agreement by Cogen on twenty-four (24)
months' prior written notice to Exxon, shall not be considered a breach of this
Agreement by Cogen.
2.4 Cut-Off Date. In no event shall this Agreement extend beyond January 1,
2033, without the written consent of both Parties.
<PAGE>
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ARTICLE 3
SALE OF STEAM
3.1 General.
A. Commencing on the Date of Initial Commercial Operation, Cogen
shall sell and deliver to Exxon Steam at Exxon's Complex, Exxon's Marketing
Terminal, and Exxon's Technology Center up to a maximum rate of 1,000 K lbs. per
hour for the months October through and including May, and up to a maximum rate
of 600 K lbs. per hour for the months June through and including September. This
delivery of Steam shall be uninterrupted. In the event of an upset or other
emergency at Exxon's Complex, Exxon's Marketing Terminal, or Exxon's Technology
Center during the months June through and including September, Cogen shall sell
and deliver to Exxon Steam at Exxon's Complex, Exxon's Marketing Terminal, and
Exxon's Technology Center up to a maximum rate of 1,000 K lbs. per hour for the
duration of such upset or emergency. In addition, if at any time Exxon requests
Steam at Exxon's Complex, Exxon's Marketing Terminal, and Exxon's Technology
Center in excess of 1,000 K lbs. per hour during the months October through and
including may, or in excess of 600 K lbs. per hour during the months June
through and including September, Cogen shall meet such request to the extent
Cogen is able to do so, provided that Cogen is not materially adversely affected
under the Power Purchase Agreement or Cogen's other agreements to sell steam to
other steam users.
<PAGE>
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B. Exxon shall purchase and use from Cogen at least 876,000 K lbs. of
Exxon's External Steam Requirements in each Annual Period. Exxon may at any time
take steam from the sources described in Exhibit D and, subject to Exxon's
obligations set forth in the preceding sentence, from any other source upon
reasonable notice to Cogen.
C. Exxon's External Steam Requirements at Exxon's Complex, Exxon's
Marketing Terminal, and Exxon's Technology Center are presently estimated, but
not guaranteed, to be 4,660,000 K lbs. per Annual Period. Cogen recognizes that
Exxon may reduce, terminate, or change the nature of its operations at Exxon's
Complex, Exxon's Marketing Terminal, or at Exxon's Technology Center and that
Exxon's External Steam Requirements might be reduced below 876,000 K lbs. per
Annual Period or eliminated as a result. However, if Exxon elects to cease all
or substantially all industrial operations in Exxon's Complex (other than
because of Force Majeure) with the results described in Article 11.2E, Cogen may
elect to terminate this Agreement pursuant to Article 11.2E.
D. If Exxon, during the term of this Agreement, decides to make
substantial changes in the nature of its industrial operations in Exxon's
Complex (other than because of Force Majeure) with the probable result that
Exxon's maximum rate of Steam taken from Cogen under Articles 3.1A and 3.1B
would permanently fall below both 700 K lbs. per hour for the months
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October through and including may and 400 K lbs. per hour for the months June
through and including September, Exxon shall give Cogen prompt written notice of
such decision. In that event, if Cogen so requests, Exxon and Cogen shall work
together to revise Cogen's obligations as defined in Article 3.1A, so that Cogen
shall continue to be obligated to provide to Exxon the Steam which Exxon needs
for its changed operations and so that Cogen shall have the opportunity to seek
and obtain other customers for the volume of Exxon's External Steam Requirements
no longer needed by Exxon.
E. If Exxon is impacted by Force Majeure which causes Exxon's External
Steam Requirements from Cogen under this Agreement to fall below 438,000 K lbs.
of Steam for any consecutive six (6) month period (an average of 100 K lbs. Of
Steam per hour on a six (6) month basis), and if Cogen, with Exxon's Steam take
from Cogen in combination with the steam take from Cogen's other steam
customers, would be unable, in Cogen's reasonable judgment, to maintain the
status of the Cogeneration Facility as a "qualifying cogeneration facility" (as
defined in Section 3(18) of the Federal Power Act and the regulations
thereunder) for at least five (5) gas turbines, Cogen, by prompt written notice
to Exxon, may reduce its obligation in Article 3.1A to provide 1,000 K lbs. of
Steam per hour to 800 K lbs. of Steam per hour. The purpose of this reduction in
Cogen's obligation in Article 3.1A would be to give Cogen a
<PAGE>
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reasonable opportunity to maintain the status of the Cogeneration Facility as a
"qualifying cogeneration facility" by obtaining other customers for up to 200 K
lbs. per hour of its steam from October through and including May and, during
upsets or emergencies, from June through and including September. If Cogen's
obligation to sell and deliver Steam to Exxon is reduced as described in this
Article 3.lE, and if subsequently the Force Majeure impacting Exxon abates,
Exxon may request Cogen to reinstate the original rate of 1,000 K lbs. of Steam
per hour under Article 3.1A. Cogen's obligation under this Article 3.1E shall
revert to the original rate of 1,000 K lbs. of Steam per hour under Article 3.1A
twenty-four (24) months following Cogen's receipt of a written notice from Exxon
requesting such reversion, unless the Parties mutually agree upon an earlier
date for such reversion.
3.2 Reduced Deliveries.
A. Should Cogen be unable to deliver and sell the quantity of Steam
required to be delivered and sold to Exxon under Article 3.1A due to a reduction
in the amount of steam being generated by the Cogeneration Facility due to Force
Majeure, Exxon shall have the right to a pro rata allocation of steam being
generated, delivered and sold from the Cogeneration Facility in relation to
Cogen's delivery of steam to American Cyanamid Company ("Cyanamid") pursuant to
an agreement between Cogen and Cyanamid for the sale of steam to be executed at
a
<PAGE>
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future date. Such pro rata allocation shall be based on Exxon's and Cyanamid's
previous twenty-four (24) hours of demand for steam from the Cogeneration
Facility at the time of reduction of the amount of steam being generated and
available for delivery and sale.
B. Should Cogen fail for any reason to deliver to Exxon the Steam
that Cogen is required to deliver to Exxon under Article 3.1, Exxon shall have
the right immediately to obtain, and shall not be deemed in breach of this
Agreement if it obtains, replacement steam from any other source (within or
external to Exxon's Complex) for the duration of Cogen's failure to provide the
Steam. If Cogen does fail for any reason (other than because of Force Majeure)
to deliver to Exxon the Steam that Cogen is required to deliver to Exxon under
this Article 3, and if Exxon obtains replacement steam from any other source,
Cogen shall reimburse Exxon for any difference between Exxon's reasonable cost
for the replacement of such steam and the cost Exxon would have incurred in
buying Steam under Articles 3 and 4. To the extent that Cogen's failure to
deliver Steam is excused by Force Majeure, Cogen shall owe Exxon no money for
any such difference in cost. The cost which Exxon would have incurred in buying
Steam under Articles 3 and 4 shall be calculated as provided in Article 10.6B.
<PAGE>
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3.3 Routine Scheduling. Commencing with the Date of Initial Commercial
Operation, Exxon shall give Cogen its best estimate of its expected requirements
for Steam from the Cogeneration Facility hereunder (including the hourly
delivery rates) in such detail as follows:
A. For each calendar year, at least by December 1 of the preceding
calendar year on a monthly basis; and
B. For each month, at least ten (10) days prior to
the end of the preceding month, on a weekly basis.
Notwithstanding the foregoing, Exxon shall advise Cogen of any significant
changes in its expected requirements for Steam from the Cogeneration Facility as
soon as reasonably practicable.
3.4 Quality of Steam. All Steam shall meet either of the following
specifications: for high pressure level not less than 700 psig nor more than 740
psig at 700 (degrees)-740 (degrees)F, and for low pressure level not less than
130 psig nor more than 150 psig at 440 (degrees)-480 (degrees)F, and for both
the high pressure level and the low pressure level, total dissolved solids and
the oxygen present shall not exceed the amounts recommended by standard
industrial practices for 1500 psig steam systems. At Exxon's option and subject
to the limits of Article 3.1A, Exxon shall specify and Cogen shall deliver to
Exxon the amounts of high pressure and low pressure Steam that Exxon desires;
provided, however, that Cogen shall not be obligated to supply Exxon with more
than 600 K lbs. per hour of Steam at the high pressure level at any time (except
<PAGE>
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to the extent that Cogen is able to provide more than 600 K lbs. per hour at the
high pressure level, Cogen shall do so, provided that Cogen is not materially
adversely affected under the Power Purchase Agreement or Cogen's other
agreements to sell steam to other steam users) or 600 K lbs. per hour of Steam
at the low pressure level at any time (except to the extent that Cogen is able
to provide more than 600 K lbs. per hour at the low pressure level, Cogen shall
do so, provided that Cogen is not materially adversely affected under the Power
Purchase Agreement or Cogen's other agreements to sell steam to other steam
users).
3.5 Sales During Testing. Prior to the Date of Initial commercial
operation, with Exxon's consent, Cogen may sell Steam from the Cogeneration
Facility to Exxon in accordance with mutually acceptable terms.
3.6 Points of Delivery. Cogen shall pay for the installation and
maintenance of all Steam Interconnection Facilities.
ARTICLE 4
COST OF STEAM
4.1 Monthly Steam Charge. Exxon shall pay to Cogen the monthly steam
charge (MS) calculated pursuant to Part 1 of Exhibit A.
4.2 Annual Steam Adjustment. Subject to Article 4.5, Cogen shall calculate
and credit to Exxon the annual steam adjustment (ASA) according to Part 2 of
Exhibit A. This adjustment reflects
<PAGE>
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differences in Steam charges to Exxon when quantities delivered to Exxon are
calculated on an annualized basis versus a monthly basis.
4.3 Monthly Initial Steam Commitment Credit. Subject to Article 4.5, Cogen
shall calculate and credit to Exxon the monthly initial steam commitment credit
(MC) according to Part 3 of Exhibit A. This credit is provided because of
Exxon's commitment to purchase Steam at the initial planning stage of the
development of the Cogeneration Facility and reflects a change from Cogen's
previous plan to provide electricity to Exxon.
4.4 Annual Initial Steam Commitment Credit Adjustment. Subject to Article
4.5, Cogen shall calculate and credit to Exxon the annual initial steam
commitment credit adjustment (ACA) according to Part 4 of Exhibit A. This
adjustment reflects differences in the monthly initial steam commitment credit
when quantities of Steam delivered to Exxon are calculated on an annualized
basis versus a monthly basis.
4.5 Cumulative Adjustments and Credits. The cumulative adjustments and
credits pursuant to Articles 4.2, 4.3 and 4.4 in any Annual Period shall not
exceed the cumulative monthly steam charge under Article 4.1 in any Annual
Period.
<PAGE>
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ARTICLE 5
OTHER RIGHTS AND OBLIGATIONS OF PARTIES
5.1 Rights and Obligations of Cogen. In addition to the rights and
obligations of Cogen specified in Article 3 and Article 4, Cogen shall:
A. Have the right to sell any and all electric power generated at the
Cogeneration Facility in excess of the amounts Cogen is obligated to sell to
Consolidated Edison under the Power Purchase Agreement, to any third person
under such terms and conditions as Cogen, in its sole discretion, determines
to be appropriate.
B. Have the right to sell any and all steam produced at the
Cogeneration Facility that is first offered to but not purchased by Exxon
under Article 3 to any other person on such terms and conditions as Cogen
and such person shall agree, without interference by Exxon, except that such
sale shall not be conducted in such manner as to interfere with Cogen's
provision of Steam under Article 3 or with Exxon's reasonable and normal
operation of Exxon's Complex, Exxon's Marketing Terminal, and Exxon's
Technology Center.
C. Design, construct, operate, and maintain the Cogeneration Facility
to meet reliability and safety standards consistent with steam supply to a
major industrial complex and will work with Exxon so that such reliability
and safety standards are adequately addressed.
<PAGE>
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5.2 Rights and Obligations of Exxon. In addition to the rights and
obligations of Exxon specified in Article 3 and Article 4, Exxon shall:
A. Receive Cogen's delivery of Steam under this Agreement in a manner
consistent with safety standards generally applicable to receipt and use of
steam at a major industrial complex.
B. Be allowed to review and comment on the reliability provisions of
Cogen's design of the Cogeneration Facility, and have the right to review
and approve any "Improvements" (as defined in Article 1 of the Ground Lease
Agreement) installed within any easements granted by Exxon to Cogen under
the Ground Lease Agreement from the perspective of maintenance access,
emergency access and impact on existing or future equipment and improvements
of Exxon, which approval shall not be unreasonably withheld.
C. Have the right to sell and deliver Steam purchased from Cogen to
any person who owns or operates facilities within Exxon's Complex, Exxon's
Marketing Terminal, or Exxon's Technology Center; provided, however, that
Exxon shall first provide Cogen with a declaratory order of the New Jersey
Board of Public Utility Commissioners or other official assurances
satisfactory to Cogen that such sale and delivery would not cause or would
not be likely to cause the Cogeneration Facility to cease to be a
"qualifying
<PAGE>
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cogeneration facility" as defined in Section 3(18) of the Federal
Power Act and the regulations thereunder, and that such sale and
delivery would not result in Cogen, or any person having an ownership
interest in Cogen, or the Cogeneration Facility, or any person
operating the Cogeneration Facility, or any Affiliate of Cogen or any
such persons, becoming subject to or affected by regulation under the
Federal Power Act, the Public Utility Holding Company Act of 1935, or
state laws and regulations respecting the regulation of utilities,
except reporting or safety requirements that are non-burdensome in
nature.
ARTICLE 6
MEASUREMENT AND METERING
6.1 Units of Measurement. For the purposes of this Agreement, Steam shall
be measured in K lbs. of steam mass.
6.2 Cogen's Measuring Equipment. Cogen shall design, install, operate,
maintain, and own all measuring equipment necessary for an accurate
determination of the quantity of Steam. Except as provided in Article 6.4,
Cogen's meters shall be used for quantity measurements under this Agreement.
6.3 Exxon's Measuring Equipment. Exxon may design, install, operate,
maintain, and own, at its sole expense, steam measuring equipment, provided that
Exxon shall not interfere with Cogen's steam supply system or with Cogen's
measuring equipment.
<PAGE>
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6.4 Alternative Means of Measurement. In the event Cogen's measuring
equipment is out of service or registers inaccurately, measurement shall be
determined by:
A. Using the registration of any meter or meters of Exxon, if
installed and accurately registering; or
B. In the absence of an installed and accurately registering meter of
Exxon, making a calibration test or mathematical calculation, if the
percentage of error is ascertainable; or
C. In the absence of both an installed and accurately registering
meter of Exxon and an ascertainable percentage of error, estimating by
reference to quantities measured during periods under similar conditions
when Cogen's meter was registering accurately; or
D. In the absence of an ability to use any of the above methods of
measurement, estimating by reference to Exxon's operating records for
Exxon's Complex, Exxon's Marketing Terminal, and Exxon's Technology Center
for the period in question.
6.5 Testing and Corrections.
A. Testing. The accuracy of Cogen's measuring equipment shall be
tested and verified by Cogen at quarterly intervals in Exxon's presence. The
calibration procedure to be used under this Article 6.5A shall be mutually
agreed to by the Parties prior to the time Cogen first delivers Steam to Exxon.
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In the event that either Party notifies the other that it desires a test of its
own or of the other Party's measuring equipment, the Parties shall cooperate to
secure a prompt verification of the accuracy of such equipment.
B. Costs of Testing. Cogen shall bear the cost of the testing and any
required adjustments of Cogen's measuring equipment done at quarterly intervals.
In the event that Exxon requests a testing of Cogen's measuring equipment at
other than quarterly intervals, Exxon shall bear the cost of the testing unless
such equipment is found to be inaccurate by greater than two percent (2%).
C. Corrections of Measuring Equipment. If, upon testing, any
measuring equipment is found to be inaccurate by less than two percent (2%) at a
flow rate corresponding to the average hourly flow rate for Steam supplied by
Cogen to Exxon for Exxon's Complex, Exxon's Marketing Terminal, and Exxon's
Technology Center for the period since the last preceding test, previous
recordings of such equipment shall be considered accurate in computing
deliveries of Steam hereunder, but such equipment shall be promptly adjusted to
record correctly to the extent possible. If, upon testing, any measuring
equipment shall be found to be inaccurate by greater than two percent. (2%) at a
flow rate corresponding to the average hourly flow rate for Steam supplied by
Cogen to Exxon for Exxon's Complex, Exxon's Marketing Terminal, and Exxon's
Technology Center for the period since the
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last preceding test, then such equipment shall be promptly adjusted to record
properly, to the extent possible, and any previous recordings by such equipment
shall be corrected to zero error, to the extent possible, and Cogen shall
promptly send to Exxon, pursuant to Article 7, billing adjustments based on such
corrected recordings. If no reliable information exists as to when the equipment
became inaccurate, it shall be assumed for correction purposes hereunder that
such inaccuracy began at a point in time midway between the testing date and the
last previous date on which the equipment was tested and found to be accurate or
adjusted to be accurate.
6.6 Maintenance. Each Party shall have the right to be present whenever the
other Party reads, cleans, changes, repairs, inspects, tests, calibrates, or
adjusts its measuring equipment. Each Party shall give timely notice to the
other Party in advance of taking any of such actions.
6.7 Measurement/Notice. Commencing on the first day of the second calendar
month subsequent to the date Cogen first sells Steam to Exxon and thereafter on
the first day of each calendar month during the term of this Agreement, Cogen
shall cause Cogen's measuring equipment to be read, determine the quantities of
Steam delivered to Exxon during the immediately preceding calendar month, and
promptly notify Exxon in writing of such quantities.
<PAGE>
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ARTICLE 7
BILLING AND RECORDS
7.1 Billing.
A. Monthly Bill to Exxon. On or before the tenth (10th) day of each
month, Cogen shall prepare and deliver to Exxon an invoice setting forth the
monthly steam charge and the monthly initial steam commitment credit, as set
forth in Articles 4.1 and 4.3, for the preceding month. Such invoice shall also
set forth the other information called for in Exhibit C and shall be in the form
shown in Exhibit C. If Cogen from time to time does not know its actual cost of
fuel for purposes of Exhibit A calculations for the month in question when Cogen
prepares an invoice pursuant to this Article 7.1A, Cogen may estimate such cost
using all available data. To the extent that an estimate is provided and used
for purposes of determination of Cogen's actual cost of fuel in Exhibit A, Cogen
shall provide Exxon a statement of Cogen's actual cost of fuel as soon as
available to Cogen, and Cogen shall make the appropriate adjustment as well as
any adjustment as a result of Cogen's actual cost of fuel exceeding the cap in
Note 1 to Exhibit A, in the following month's invoice.
B. Annual Adjustments. Within thirty (30) days following the end of
each Annual Period, Cogen shall pr6pare and deliver to Exxon an invoice setting
forth any credits due as a result of the annual steam adjustments as set forth
in
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Article 4.2 and the annual initial steam commitment credit adjustment as set
forth in Article 4.4. Such invoice shall also set forth the other information
called for in Exhibit C and shall be in the form shown in Exhibit C.
C. Other Adjustments. Cogen shall promptly prepare and deliver to
Exxon an invoice setting forth any adjustments for discrepancies in billing
identified through meter verifications pursuant to Article 6.5C, through other
means pursuant to Article 6.4, or for any other reason which would result in
reimbursement of billed amounts to Exxon or additional payments by Exxon to
Cogen.
7.2 Payment and Penalties.
A. Payment. Exxon shall, within fifteen (15) days of the receipt of
Cogen's invoice setting forth-the monthly bill to Exxon pursuant to Article
7.1A, pay Cogen for all amounts billed. Cogen shall, within fifteen (15) days
after issuing its invoice setting forth annual reconciliation credits due Exxon
pursuant to Article 7.1B, pay Exxon all amounts due. Reimbursements or
additional payments pursuant to Article 7.1C shall be paid within thirty (30)
days of receipt of the billing adjustment invoice.
B. Interest. If Exxon fails to pay timely all or a portion of the
amounts billed pursuant to Article 7.1A or either Party fails to make timely
reimbursements or additional payments pursuant to Article 7.1B or 7.1C within
the time stated in this Article 7, interest on the unpaid portion shall accrue
from the
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date due until paid at two percent (2%) over the bank prime loan rate as
reported in Federal Reserve Statistical Release H.15 (or a successor publication
of similar authority, if Statistical Release H.15 is discontinued) for the day
the payment becomes due; provided, however, in no event shall this rate of
interest exceed the maximum rate of interest permissible under the laws of the
State of New Jersey.
7.3 Disputes. If any invoice or adjustment under Article 7.1 is disputed
by either Party and subsequently resolved, there shall be added to the amount
determined to be due Cogen or credited to the amount due Exxon, if Exxon is due
a refund, interest calculated in the same manner as for late payments under
Article 7.2B.
7.4 Records. Both Cogen and Exxon shall keep all invoices, receipts,
charts, computer printouts, punchcards, magnetic tapes, and other records
related to the volume and price of Steam sales made under this Agreement,
including Cogen's cost of fuel and all calculations based on such records. Such
records shall be made available for inspection and copying by either Party or
their representatives upon reasonable notice. Each Party shall keep all such
materials for a minimum of three (3) years from the date of their preparation.
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ARTICLE 8
TAXES
Exxon shall be solely responsible for any sales, use, gross receipts,
transfer, and similar taxes that may be imposed on the sale of Steam by Cogen to
Exxon under this Agreement. Cogen shall be solely responsible for any taxes that
may be imposed on the manufacture of steam by Cogen under this Agreement.
ARTICLE 9
AUTHORITY
9.1 Authority of Exxon. Exxon hereby represents and warrants to Cogen as
follows:
A. Exxon is a corporation duly organized and existing in good
standing under the laws of the State of New Jersey.
B. Exxon possesses all requisite power and authority to enter into
and perform this Agreement and to carry out the transactions contemplated
herein.
C. No suit, action or arbitration, or legal, administrative or other
proceeding is pending against Exxon or its Affiliates that would affect the
validity or enforceability of this Agreement or the ability of Exxon to
materially fulfill its commitments hereunder.
9.2 Authority of-Cogen. Cogen hereby represents and warrants to Exxon as
follows:
A. Cogen is a limited partnership duly organized and existing under
the laws of the State of Delaware and is duly qualified to do business in
the State of New Jersey.
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B. Cogen possesses all requisite power and authority to enter into
and perform this Agreement and to carry out the transactions contemplated
herein.
C. No suit, action or arbitration, or legal, administrative or other
proceeding is pending against Cogen or its Affiliates that would affect the
validity or enforceability of this Agreement or the ability of Cogen to
materially fulfill its commitments hereunder.
ARTICLE 10
FORCE MAJEURE
10.1 Definition. Except for the obligations of a Party to make payments
when due under this Agreement, the Parties shall be excused from delays in
performance or failures to perform their respective obligations hereunder and
shall not be liable in damages or otherwise, if and only to the extent that such
delays or failures are caused by Force Majeure. The term "Force Majeure" means
any cause beyond the reasonable control of the affected Party, including,
without limitation, storm, flood, lightning, drought, earthquake, fire,
explosion, civil disturbance, labor dispute, act of God or the public enemy, or
action of a court or governmental authority. Financial distress of either Party,
late delivery of materials or equipment (unless itself caused by Force Majeure),
or inadequate performance by contractors (unless itself caused by Force Majeure)
shall not be considered Force Majeure.
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10.2 Burden of Proof. The burden of proof as to whether a Force Majeure
event or condition has occurred shall be upon the Party claiming that it should
be excused from performing its obligations hereunder due to the occurrence of
such an event or condition.
10.3 Condition. If either Party relies on Force Majeure as a basis for
being excused from performance of its obligations under this Agreement, then the
Party relying on Force Majeure shall:
A. Provide prompt oral notice to the other Party, confirmed promptly
in writing, of the occurrence of the event or condition, with an estimate of
its expected duration and the probable impact on the performance of its
obligations hereunder;
B. Exercise all reasonable efforts to continue to perform its
obligations hereunder;
C. Expeditiously take action to correct or cure the event or condition
excusing performance to the extent reasonably practicable;
D. Exercise all reasonable efforts to mitigate or limit damages to the
other Party; and
E. Provide prompt oral notice to the other Party, confirmed promptly
in writing, of the cessation of the event or condition giving rise to its
excusal from performance.
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10.4 Labor Disputes. This Article 10 shall not require the settlement of
any strike, walkout, lockout, or other labor dispute on terms which, at the
discretion of the Party involved, are contrary to its interests. The settlement
of such labor disputes shall be at the sole discretion of the Party involved.
10.5 Termination for Force Majeure. If, after the Date of Initial
Commercial Operation, Cogen is excused from performing its obligations hereunder
due to Force Majeure, and such Force Majeure continues in effect for a period of
six (6) months after the initial event or condition of Force Majeure, subject
to Article 10.6, Exxon may terminate this Agreement, effective on the last day
of such six (6) month period or thereafter, by giving Cogen and the Financier
identified in Article 11.4 at least thirty (30) days' prior written notice.
Failure by Cogen to perform its obligations due to Force Majeure or the failure
by Cogen to implement one of the alternatives described in subparagraph (i),
(ii), or (iii) of Article 10.6A shall not be considered a breach of this
Agreement by Cogen.
10.6 Cogen's Right to Temporary Cure.
A. If after the Date of Initial Commercial operation Cogen is
prevented for a period of six (6) months by Force Majeure from delivering to
Exxon Steam in accordance with Article 3 from the Cogeneration Facility, Cogen,
at its option, may prevent Exxon from terminating this Agreement pursuant to
Article 10.5, and will be in compliance with this Agreement, by:
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(i) supplying Steam from temporary boilers or otherwise to Exxon's
Complex, Exxon's Marketing Terminal, and Exxon's Technology
Center in an amount, quality, and at a cost as provided in
Articles 3 and 4; or
(ii) paying to Exxon the cost of procurement and installation by Exxon
of temporary boilers to supply steam to Exxon's Complex, Exxon's
Marketing Terminal, and Exxon's Technology Center in an amount
and quality as provided in Article 3 and paying Exxon any
difference between the cost to Exxon of generating such steam and
the cost Exxon would have incurred in buying Steam under Articles
3 and 4, provided that this option shall not apply unless Exxon
is reasonably able to procure, install, and operate such
temporary boilers; or
(iii) paying to Exxon any difference between Exxon's cost for steam
purchased from Public Service Electric and Gas Company (or its
successor) and the cost Exxon would have incurred in buying Steam
under Articles 3 and 4,
from the end of the six (6) month period described in Article 10.5 until either
the Force Majeure no longer prevents Cogen from delivering Steam in accordance
with Article 3 from the
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Cogeneration Facility, or until twenty-four (24) months after Cogen gives Exxon
written notice that Cogen does not intend to continue pursuant to subparagraph
(i), (ii), or (iii) above. If Cogen elects to continue the Agreement in force by
implementing one of the alternatives described in subparagraph (i), (ii), or
(iii) above, it must give Exxon at least ninety (90) days' prior written notice
to that effect and such notice must specify which alternative Cogen elects. In
the event that Cogen subsequently gives Exxon such written notice that it does
not intend to continue pursuant to subparagraph (i), (ii), or (iii) above, the
termination of this Agreement pursuant to Article 10.5 shall be effective
twenty-four (24) months after Cogen gives Exxon such written notice, or on such
later date as Cogen may designate in its written notice.
B. For purposes of determining the cost which Exxon would have
incurred in buying Steam under Articles 3 and 4, the cost of Cogen's fuel for
the Exhibit A calculations shall conclusively be deemed to be the Weighted
Average Cost of Gas. Additionally, the cost which Exxon would have incurred in
buying Steam under Articles 3 and 4 shall include payments or credits to Exxon
for the annual steam adjustment, monthly initial steam commitment credit, and
annual initial steam commitment credit adjustment.
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C. The implementation by Cogen of one of the alternatives described
in subparagraphs (i), (ii), and (iii) of Article 10.6A and subsequent
termination of this Agreement by Cogen on twenty-four (24) months' prior written
notice to Exxon shall not be considered a breach of this Agreement by Cogen.
ARTICLE 11
BREACH OF CONTRACT AND TERMINATION
11.1 Exxon's Right to Terminate. Subject to Article 11.4, Exxon shall
have the right, at its option, to terminate this Agreement upon the occurrence
of any of the following events:
A. Cogen breaches this Agreement by failing to substantially perform
any material obligation under this Agreement, which failure continues for a
period of sixty (60) days after Exxon gives Cogen and the Financier
identified in Article 11.4 written notice of such breach; provided,
however, that if such breach may not reasonably be cured within such sixty
(60) day period, Exxon may not terminate this Agreement pursuant to this
Article ll.lA if Cogen diligently commences to cure such breach within such
sixty (60) day period, and this Agreement shall remain in effect for so
long as Cogen diligently continues such efforts, unless such breach
continues uncured for six (6) months after Exxon's written notice of breach
to Cogen and the Financier identified in Article 11.4; or
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B. Cogen fails to commence Commercial Operation by July 1, 1993 (as
such date may be extended by Force Majeure pursuant to the terms of Article
2.3A), or to initiate any of the alternative arrangements described in
Article 2.3B, and Exxon gives Cogen and the Financier identified in Article
11.4 thirty (30) days' prior written notice of termination pursuant to
Article 2.3A; or
C. Cogen claims that it is excused after the Date of initial
Commercial Operation from failing to deliver Steam to Exxon from the
Cogeneration Facility due to Force Majeure and does not within six (6)
months either resume full performance or initiate one of the alternative
arrangements described in Article 10.6, and Exxon gives Cogen and the
Financier identified in Article 11.4 thirty (30) days' prior written notice
of termination pursuant to Article 10.5; or
D. Exxon elects to terminate this Agreement at the expiration of the
Base Term or at the expiration of the first five (5) year renewal term, as
the case may be, by giving to Cogen and the Financier identified in Article
11.4 five and one-half (5-1/2) years' prior written notice of termination,
as provided in Article 2.2.
11.2 Cogen's Right To Terminate. Cogen shall have the right, at its option,
to terminate this Agreement upon the occurrence of any of the following events:
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A. Exxon breaches this Agreement by failing to make timely payment to
Cogen of the monthly Steam charges pursuant to Article 7, which failure
continues for a period of thirty (30) days after Cogen gives Exxon written
notice of such failure to pay; or
B. Exxon breaches this Agreement by failing to substantially perform
any material obligation under this Agreement, other than payment of amounts
due as described in Article 11.2A, which failure continues for a period of
sixty (60) days after Cogen gives Exxon written notice of such breach;
provided, however, that if such breach may not reasonably be cured within
such sixty (60) day period, Cogen may not terminate this Agreement pursuant
to this Article 11.2B, if Exxon diligently commences to cure such breach
within such sixty (60) day period, and this Agreement shall remain in
effect for so long as Exxon diligently continues such efforts, unless the
breach continues uncured for six (6) months after Cogen's written notice of
breach to Exxon; or
C. Cogen fails to commence Commercial Operation by the date specified
in Article 2.3A, but initiates one of the alternative arrangements
described in Article 2.3B, and subsequently gives Exxon twenty-four (24)
months' prior written notice under Article 2.3B that Cogen does not intend
to continue such arrangement; or
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D. Cogen claims that it is excused from failing to perform its
obligations under this Agreement due to Force Majeure, initiates one of the
alternative arrangements described in Article 10.6, and subsequently gives
Exxon twenty-four (24) months' prior written notice under Article 10.6 that
Cogen does not intend to continue such arrangement; or
E. Exxon's External Steam Requirements from Cogen under this
Agreement fall below 315,360 K lbs. of Steam in any Annual Period (other
than because of Force Majeure) and Cogen, with Exxon's External Steam
Requirements from Cogen in combination with the steam demand from Cogen's
other steam customers, is unable to maintain the status of the Cogeneration
Facility as a "qualifying cogeneration facility" (as defined in Section
3(18) of the Federal Power Act and the regulations thereunder) for at least
two (2) gas turbines, and Cogen subsequently gives Exxon six (6) month's
prior written notice of termination of this Agreement; or
F. Cogen elects to terminate this Agreement at the expiration of the
Base Term or at the expiration of the first five (5) year renewal term, as
the case may be, by giving to Exxon four (4) years' prior written notice of
termination, as provided in Article 2.2.
Any notice from Cogen to Exxon of termination of this Agreement will be
effective only if such notice either (i) is joined in by the Financier in
writing, if there is a Financier then in existence, or (ii) certifies on its
face that there is no Financier.
11.3 Automatic Termination. This Agreement shall automatically terminate as
of the effective date set forth in Article 11.5 below if:
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A. The Ground Lease terminates under Section 16.3B of the Ground
Lease Agreement (relating to full taking of the Demised Premises);
B. The Ground Lease enters the Improvements Removal Period or
terminates for any other reason; or
C. This Agreement continues in effect until January 1, 2033, and is
not extended by the written consent of the Parties.
11.4 Notice to the Financier, Lenders and Mortgagees.
A. Exxon shall have no right to terminate this Agreement for breach
pursuant to Article 11.1A, 11.1B, or 11.1C, until Exxon (i) has provided the
Financier substantially the same notice which Exxon is obligated to provide
Cogen pursuant to Article 11.1A, 11.1B, 11.1C, or 11.5A; (ii) has provided the
Financier the same right to cure such breach as Cogen; and (iii) in the case of
breach which is susceptible of being cured only if the Financier has access to
the Demised Premises, the "Improvements," the "Interconnection Areas," the
"Utility Areas," and the "Access Rights of Way," in each case as defined in the
Ground Lease Agreement (and only in the case of such breach), has provided the
Financier six (6) additional months subsequent to the end of the period in
Article ll.lA for the cure of any such breach, without extension for any period
contemplated in Article 10, to cure such breach; provided that the Financier has
pursued and continues to pursue with diligence, continuity and good faith
<PAGE>
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all actions to enable the Financier to obtain access in order to cure, and to
cure, such breach; provided, further, that in respect of any such breach which
is the failure to deliver to Exxon Steam from the Cogeneration Facility in
accordance with Article 3, the Financier must also pay to Exxon, for so long as
such breach continues during such additional period, any difference between
Exxon's reasonable cost for replacement steam from any other source and the cost
Exxon would have incurred in buying Steam under Articles 3 and 4. Exxon may in
its discretion obtain such replacement steam from any source (within or external
to Exxon's Complex) it deems appropriate. All payments by the Financier to Exxon
pursuant to the above provision will be made, to the account specified by Exxon
in writing, monthly within ten (10) days of receipt by the Financier of a
written statement from Exxon setting forth the amount due and in reasonable
detail the basis for the amount due. The cost which Exxon would have incurred in
buying Steam under Articles 3 and 4 shall be calculated as provided in Article
10.6B.
B. Cogen shall have no right to terminate this Agreement pursuant to
Article 11.2 until Cogen (i) has provided any lender to whom Exxon has assigned
the Ground Lease Agreement to secure a loan and has provided any mortgagee
holding a mortgage on all or any part of Exxon's Property substantially the same
notices which Cogen is obligated to provide Exxon pursuant to Article 11.2, and
(ii) has provided such lender or mortgagee
<PAGE>
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the same right to cure as Exxon, provided that Exxon has previously given Cogen
actual notice of the appropriate contact person and address for any such lender
or mortgagee. If Cogen gives Exxon written notice of its termination of this
Agreement, Exxon shall notify the Financier that Exxon has received such notice.
11.5 Effective Date of Termination.
A. If a breach described in Article ll.lA occurs and the time period
described in Article ll.lA has expired, Exxon may promptly give Cogen a second
written notice, which notice shall, when given, terminate this Agreement.
B. If the event described in Article ll.lB occurs, this Agreement
shall terminate on the date described in Article 2.3A.
C. If the events described in Article ll.lC occur, this Agreement
shall terminate at the end of the thirty (30) day period referred to in Article
10.5.
D. If the events described in Article ll.lD occur, this Agreement
shall terminate at the expiration of the Base Term or at the expiration of the
first five (5) year renewal term, as the case may be.
E. If a breach described in Article 11.2A or 11.2B occurs and the
applicable time period described in Article 11.2A or 11.2B has expired, Cogen
may promptly give Exxon a second written notice, which notice shall, when given,
terminate this Agreement.
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F. If the events described in Article 11.2C occur, this Agreement
shall terminate upon the expiration of the twenty-four (24) month notice period
described in Article 2.3B.
G. If the events described in Article 11.2D occur, this Agreement
shall terminate upon the expiration of the twenty-four (24) month notice period
described in Article 10.6A.
H. If the events described in Article 11.2E occur, this Agreement
shall terminate upon the expiration of the six (6) month notice period described
in Article 11.2E; provided that, if Exxon does not need Steam from Cogen for all
of such six (6) month period, Exxon shall promptly advise Cogen in writing and
the Parties may accelerate the termination date of this Agreement by mutual
written consent.
I. if the events described in Article 11.2F occur, this Agreement
shall terminate at expiration of the Base Term or at the expiration of the first
five (5) year renewal term, as the case may be.
J. If any of the events described in Article 11.3A occurs, this
Agreement shall automatically terminate when the Ground Lease terminates. If the
Ground Lease terminates for any other reason, this Agreement shall automatically
terminate pursuant to Article 11.3B when the Improvements Removal Period
commences or, if there is no Improvements Removal Period, when the Ground Lease
terminates.
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K. If the event described in Article 11.3C occurs, this Agreement
shall terminate at 12:01 a.m. on January 1, 2033.
11.6 Transition.
A. If this Agreement is terminated for any reason, the Parties shall
work together to achieve a smooth transition. Unless and until this Agreement
has been terminated, neither Party shall refuse to make any of the payments or
perform any of the other obligations required under this Agreement on the basis
of any anticipated termination of this Agreement, or any actual or alleged
breach by the other Party, subject to the exception described in Article 11.6B
below.
B. If Cogen terminates the Ground Lease under Sections 16.2D
(relating to termination of the Power Purchase Agreement), 16.2E (relating to
inability of Cogen to receive or maintain Governmental Authorizations), 16.2F
(relating to inability of the Demised Premises and other areas to be used for
Cogen's purposes), or 16.2G (relating to partial taking) of the Ground Lease
Agreement, thus triggering subsequent automatic termination of this Agreement
under Article 11.3, it is understood that Cogen may not be able to continue to
provide Steam to Exxon under this Agreement. In such event, Cogen shall: (i) use
its best efforts to continue to supply Steam to Exxon, as would otherwise be
required by Article 3.1A, until the commencement of the Improvements Removal
Period, or (ii) if Cogen cannot supply such Steam, permit Exxon to operate and
maintain
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the Cogeneration Facility to supply steam to Exxon's Complex, Exxon's Marketing
Terminal, and Exxon's Technology Center until the commencement of the
Improvements Removal Period, provided that in neither event shall Cogen be
required to make capital expenditures or to incur out-of-pocket operating and
maintenance costs net of revenues in order to keep the Cogeneration Facility
operational, unless Exxon fully and promptly reimburses Cogen for such capital
expenditures and out-of-pocket operating costs net of revenues.
ARTICLE 12
LIABILITY
12.1 Limitation on Liability for Damages.
A. Cogen, and its officers, directors, partners, agents, employees,
Affiliates, successors and assigns shall not be liable under this Agreement to
Exxon or its officers, directors, partners, agents, employees, Affiliates, or
their successors or assigns, for any punitive, indirect, or consequential
damages, including loss of profits, however caused; provided that this
limitation shall not apply to any damages under this Agreement caused by Cogen's
intentional provision of steam to another entity with the result that Exxon does
not receive the amounts of Steam it is entitled to under this Agreement.
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B. Exxon, and its officers, directors, partners, agents, employees,
Affiliates, successors and assigns shall not be liable under this Agreement to
Cogen or its officers, directors, partners, agents, employees, Affiliates, or
their successors or assigns, for any punitive, indirect, or consequential
damages, including loss of profits, however caused; provided that this
limitation shall not apply to any damages under this Agreement caused by
Exxon's intentional purchase and acceptance of steam for industrial purposes
at Exxon's Complex, Exxon's Marketing Terminal, or at Exxon's Technology Center
from an entity other than Cogen, or caused by Exxon's provision to itself of
steam for industrial purposes from steam sources other than those described in
Exhibit D, when Exxon has not purchased Steam from Cogen in such amounts as
specified in Article 3.1B and Cogen is otherwise able to provide such amounts of
Steam.
C. Nothing in this Article 12.1 shall prohibit or prevent Cogen from
making the allocations of Steam described in Article 3.2A, nor shall anything in
this Article 12.1 prohibit or prevent Exxon from obtaining steam from alternate
sources pursuant to and under the circumstances described in Article 3.2B, which
activities shall not be deemed breaches of this Agreement.
D. In the event this Agreement is terminated pursuant to Article
11.1B, 11.1C, 11.1D, 11.2C, 11.2D, 11.2E, 11.2F, 11.3C, or in the event this
Agreement is terminated pursuant to
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Article ll.3A or 11.3B because the Ground Lease Agreement was terminated
pursuant to Section 16.1D, 16.1F, 16.2C, 16.2D, 16.2E, 16.2F, 16.2G, 16.2H,
16.3A or 16.3B, both Parties shall be discharged from all obligations under this
Agreement other than those which accrued before the effective date of such
termination of this Agreement.
12.2 Damages.
A. If either Party breaches this Agreement, the aggrieved Party shall
be entitled to seek damages as available at law except as may be limited
pursuant to Article 12.1.
B. Subject to It-he limitations in Article 12.1 above and in Section
14.1 of the Ground Lease Agreement, if either Party terminates the Ground Lease
Agreement because of default by the other Party under the Ground Lease
Agreement, the aggrieved Party shall be entitled to seek damages under both the
Ground Lease Agreement and this Agreement (which will automatically terminate
under Article 11.3B), but shall not be entitled to double recovery of damages,
that is, recovery of the same damages under both agreements.
C. Termination of this Agreement shall not automatically trigger
termination of the Ground Lease Agreement. However, subject to the limitations
in Article 12.1 above and in Section 14.1 of the Ground Lease Agreement, if
either Party terminates this Agreement because of breach by the other Party
under this Agreement and subsequently terminates the Ground Lease
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Agreement (under Sections 16.1C or 16.2B of the Ground Lease Agreement, as
applicable) based on the termination of this Agreement, the aggrieved Party
shall be entitled to seek damages under both this Agreement and the Ground Lease
Agreement, but shall not be entitled to double recovery of damages, that is,
recovery of the same damages under both agreements.
12.3 Specific Performance. In addition to the right of termination referred
to in Article 11, Exxon and Cogen shall each have the right to seek the specific
performance by the other Party of any of its obligations under this Agreement.
ARTICLE 13
NONWAIVER
The various rights, remedies, options, and elections of Exxon and Cogen as
expressed herein are cumulative, and the failure of Exxon or Cogen to enforce
strict performance by the other Party of the provisions of this Agreement or to
exercise any right, election, or option or to resort or have recourse to any
remedy herein conferred will not be construed or deemed to be a waiver or a
relinquishment of the future enforcement by Exxon or Cogen of any such
provisions, rights, options, elections, or remedies, but the same will continue
in full force and effect.
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ARTICLE 14
NOTICE AND SERVICE
14.1 Notice. All notices, requests, demands and other communications
required or permitted under the terms of this Agreement shall be sufficient in
form if in writing and shall be deemed to be duly given if delivered by personal
service, telegram, or mailed certified or registered first class mail, postage
prepaid, properly addressed to the Party entitled to receive such notice
pursuant to Article 14.3.
14.2 Date of Service.
A. Mail. If a notice is sent by registered or certified mail, it
shall be deemed given within three (3) days, excluding Saturdays, Sundays, or
legal holidays of the State of New Jersey, after deposit of the same in the
United States mail, postage prepaid, except as otherwise demonstrated by a
signed receipt.
B. Telegram. If a notice is served by telegram, it shall be deemed
given eighteen (18) hours after delivery to the telegram company.
C. Personal Service. If a notice is served by personal service, it
shall be deemed given upon the date of actual delivery to the address of the
Party to be notified.
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14.3 Addresses. Notices may be sent to the Parties at the following
addresses:
A. Cogen: Cogen Technologies Linden Venture, L.P.
c/o Cogen Technologies, Inc.
Suite 5000
1600 Smith Street
Houston, Texas 77002
Attn.: Mr. Robert C. McNair
President
B. Exxon: Exxon Chemical Company
Bayway Chemical Complex
1400 Park Avenue
Linden, New Jersey 07036
Attn.: Complex Manager
Exxon Chemical Americas
or to such other and different persons or addresses as may be designated by the
Parties.
ARTICLE 15
AMENDMENTS
No amendment or modification of the terms of this Agreement shall be
binding on either Exxon or Cogen unless reduced to writing and signed by both
Parties.
ARTICLE 16
SUCCESSORS AND ASSIGNS
16.1 Assignment by Exxon. At any time Exxon may sell or transfer all or any
part of Exxon's Complex, Exxon's Marketing Terminal, Exxon's Technology Center,
or Exxon's Property to any Affiliate of Exxon or any third party. If Exxon sells
or otherwise transfers all of Exxon's Complex to any entity, this Agreement
shall automatically be assigned to such entity and
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shall be binding on and inure to the benefit of any such entity. Subject to
Article 16.6, if Exxon sells or otherwise transfers to any entity any part of
Exxon's Complex which has consumed steam since January 1, 1988, such transferee
and Cogen shall enter into the separate agreement described in Article 16.5 for
the continued provision of Steam to that part of Exxon's Complex.
16.2 Assignment by Cogen. Cogen shall not assign, transfer, pledge, or
hypothecate this Agreement at any time, except that:
A. Cogen may at any time assign, pledge, or hypothecate this
Agreement, provided that, in accordance with the terms of the Ground Lease
Agreement, the Ground Lease Agreement is simultaneously assigned, pledged,
or hypothecated to the same entity by Cogen; and
B. Following two (2) years after the Date of Initial Commercial
Operation, Cogen may assign or transfer this Agreement to an unrelated
entity, provided that such unrelated entity shall also assume Cogen's
rights and obligations under the Ground Lease Agreement, and (i) first
deliver to Exxon its written assumption agreement substantially in the form
of Exhibit G-1 to be bound by all of the provisions of this Agreement and
the Ground Lease Agreement; (ii) have the personnel, experience, equipment
and other resources reasonably required to perform its obligations under
this Agreement and the Ground Lease Agreement; (iii) be financially capable
based upon
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reasonable standards of performing its obligations under this Agreement and the
Ground Lease Agreement; and (iv) be in other respects reasonably acceptable to
Exxon. Subject to Article 16.7, this Agreement shall be binding on and inure to
the benefit of the successors and assigns of Cogen.
16.3 Continuing Obligations. No assignment of this Agreement by Exxon or
Cogen shall operate to relieve Exxon or Cogen of any obligations under this
Agreement which have accrued prior to the effective date of the assignment. An
obligation shall be deemed to have accrued before the effective date of an
assignment only if all the substantive elements of the obligation have accrued
by that date. An assignment of this Agreement shall relieve the assignor of any
obligations to the other Party under this Agreement which have not accrued
before the effective date of the assignment; provided, however, that the
assignor shall continue to be obligated under this Agreement if any such
assignment shall be ineffective.
16.4 Ground Lease Agreement. No assignment of this Agreement by Exxon or
Cogen shall operate to relieve Exxon or Cogen of any of their obligations under
the Ground Lease Agreement, including without limitation any environmental
obligations and obligations with respect to the New Jersey Environmental Cleanup
Responsibility Act, NJSA 13:1K-6 et seq., together with related regulations, as
such Act and regulations may be amended from time to time, as those obligations
are defined in the Ground Lease Agreement.
<PAGE>
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16.5 Transfers of Part of Exxon's Complex.
A. Subject to Article 16.6, if Exxon sells or otherwise transfers to
any entity any part of Exxon's Complex which has consumed steam since January 1,
1988, such transferee shall be obligated to enter into a separate agreement with
Cogen covering the provision of Steam to such entity. In such event, Exxon's
obligations to purchase Steam and Cogen's obligations to provide Steam under
this Agreement shall be reduced pursuant to Article 16.5B, and the formulas for
calculating the monthly steam charge and annual steam adjustment under this
Agreement shall be adjusted pursuant to Article 16.5C. The provisions of any
separate agreement shall be substantially similar to those of this Agreement,
with the transferee assuming the rights and obligations of Exxon for the
remaining term of this Agreement with respect to the transferee's part of
Exxon's Complex, except that (i) Article 2 shall reflect, as appropriate, that
some of the Base Term of the Agreement will have passed; (ii) Article 3 shall
incorporate reduced rates of Steam according to Article 16.5B below; (iii)
Exhibit A, Parts 1 and 2, shall be amended according to Article 16.5C below;
(iv) Exhibits B, C and D shall be amended as appropriate; and (v) the references
to the Ground Lease Agreement may or may not continue to apply, depending on
whether the transferee succeeds to Exxon's interest in the Ground Lease
Agreement.
<PAGE>
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B. Subject to Article 16.6, should Exxon sell or otherwise transfer
any part of Exxon's Complex, with the result that the transferee enters into a
separate agreement covering the provision of Steam to such entity pursuant to
Article 16.5A, the rates of Steam set forth in Articles 3.1A, 3.1B, 3.1D, 3.1E
and 11.2E of such separate agreement shall be reduced on a pro rata basis by
multiplying the rate in question by a/b, where a is the total amount of Steam
provided by Cogen to the part of Exxon's Complex subject to transfer during the
last twenty-four (24) month period of continuous steam use at such part of
Exxon's Complex subsequent to January 1, 1988 (or a reasonable estimate of the
same if the data is unavailable) and b is the total amount of Steam provided by
Cogen during the same period of time to Exxon's Complex (excluding those parts
of Exxon's Complex identified in Exhibit F), Exxon's Marketing Terminal and
Exxon's Technology Center. The rates of Steam set forth in Articles 3.1A, 3.1B,
3.1D, 3.1E and 11.2E of this Agreement shall thereafter be reduced on a pro
rata basis by multiplying the rate in question by (b-a)/b. An example of a pro
rata allocation of Steam is set forth in Exhibit E. If a is zero (i.e., the part
of Exxon's Complex to be transferred has not used steam other than from the
sources described in Exhibit D for a continuous twenty-four (24) month period
since January 1, 1988), the transferee shall have no obligation to enter into
any separate agreement with Cogen. If part of Exxon's Complex to be transferred
has
<PAGE>
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been removed from operation requiring steam prior to and at the time of transfer
and if the transferee has no intention of using steam at that part of Exxon's
Complex and will affirm the same to Cogen in writing, then neither the
transferee nor Cogen will have any obligation to enter into any separate
agreement pursuant to Article 16.5A and this Agreement shall not be modified
pursuant to Article 16.5A. The rates of high pressure level and low pressure
level Steam set forth in Article 3.4 shall also be pro rated. These pro rations
shall be based on high pressure level and low pressure level Steam use and shall
be calculated using methods similar to the methods described above as
illustrated in the example set forth in Exhibit E.
C. Should Exxon sell or otherwise transfer any part of Exxon's
Complex with the result that the transferee enters into a separate agreement
covering the provision of Steam to such entity pursuant to Article 16.5A,
Exhibit A, Parts 1 and 2, of such separate agreement shall be amended by
multiplying the number "150" in those places where it appears by the fraction
a/b determined under Article 16.5B and Exhibit A, Parts 3 and 4, will be
deleted. Furthermore, this Agreement will be amended by multiplying the number
"150" in Exhibit A, Parts 1 and 2, by the fraction (b-a)/b, but Exhibit A, Parts
3 and 4, shall remain unchanged. An example of an amendment to the number "150"
in Exhibit A is set forth in Exhibit E.
<PAGE>
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16.6 Selected Transfers. Exxon may freely sell or otherwise transfer those
parts of Exxon's Complex identified in Exhibit F (the Rahway Tank Field and the
Forty-Acre Tank Field) and Cogen shall be under no obligation to supply Steam to
the transferee and the transferee shall be under no obligation to take Steam
from Cogen.
16.7 Rights of the Financier and Other Lenders.
A. With regard to the initial Financier (General Electric Power
Funding Corporation), Exxon upon request of such Financier, shall execute and
deliver a consent to assignment substantially in the form shown in Exhibit H.
with respect to the designated Affiliate of General Electric Power Funding
Corporation, upon (i) any refinancing of the initial loan for the construction
of the Cogeneration Facility, (ii) acknowledgment by General Electric Power
Funding Corporation in writing that it is no longer the Financier to be
recognized by Exxon for purposes of this Agreement, and (iii) the request of
such designated Affiliate, Exxon and Cogen shall execute and deliver a
recognition agreement substantially in the form shown in Exhibit I. Thereafter,
if Cogen assigns, pledges, or hypothecates this Agreement to secure a loan from
another Financier to be recognized as the Financier by Exxon for purposes of
this Agreement, pursuant to Article 16.2 above, in connection therewith Exxon
shall execute a similar consent to any such assignment as may be reasonably
requested by the other Financier
<PAGE>
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and Exxon shall give the information specified in Article 16.8 below.
B. On instructions from the Financier, unless otherwise directed by a
court of competent jurisdiction, Exxon shall make all payments due Cogen under
this Agreement in accordance with the written instructions of the Financier in
conformity with its documentation with Cogen, and in such event Exxon shall not
be liable to Cogen for such payments.
C. If Cogen becomes in default under any loan documentation with the
Financier or any successor or assign of Financier holding a collateral
assignment, pledge, or hypothecation of Cogen's interest in this Agreement, the
Financier or such successor or assign may assume or cause a third party to
assume Cogen's rights and obligations under this Agreement at any time, provided
that the Financier or such successor, assign, or third party must first give
Exxon reasonable written notice of such assumption, which notice shall contain a
request (which specifically references this Article 16.7C) for a list of all
defaults of Cogen under this Agreement and the Ground Lease Agreement, at least
thirty (30) days in advance and must first (i) enter into an agreement with
Exxon agreeing to assume Cogen's rights and obligations thereafter accruing
under this Agreement and the Ground Lease Agreement and to cure all existing
defaults of Cogen under this Agreement and the Ground Lease Agreement that can
be cured
<PAGE>
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(including without limitation paying all amounts owed by Cogen to Exxon, subject
to the caps set forth in Exhibit G-3, if applicable) pursuant to and as provided
in an assumption agreement substantially in the form of Exhibit G-2; provided
that the Financier or any nominee or designee of the Financier holding the
interest in this Agreement for the benefit of the Financier may enter into such
an assumption agreement substantially in the form of Exhibit G-3; (ii) have the
personnel, experience, equipment, and other resources reasonably required to
perform its obligations under this Agreement and the Ground Lease Agreement;
(iii) be financially capable based upon reasonable standards of performing its
obligations under this Agreement and the Ground Lease Agreement, and (iv) be in
the other respects reasonably acceptable to Exxon. In such event, Exxon will
accept performance by such Financier, successor, assign, or third party and the
time limitation in Article 16.2 respecting assignment by Cogen will not apply to
such Financier, successor, assign, or third party. Similarly, if the general
partner of Cogen becomes in default under its partnership agreement with the
designated Affiliate of General Electric Power Funding Corporation (as described
in Article 1.15), the designated Affiliate may designate a new general partner
of Cogen, provided that such new general partner has the personnel, experience,
equipment and other resources reasonably required to perform its obligations
under this Agreement and the Ground Lease Agreement and is in
<PAGE>
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other respects reasonably acceptable to Exxon. Exxon agrees that General
Electric Company and General Electric Power Funding Corporation meet the
requirements of Article 16.7C(ii), (iii), and (iv) (and the comparable
requirements of Article 16.7F(ii)(b), (c), and (d)).
D. Following the assumption of Cogen's rights and obligations under
this Agreement by the Financier or its successor, assign, or a third party
pursuant to Article 16.7C, such Financier, successor, assign, or third party may
assign its rights and obligations under this Agreement to any entity, provided
that such Financier, successor, assign, or third party must first give Exxon
reasonable written notice of such assignment at least thirty (30) days in
advance and must first meet the requirements of Article 16.7C(i), (ii), (iii),
and (iv). Any such entity may, with reasonable written notice to Exxon at least
thirty (30) days in advance, assign its rights and obligations under this
Agreement to other entities meeting the requirements of Article 16.7C(i), (ii),
(iii), and (iv). In such event, Exxon will accept performance by such entity.
E. Notwithstanding any other provision of this Agreement, after the
Financier or any successor, assign, third party or other entity referred to in
Article 16.7C or 16.7D above assumes Cogen's rights and obligations under this
Agreement, Exxon will retain all of its rights under this Agreement, including
without limitation the right to terminate this
<PAGE>
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Agreement for any of the reasons specified in Article 11. Furthermore, Cogen and
the Financier (and its successors and assigns) will give Exxon concurrent notice
of any default by Cogen and the exercise by Financier (and its successors and
assigns) of any remedy under any of the documentation between Cogen and
Financier (and its successors and assigns) pertaining to the Cogeneration
Facility.
F. In the event of the rejection of this Agreement and the Ground
Lease Agreement prior to their stated expiration dates pursuant to Section 365
of the Bankruptcy Code of 1978, as amended, or any successor provision thereto,
in a case wherein Cogen is the debtor, Exxon will enter into both a new steam
sale agreement and a new ground lease of the Demised Premises with the Financier
or the same nominee or designee of the Financier for the remainder of the term
of this Agreement and the Ground Lease Agreement, respectively (assuming no
rejection had occurred), effective, in each case, as of the date of such
rejection and upon substantially the same covenants, agreements, terms,
provisions, and limitations herein contained and therein contained (in each
case, excluding a provision equivalent to this Article 16.7F), provided:
(i) the Financier delivers a written request to Exxon for such
new steam sale agreement and new ground lease within thirty
(30) days from the date of such rejection, which written
<PAGE>
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request is accompanied by payment to Exxon of all amounts
due to Exxon under this Agreement and the Ground Lease
Agreement and unpaid as of the date of such request and
which request identifies the party to act as supplier under
the new steam sale agreement and lessee under such new
ground lease.
(ii) the Financier or such nominee or designee who is to act as
supplier under the new steam sale agreement and lessee under
such new ground lease must (a) cure all existing defaults of
Cogen under this Agreement and the Ground Lease Agreement
that can be cured and that would exist but for such
rejection (including without limitation paying all amounts
owed by Cogen to Exxon, subject to the limitations of
recovery set forth in Article 10 of the Ground Lease
Agreement), (b) have the personnel, experience, equipment,
and other resources reasonably required to perform its
obligations under the new steam sale agreement and the new
ground lease agreement, (c) be financially capable based
upon reasonable standards of performing its obligations
under the new steam sale agreement and the new ground lease
agreement, and (d) be in the other respects reasonably
acceptable to Exxon;
<PAGE>
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(iii) such new steam sale agreement and new ground lease agreement
will expressly provide that Exxon will not be required to
deliver actual possession of the Demised Premises on the
date of execution and delivery thereof free of lessees,
tenants, or other occupants;
(iv) such new steam sale agreement and new ground lease agreement
will expressly provide that with respect to all
representations, warranties, and covenants of Exxon under
the new steam sale agreement and new ground lease agreement
that refer to the "date hereof" or "effective date of this
Agreement" or words or phrases or provisions of similar
import, the same refer to the date of this Agreement and of
the Ground Lease Agreement, respectively, and not the date
of execution and delivery of such new steam sale agreement
and new ground lease agreement and it is agreed that Exxon
will not be obligated to remove any liens placed on the
Demised Premises or any other part of Exxon's Property
subsequent to the date hereof;
(v) the last sentence of Section 8.2 of such new ground lease
agreement will expressly exclude
<PAGE>
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Cogen, the Ground Lease Agreement and persons claiming by,
through or under Cogen or its successors and assigns under
the Ground Lease Agreement (and actions or omissions of such
persons) and claims and actions of the same from the
operation thereof; and
(vi) the Financier or such nominee or designee enters into both a
new steam sale agreement and a new ground lease agreement,
unless this Agreement has been previously terminated in
accordance with its terms other than in the event this
Agreement is rejected pursuant to Section 365 of the
Bankruptcy Code of 1978, as amended, or any successor
provision thereto, in a case.wherein Cogen is the debtor.
G. So long as there exists a Financier, Exxon and Cogen shall not,
without the prior written consent of the Financier (which consent shall not be
unreasonably delayed or withheld) enter into a written amendment of this
Agreement.
16.8 Status Certificates. Either Party from time to time at the request of
the other Party shall sign promptly a written certificate confirming that this
Agreement has been duly authorized, is valid, and does not conflict with the
articles of incorporation, by-laws, or partnership agreement of the Party in
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question, and stating whether the Agreement is in full force and effect; whether
it has been modified or amended, and if so, the substance of such modification
or amendment; whether there have been any uncured breaches; whether there are
any offsets, counterclaims, or defenses to be asserted by that Party against the
other under this Agreement; and such other information as may be reasonably
requested.
ARTICLE 17
CHOICE OF LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of New Jersey.
ARTICLE 18
RENEGOTIATION
Should any term or provision of this Agreement be found invalid by any
court or regulatory body having jurisdiction thereover, the Parties shall
immediately renegotiate in good faith such term or provision of the Agreement to
eliminate such invalidity, consistent with the intent of this Agreement.
ARTICLE 19
CONSENT NOT TO BE UNREASONABLY WITHHELD
Whenever either Party requests any consent, permission, or approval which
may be required or desired by that Party pursuant to the provisions of this
Agreement, the other Party shall not unreasonably withhold or postpone the grant
of such consent, permission, or approval.
<PAGE>
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ARTICLE 20
OTHER AGREEMENTS
This Agreement and the Ground Lease Agreement supersede all prior oral and
written agreements and understandings of the Parties relating to the subject
matters hereof. This Agreement and the Ground Lease Agreement constitute the
entire agreement and understanding of the Parties relating to the subject
matters hereof.
ARTICLE 21
CAPTIONS
All indices, titles, subject headings, section titles, and similar items
are provided for the purpose of reference and convenience and are not intended
to be inclusive, definitive, or to control the meaning, content, or scope of
this Agreement.
ARTICLE 22
COUNTERPARTS
This Agreement may be executed in any number of counterparts, and each
executed counterpart shall have the same force and effect as an original
instrument.
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first set forth above.
ATTEST: COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
(d/b/a COGEN TECHNOLOGIES LINDEN VENTURE,
LIMITED PARTNERSHIP)
______________________
Assistant Secretary By: COGEN TECHNOLOGIES LINDEN, LTD.
(d/b/a COGEN TECHNOLOGIES LINDEN,
LIMITED PARTNERSHIP), ITS SOLE
GENERAL PARTNER
By: COGEN TECHNOLOGIES, INC.
ITS SOLE GENERAL PARTNER
By: /s/ ROBERT C McNAIR
------------------------------------
Robert C. McNair
President
ATTEST: EXXON CORPORATION
/s/ CONSTANCE C. MUSA By: /s/ RAY B. NESBITT
- -------------------------- -------------------------------
Constance C. Musa Ray B. Nesbitt
Assistant Secretary Executive Vice President of
Exxon Chemical Company, a
Division of Exxon Corporation
Attorney-In-Fact for
Exxon Corporation
<PAGE>
EXHIBIT 10.6
BACKUP FUEL STORAGE AND SUPPLY AGREEMENT
BETWEEN
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
(d/b/a COGEN TECHNOLOGIES LINDEN VENTURE, LIMITED PARTNERSHIP)
AND
EXXON CORPORATION
OCTOBER 4, 1991
<PAGE>
TABLE OF CONTENTS
-----------------
Article Heading Page
- ------- ------- ----
1 Definitions 3
2 Commitments 10
3 Butane Transfer Facilities 13
4 Butane Storage Service 15
5 Wintertime Fuel Supply 19
6 Summertime Fuel Supply 22
7 Testing Service 24
8 Accounting And Payment 25
9 Possession, Title And Warranty 28
10 Term 31
11 Measurement And Delivery Conditions 33
12 Actions Required To Satisfy Certain Conditions 37
13 Force Majeure 38
14 Limitation On Liability and Distribution of Risks 40
15 Insurance 42
16 Governmental Authorizations 44
17 Termination; Defaults; Right To Cure 45
18 Notice And Service 55
19 Entirety Of Contract; Other Agreements 57
20 Captions 57
21 Amendments 57
22 Consents 58
23 Nonwaiver 58
24 Severability 58
25 Renegotiation 59
26 Assignments 59
27 Counterparts 73
28 Choice Of Law 73
29 Authority 73
EXHIBIT "A" - Butane Delivery Facilities
EXHIBIT "B" - Exxon Butane Specifications
EXHIBIT "C" - BAYWAY REFINERY LPG Ship Requirements
EXHIBIT "D" - Assumption Agreement
EXHIBIT "E" - Consent to Assignment
EXHIBIT "F" - Recognition Agreement
<PAGE>
BACKUP FUEL STORAGE AND SUPPLY AGREEMENT
THIS BACKUP FUEL STORAGE AND SUPPLY AGREEMENT is made and entered into
effective October 4, 1991, by and between EXXON CORPORATION, a New Jersey
corporation ("Exxon"), and COGEN TECHNOLOGIES LINDEN VENTURE, L.P., doing
business in New Jersey as Cogen Technologies Linden Venture, Limited Partnership
("Cogen"), a Delaware limited partnership.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Exxon, operating through its division Exxon Company, U.S.A.,
owns, operates and maintains its Bayway Refinery and, operating through Exxon
Chemical Company (a division of Exxon), owns, operates and maintains its Bayway
Chemical Plant (collectively the "Exxon Complex"), both of which are located in
Linden, New Jersey; and
WHEREAS, Exxon owns, operates and maintains under the Exxon Complex
below-ground butane storage caverns (the "Butane Storage Caverns") for the
storage of butane or other fuels, together with certain loading and unloading
facilities at the Exxon Complex; and
WHEREAS, Exxon intends to install, operate and maintain at the Exxon
Complex above-ground butane transfer facilities for the delivery of butane, as
described in Exhibit A attached hereto; and
WHEREAS, Exxon owns and has or will have available to it supplies of
butane for sale at the Exxon Complex; and
<PAGE>
WHEREAS, Cogen Technologies, Inc., a Texas corporation and the general
partner of Cogen Technologies Linden, Ltd., the general partner of Cogen, has
entered into a Power Purchase Agreement dated April 14, 1989 ("Power Purchase
Agreement") with Consolidated Edison Company of New York, Inc. ("Con Ed"),
whereunder Cogen Technologies, Inc. proposes to sell to Con Ed electricity from
a cogeneration facility ("Cogeneration Facility") to be located in Linden, New
Jersey and which Power Purchase Agreement has been approved by the Public
Service Commission of the State of New York, became effective in September,
1989, and has been assigned to Cogen; and
WHEREAS, Cogen has entered into a "Ground Lease Agreement" whereunder
Cogen will lease from Exxon part of the land on which Exxon's Bayway Refinery is
located, upon which property Cogen intends to construct, own, operate and
maintain the Cogeneration Facility; and
WHEREAS, Cogen has also entered into a "Steam Sale Agreement"
whereunder Cogen will sell steam to Exxon from the Cogeneration Facility for use
at the Exxon Complex; and
WHEREAS, Cogen has entered into a "Gas Service Agreement" with Public
Service Electric and Gas Company ("PSE&G") and Elizabethtown Gas Company
("Elizabethtown") whereunder Cogen will purchase natural gas as the primary fuel
for the Cogeneration Facility; and
WHEREAS, Cogen desires to contract with Exxon for the purchase of
butane and/or other backup fuel supplies and for
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<PAGE>
the use of Exxon's butane storage and loading facilities, for the backup fuel
requirements of the Cogeneration Facility.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, conditions and obligations hereof, and other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties (as
hereinafter defined), intending to be legally bound, covenant and agree as
follows:
ARTICLE 1
DEFINITIONS
The following terms and expressions used herein shall have the
following meanings for the purposes of this Agreement:
1.1 "Affiliate" means a corporation or other entity that directly or
indirectly, through one or more intermediaries, controls or is controlled by or
is under common control with another corporation or other entity.
1.2 "Air Permit" means the permit issued to Cogen by the New Jersey
Department of Environmental Protection for the Cogeneration Facility.
1.3 "Annual Period" means any one of a succession of consecutive
twelve-month periods, the first of which shall begin on the Date of Initial
Commercial operation of the Cogeneration Facility.
-3-
<PAGE>
1.4 "Backup Fuel Agreement" means this agreement, including all
exhibits and amendments hereto that may be made from time to time.
1.5 "Barrel" means 42 gallons of liquid.
1.6 "Base Term" of the Backup Fuel Agreement means the period beginning
with the Date of Initial Commercial operation, and continuing for a period of
twenty-five Annual Periods, unless sooner terminated.
1.7 "BPU" means the Board of Public Utilities of the State of New
Jersey.
1.8 "Butane" means a hydrocarbon product as described in Exhibit B
attached hereto.
1.9 "Butane Delivery Facilities" means the additional facilities to be
constructed by Exxon for the delivery of Butane from the Butane Storage
Facilities to the Cogeneration Facility, said facilities being more particularly
described in Exhibit A attached hereto and made a part hereof for all purposes.
1.10 "Butane Storage Facilities" means Exxon's Butane Storage Caverns
and associated existing facilities, which are to be used by Exxon in the
storage, receipt and delivery of Butane for Cogen hereunder.
1.11 "Butane Transfer Facilities" means the additional facilities to be
constructed by Exxon for the delivery of Butane into the Butane Storage
Facilities, consisting of a
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<PAGE>
Butane unloading arm and associated equipment and piping located at the Exxon
Complex dock.
1.12 "Cogen Butane" means that volume of Butane delivered by Cogen to
Exxon for storage in Exxon's Butane Storage Facilities other than Exxon Butane.
1.13 "Cogen's Receiving Point" means the point as identified in Exhibit
A attached hereto at which Exxon delivers and Cogen receives Butane for the
purposes of this Agreement.
1.14 "Cogeneration Facility " means the cogeneration facility to be
constructed by Cogen on the land leased by Cogen from Exxon at the Exxon
Complex.
1.15 "Commercial Operation" means the production of electricity by
Cogen at the Cogeneration Facility upon the completion of such testing of the
Cogeneration Facility as Cogen determines is required by prudent electrical
practices, and the supply of steam at the points where Cogen's steam supply
system connects to Exxon's steam pipelines at Exxon's existing steam headers.
1.16 "Con Ed" means The Consolidated Edison Company of New York, Inc.
1.17 "CPI" means the Consumer Price Index for all Urban Consumers for
New York-Northern New Jersey, published by the Bureau of Labor Statistics of the
U.S. Department of Labor (all items figure - 1982-1984=100).
1.18 "Date of Initial Commercial operation" means the first day of the
month which immediately follows the date Cogen
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<PAGE>
designates in writing to Con Ed as the initial date of Commercial Operation of
its Cogeneration Facility.
1.19 "Pay" means a period of twenty-four (24) consecutive hours
commencing at midnight local time at Linden, New Jersey, on each calendar day
and finishing at midnight on the following calendar day.
1.20 "Elizabethtown" means Elizabethtown Gas Company.
1.21 "Evergreen Period" means that part of the term of this Backup Fuel
Agreement immediately following the Renewal Terms.
1.22 "Exxon Butane" means that volume of Butane in Exxon's Butane
Storage Facilities that is owned by Exxon or third-parties, other than Cogen, or
that is purchased by Cogen from Exxon, and shall include Butane purchased by
Exxon under Section 4.3 hereof.
1.23 "Exxon's Complex" means Exxon Company, U.S.A.'s Bayway Refinery
and Exxon Chemical America's Bayway Chemical Plant, both located at Linden, New
Jersey.
1.24 "Financier" initially means General Electric Power Funding
Corporation (as construction lender or as agent for itself and other
construction lenders), and may also mean any other entity subsequently extending
credit to Cogen for the construction, operation, maintenance, repair,
replacement, or removal of the Cogeneration Facility and other improvements, or
any entity subsequently providing funds for the refinancing or taking-out of
such loans, and the nominees or designees of any
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<PAGE>
such entities; provided that, at no time will Exxon be obligated to recognize
more than one such entity as the Financier to whom duties are owed, or rights
are granted, under this Backup Fuel Agreement. The parties anticipate that after
General Electric Power Funding Corporation is the Financier, a specific
designated Affiliate of General Electric Power Funding Corporation will become
the Financier and that such designated Affiliate will also become a limited
partner in Cogen. Exxon will recognize as the Financier for purposes of this
Backup Fuel Agreement (i) General Electric Power Funding Corporation, until such
time as General Electric Power Funding Corporation notifies Exxon in writing
that such designated Affiliated should be considered to be the Financier, and
(ii) thereafter, the designated Affiliate, until such time as such designated
Affiliate notifies Exxon in writing that Cogen has the right to designate
another entity as the Financier, and (iii) thereafter, such other entity as
Cogen may designate in writing from time to time. Exxon will not be required to
recognize as the Financier any partner of Cogen other than such designated
Affiliate of General Electric Power Funding Corporation.
1.25 "Force Majeure" means a cause beyond the reasonable control of the
affected Party, as more fully defined in Article 13.
1.26 "Gas Service Agreement" means the July 13, 1990, agreement between
Cogen and PSE&G and Elizabethtown, whereunder
-7-
<PAGE>
Cogen will purchase natural gas as the primary fuel for the Cogeneration
Facility, including all exhibits and amendments thereto that may be made from
time to time.
1.27 "Governmental Authorizations" mean any and all licenses, permits,
certificates and other authorizations required by applicable federal, state, or
local law.
1.28 "Ground Lease Agreement" means the August 1, 1990, agreement
between Cogen and Exxon granting Cogen a leasehold estate in approximately 12.77
acres at the Exxon Complex, including all exhibits and amendments thereto that
may be made from time to time.
1.29 "Leased Premises" means the two parcels of land, totalling
approximately 12.77 acres, on the site of Exxon's Bayway Refinery that have been
leased to Cogen under the Ground Lease Agreement.
1.30 "Natural Gas Suppliers" means PSE&G and Elizabethtown.
1.31 "Party" or "Parties" means Cogen and/or Exxon, as the case may be,
and its or their permitted successors and assigns.
1.32 "Power Purchase Agreement" means that certain Power Purchase
Agreement Dated April 14, 1989, executed by and between Cogen Technologies, Inc.
and Con Ed (which Power Purchase Agreement has been assigned to Cogen) under
which electric energy generated at the Cogeneration Facility will be
-8-
<PAGE>
sold by Cogen for purchase by Con Ed, including all exhibits and amendments
thereto that may be made from time to time.
1.33 "PPI" means the Producer Price Index for All Commodities,
published by the Bureau of Labor Statistics of the U.S. Department of Labor
(1982 = 100).
1.34 "PSE&G" means Public Service Electric and Gas Company.
1.35 "Renewal Term" means either of two five-year periods immediately
following the Base Term of the Backup Fuel Agreement.
1.36 "Shrinkage" means a 1.5 percent volumetric reduction of Butane
attributable to the injection operations of Exxon's Butane Storage Facilities.
1.37 "Steam Sale Agreement" means the August 1, 1990, agreement between
Cogen and Exxon for the sale of steam from the Cogeneration Facility, including
all exhibits and amendments thereto that may be made from time to time.
1.38 "Summer Season" means each period from April 1. through November 14
during the term of this Backup Fuel Agreement.
1.39 "Winter Season" means each period from November 15 until April 1
during the term of this Backup Fuel Agreement.
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ARTICLE 2
COMMITMENTS
2.1 Exxon's Commitments. Pursuant to the terms and conditions of this
Backup Fuel Agreement, in order to satisfy the backup fuel storage and supply
requirements of the Cogeneration Facility, Exxon commits:
A. to purchase, install, operate and maintain Butane Delivery
Facilities arid Butane Transfer Facilities for delivering Butane to
the Cogeneration Facility; to have such Butane Delivery Facilities
operational for testing service purposes by May 1, 1992; to have
the Butane Delivery Facilities completed by September 1, 1992; and
to have such Butane Transfer Facilities operational on or before
November 30, 1992;
B. to provide Cogen with approximately 100,000 barrels of storage
capacity in Exxon's Butane Storage Facilities during each Winter
Season;
C. to supply Cogen with a 100,000 Barrel supply of Butane, after
Shrinkage, of a quality in conformity with Exhibit B hereto, for
the initial fill of Exxon's Butane Storage Facilities on November
15 for use during each ensuing Winter Season;
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D. to give Cogen written notice by September 1 of each Annual Period
of Exxon's election to deliver Butane during each Winter Season
under Supply Option A or Supply Option B of Article 5 of this
Backup Fuel Agreement;
E. to give Cogen written notice thirty (30) Days prior to each Summer
Season of the anticipated volumes of summertime backup fuel to be
delivered during the ensuing Summer Season under Article 6 of this
Backup Fuel Agreement;
F. after the initial 100,000 Barrel fill of Exxon Butane on November
15 of each Winter Season, to receive, handle, store and deliver
subsequent shipments of Cogen Butane, if Supply Option A of
Article 5 is selected, or to provide subsequent deliveries of
Exxon Butane, if Supply Option B of Article 5 is selected; and
G. to act with due diligence and use reasonable efforts to obtain and
maintain in effect all Governmental Authorizations required to
provide the services hereunder and to cooperate with Cogen in
seeking such Governmental Authorizations.
2.2 Cogen's Commitments. Pursuant to the terms and conditions of this
Backup Fuel Agreement, in order to satisfy
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the backup fuel storage and supply requirements of the Cogeneration Facility,
Cogen commits:
A. to reimburse Exxon for reasonable Exxon direct construction costs
and reasonable third-party costs of purchasing and installing the
Butane Delivery Facilities and Butane Transfer Facilities, as
defined in Section 3.3 hereof;
B. to pay Exxon storage reservation fees, as defined in Section 4.8
hereof, for the Butane storage capacity committed to Cogen
hereunder;
C. to purchase and utilize at the Cogeneration Facility at least
100,000 Barrels of Exxon Butane during each Winter Season;
D. to purchase and utilize at the Cogeneration Facility a total of
736,000 Barrels of Exxon Butane during each Summer Season,
delivered in volumes as required to operate one or two of the
Cogeneration Facilities' gas turbines each Day of operation,
subject to (i) annual and instantaneous emission and/or fuel
consumption limits of the Air Permit, such annual limitation to
commence on November 15 of each Annual Period, (ii) Cogen's minimum
purchase obligations under the Gas Service Agreement, (iii) Con
Ed's requirements under the Power Purchase Agreement, and (iv)
Cogen's ability to utilize Butane to
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operate at least one of the Congeneration Facility's gas turbines
for a period of at least five (5) consecutive Days;
E. to give Exxon written notice by November 2 of each Annual Period of
scheduled shipments of Cogen Butane, if Supply Option A of Article
5 is selected, or of scheduled receipts of Exxon Butane, if Supply
option B of Article 5 is selected;
F. to purchase and have delivered to the Butane Storage Facilities the
shipments of Cogen Butane, if Supply Option A of Article 5 is
selected; and
G. to act with due diligence and use reasonable efforts to obtain and
maintain in effect all Governmental Authorizations required
hereunder and to cooperate with Exxon in seeking such Governmental
Authorizations.
ARTICLE 3
BUTANE DELIVERY AND TRANSFER FACILITIES
3.1 Facilities. Exxon will install the additional Butane Delivery
Facilities and Butane Transfer Facilities and have the Butane Delivery
Facilities ready for operation for testing service purposes by May 1, 1992; have
the Butane Delivery Facilities completed by September 1, 1992; and have
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the Butane Transfer Facilities ready for operation on or before November 30,
1992.
3.2 Information. Within sixty (60) Days of the execution of this Backup
Fuel Agreement, Exxon shall provide Cogen with (i) a detailed description of
the Butane Delivery Facilities and the Butane Transfer Facilities to be
constructed hereunder; (ii) the unloading and delivery capacity of the same;
(iii) the amount of capacity in the Butane Transfer Facilities that is expected
to be used for shipments of Cogen Butane and Exxon Butane; (iv) a detailed
estimate of the cost of such facilities; and (v) the construction, installation,
completion and operational schedule of the same.
3.3 Cost Responsibility. Cogen shall be responsible for reimbursing
Exxon for reasonable Exxon direct construction costs and reasonable third-party
costs of constructing and installing the Butane Delivery Facilities. Since the
parties contemplate that the Butane Transfer Facilities will be used exclusively
for shipments of Cogen Butane hereunder, Cogen shall also be responsible for
reimbursing Exxon for all reasonable Exxon direct construction costs and
reasonable third-party costs of constructing and installing the same. If, during
the first five (5) years of their operations, the Butane Transfer Facilities are
used for the unloading and/or delivery of Butane for use other than at the
Cogeneration Facility, however, Exxon shall reimburse Cogen for the pro rata
share of the costs reimbursed by Cogen of constructing and installing
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the Butane Transfer facilities to reflect the actual and anticipated use of the
same by entities other than Cogen. To determine such cost reimbursements, Exxon
shall maintain records of the volumes of Cogen Butane and Exxon Butane delivered
through the-Butane Transfer Facilities and provide copies of the same to Cogen
upon request. Exxon shall bill Cogen for the reasonable Exxon direct
construction costs and reasonable third-party costs of the Butane Delivery
Facilities and the Butane Transfer Facilities as they are constructed and
installed, which bills shall be paid by Cogen within thirty (30) Days after
Cogen's receipt of such bill(s).
ARTICLE 4
BUTANE STORAGE SERVICE
4.1 Service. During the term of this Backup Fuel Agreement, Exxon
agrees to receive from or on behalf of Cogen the Cogen Butane at Exxon's Butane
Storage Facilities, to store the same and to thereafter deliver the Cogen
Butane, less Shrinkage, and any Exxon Butane sold to Cogen hereunder, to Cogen
at Cogen's Receiving Point or at such other location as Exxon and Cogen shall
mutually agree. All Cogen Butane shipments will be commingled with the Exxon
Butane in Exxon's Butane Storage Facilities and, therefore, the actual
composition of the Butane delivered to Cogen's Receiving Point may differ from
Cogen's deliveries to Exxon's Butane Storage Facilities; provided, however, the
composition of the Butane
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delivered to Cogen's Receiving Point shall conform with the specifications set
forth in Exhibit B hereto.
4.2 Quantity. Exxon shall provide Cogen with 100,000 Barrels of storage
capacity in the Butane Storage Facilities during each Winter Season. Cogen may
commence injections of Cogen Butane into Exxon's Butane Storage Facilities on
and after November 15 of each Winter Season, unless an earlier injection date is
approved by Exxon, and must withdraw all Cogen Butane and Exxon Butane sold to
Cogen hereunder injected into Exxon's Butane Storage Facilities no later than
April 1 of each Annual Period.
4.3 Purchase Option. In lieu of requiring Cogen to withdraw by April 1
of each Annual Period the Cogen Butane injected into Exxon's Butane Storage
Facilities and Exxon Butane sold to Cogen hereunder, Exxon may elect to purchase
and Cogen may elect to sell the remaining volumes of such Butane at a mutually
agreeable price. If Exxon does not elect to purchase such Cogen Butane, Exxon
shall cooperate with Cogen in any efforts to sell the same to a third party, so
long as Cogen bears Exxon's cost of shipping such Butane to a third party.
Furthermore, Cogen and Exxon shall determine after each shipment of Cogen Butane
whether there are any volumes of Butane in the shipment vessel in excess of the
volumes Exxon is obligated to store hereunder. If any such volumes exist, Exxon
may agree to purchase and Cogen may agree to sell the same at a mutually
acceptable price.
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4.4 Injection Limitations. Upon receipt or delivery of Cogen Butane at
Exxon's Butane Storage Facilities, Exxon shall thereupon inject, or cause to be
injected into storage for Cogen's account, the volume of Cogen Butane so
delivered subject to the limitations set forth below. The quantity of individual
Butane shipments delivered by or on behalf of Cogen for storage in Exxon's
Butane Storage Facilities at any time shall be limited to approximately 100,000
barrels. After the initial fill of Butane under Section 5.2 or 5.3 by Exxon,
Cogen will be limited to delivering no more than one (1) nominal 100,000 Barrel
shipment of Butane every two (2) weeks, and no more than four (4) total Butane
shipments during each Winter Season, if Supply Option A in Section 5.2 is
selected.
4.5 Withdrawal Limitations. When Cogen desires the delivery of Cogen
Butane or Exxon Butane sold to Cogen hereunder, Cogen shall give at least two
(2) hours advance notice to Exxon's designee, to be named by Exxon, specifying
the volume of such Butane it desires delivered. Exxon shall thereupon deliver to
Cogen any and all volumes of Cogen Butane and Exxon Butane sold to Cogen
hereunder, up to the maximum withdrawal rate of 20,000 Barrels per Day, as
requested by Cogen.
4.6 Scheduling. The volumes of Cogen Butane injected into storage for
Cogen's account and the volumes of Cogen Butane and Exxon Butane sold to Cogen
hereunder withdrawn from storage and delivered to Cogen in any Day shall be
determined
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by the volumes of such Butane scheduled for injection or withdrawal in such Day
by dispatchers of Cogen and/or the Natural Gas Suppliers and Exxon. All Butane
deliveries by Cogen shall be coordinated through Exxon's Bayway Light Ends
Coordinator. Exxon shall keep accurate records of volumes injected and
withdrawn for Cogen's account, which records shall be made available to Cogen at
its request.
4.7 Shipment Variations. Cogen's Butane storage and shipment volumes may
exceed the 100,000 Barrel limitation by up to ten percent (10%) if storage
capacity is available in Exxon's Butane Storage Facilities. In such event the
annual storage reservation fee set forth in Section 4.8 shall be increased by an
equal percentage, unless Exxon has elected to purchase such excess volume
pursuant to Section 4.3 of this Backup Fuel Agreement.
4.8 Charges. On November 1 following the Date of Initial Commercial
operation, and thereafter on November 1 of each Annual Period during the term of
this Backup Fuel Agreement, Cogen shall pay Exxon an annual storage reservation
fee of $50,000, which fee will be adjusted annually based upon the CPI, using
the 1990 average as a base year. In addition, Cogen will pay Exxon a handling
fee of fifty cents ($0.50) per Barrel of Cogen Butane, which handling fee will
be adjusted annually based upon the PPI, using the 1990 average as a base year.
Cogen will also reimburse Exxon for all reasonable third-party costs incurred by
Exxon in connection with such
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deliveries of Cogen Butane, including demurrage and other costs as defined in
Exhibit C.
4.9 Butane Exchange. At least seven (7) Days prior to the scheduled
delivery date of a Cogen Butane shipment, Exxon will have the option to trade an
equal quantity of Butane owned by Exxon (of comparable quality) to Cogen for the
waterborne cargo. In such a case, any additional shipping, handling, disposal or
other costs of the waterborne cargo would be assumed by Exxon.
ARTICLE 5
WINTERTIME FUEL SUPPLY
5.1 Service Options. On or before September 1 of each Annual Period,
Exxon shall give Cogen written notice of the alternative backup fuel services
that Exxon will provide during the following Winter Season as described in
Sections 5.2 and 5.3 hereof. As part of both Supply Option A and Supply Option
B, Exxon will provide in Exxon's Butane Storage Facilities for Cogen's account
an initial fill of 100,000 Barrels of Exxon Butane, after Shrinkage, on November
15 of each Winter Season. Cogen shall have the right to withdraw from Exxon's
Butane Storage Facilities up to 20,000 Barrels per Day at a pressure of 450
psig, not to exceed 600 psig.
5.2 Supply Option A. After the initial fill of 100,000 Barrels of Exxon
Butane by Exxon pursuant to Section 5.1 above, all other Butane deliveries
during the
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ensuing Winter Season shall be provided by Cogen and shall be subject to the
provisions of Article 4 of this Backup Fuel Agreement.
5.3 Supply Option B. In addition to the initial fill of Exxon Butane
delivered by Exxon under Section 5.1 above, Exxon will provide Cogen with up to
two (2) Exxon Butane storage refills of 100,000 Barrels each, after Shrinkage,
but not to exceed the maximum necessary to refill Cogen's 100,000 Barrel Butane
Storage Facilities' capacity on each occasion; provided, however, Exxon agrees
to provide a total volume of Butane during each Winter Season sufficient to
satisfy Cogen's Butane supply obligations under the Gas Service Agreement. The
two (2) refills of Exxon Butane will be scheduled by Cogen prior to November 2
of each Annual Period, with each refill occurring no sooner than three (3) weeks
following the last fill or refill. If such refill dates are not specified by
Cogen by November 2, the refills will occur on December 15 and January 15 of
each Winter Season. The Parties may agree upon a third and fourth refill of
Exxon Butane for Cogen's storage capacity, with the prices and delivery schedule
for such refills to be negotiated within ten (10) Days of Exxon's receipt of
written notice of the request for such refills by Cogen, as provided in the Gas
Service Agreement. Cogen shall have the right to assume any Exxon Butane refill
purchase obligation, and to divert any shipment to a different facility,
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so long as such assumption and diversion is free of cost to Exxon.
5.4 Price. Except as provided in Section 5.5, the price for all Exxon
Butane under this Article 5 will be equivalent to the spot price of normal
Butane at Mont Belview, Texas, as expressed in Platt's Oilgram Price Report, on
Exxon's scheduled delivery date to Cogen, plus a premium of $2.94 per Barrel.
The premium will be adjusted annually based on the PPI, using the 1990 average
as a base year. Either Party shall have the right to reopen pricing negotiations
if the price set forth herein can be shown to differ by more than five percent
(5%) from the prevailing price of Butane delivered in 100,000 Barrel shipments,
including handling, to a facility such as Exxon's Complex in the northeast
United States.
5.5 Emergency Butane Use. If, due to emergency or abnormal operating
conditions during the Winter Season, Exxon must reduce its Butane inventory in
the Butane Storage Facilities, upon a written request from Exxon, Cogen agrees
to purchase and utilize Butane at the Cogeneration Facility each Day that such
emergency or abnormal operating conditions continue, subject to the following
conditions: (a) the volume utilized by Cogen shall be that required to operate
either one or two of the Cogeneration Facility's gas turbines each Day of
operation; (b) Exxon will provide Cogen at least seven (7) Days of prior written
notice of its emergency need to deliver Butane; and (c) Cogen's obligation to
take Butane deliveries is
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subject to (i) annual and instantaneous emission and/or consumption limits of
the Air Permit, such annual limitation to commence on November 15 of each Annual
Period, (ii) Cogen's minimum purchase obligations under the Gas Service
Agreement, (iii) Con Ed's requirements under the Power Purchase Agreement, and
(iv) Cogen's ability to utilize Butane to operate at least one of the
Cogeneration Facility's Gas turbines for a period of a t least five (5)
consecutive Days. Any Butane taken by Cogen under such conditions during the
Winter Season, at Cogen's option, shall be credited against the volumes of
Butane which Cogen is obligated to take during the following Summer Season and
will be priced pursuant to Section 6.2 hereof.
ARTICLE 6
SUMMERTIME FUEL SUPPLY
6.1 Quantity. At Exxon's election, after Cogen certifies in writing that
testing of the Butane burning systems at the Cogeneration Facility is complete
and acceptable to Cogen, Exxon shall deliver and Cogen shall purchase and
utilize at the Cogeneration Facility a total of 736,000 Barrels of Exxon Butane
during each Summer Season, subject to the following conditions: (a) when offered
by Exxon and accepted by Cogen, Cogen shall utilize whatever volumes are
required to operate one or two of the Cogeneration Facilities' gas turbines each
Day of operation; (b) Exxon will provide Cogen at least seven (7) Days prior
written notice of its desire to deliver
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such Butane; (c) Cogen shall have no obligation to take Butane on any particular
Day, so long as Cogen purchases the referenced total volume of Exxon Butane
during each Summer season; and (d) Cogen's obligation to take Butane deliveries
is subject to (i) annual and instantaneous emission and/or consumption limits of
the Air Permit, such annual limitation to commence on November 15 of each Annual
Period, (ii) Cogen's minimum purchase obligations under the Gas Service
Agreement, (iii) Con Ed's requirements under the Power Purchase Agreement, and
(iv) Cogen's ability to utilize Butane to operate at least one of the
Cogeneration Facility's Gas turbines for a period of at least five (5)
consecutive Days.
6.2 Price. Cogen shall pay Exxon, for the Exxon Butane that Cogen is
required to take under Section 6.1, a price equal to the price per Dekatherm
payable by Cogen to the Natural Gas Suppliers for Sales Service Gas under the
Gas Service Agreement.
6.3 Propane Substitution. At Exxon's request, Cogen shall be required
to purchase and utilize propane, instead of the Butane that it would otherwise
be required to take under Section 6.1, at an equivalent price per Dekatherm, if
(a) Cogen determines that it can use propane as an alternative backup fuel
without significant adverse effects on Cogen or the Cogeneration Facility; (b)
Cogen and Exxon mutually agree on the allocation between them of the cost of any
additional equipment necessary to use propane as a backup fuel at the
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cogeneration Facility; (c) Exxon provides sufficient notice of the substitution
to permit Cogen to make the necessary equipment modifications and control system
adjustments; and (d) the use of propane is authorized under the Air Permit. In
the event propane is utilized as a substitute for Butane hereunder, any
provisions of this Agreement applicable to Butane, other than price, will apply
to the use of propane.
6.4 Scheduling. Thirty (30) Days prior to the start of a Summer Season,
Exxon shall provide Cogen with a written estimate of the volumes of Butane to be
delivered under Section 6.1 hereof during the ensuing Summer Season. Such
estimate may be modified by mutual agreement of the Parties.
ARTICLE 7
TESTING SERVICE
7.1 Prior to the Date of Initial Commercial Operation, or until Cogen
certifies in writing that testing of the Butane burning systems of the
Cogeneration Facility is complete and acceptable to Cogen, whichever occurs
later, Exxon will supply, at Cogen's election, up to 40,000 Barrels of Exxon
Butane for the operational testing of the Cogeneration Facility. The price for
such Butane will be the same as that set forth in Sections 5.4 and 6.2, as
appropriate, of this Backup Fuel Agreement. If Exxon is required to transport
Butane for testing by rail, however, then the Butane will be priced at the cost
to Exxon including the cost of shipping.
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The maximum delivery rate for such Butane will be 20,000 Barrels per Day at 450
psig. Cogen will advise Exxon of the schedule of requirements for testing
service and, if Cogen requires testing service prior to May 1, 1992, Exxon shall
use best efforts to provide such service but will not be required to provide
testing service prior to May 1, 1992.
ARTICLE 8
PAYMENT AND ACCOUNTING
8.1 Payment. On or before the tenth (10th) Day of each month, Exxon
will calculate all sums payable to it by Cogen for storage services and backup
fuel deliveries at Cogen's Receiving Point or in the Butane Storage Facilities,
as appropriate, during the preceding month and will deliver its invoice to Cogen
showing thereon full billing details. The invoice will be due and payable to
Exxon by Cogen by the twenty-fifth Day of the month. If Exxon fails to render an
invoice by the due date for such invoice, the relevant due date of the payment
by Cogen shall be extended by a corresponding number of Days. If an index, rate,
publication or other source of information required for the adjustment of any
price, charge or credit under this Backup Fuel Agreement is unavailable on the
effective date for such adjustment, Exxon's invoice will be calculated using the
best available estimate of such adjustment. When the information necessary for
calculation of the actual adjustment becomes available, such invoice will be
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recalculated and any net charge or credit resulting from the recalculation will
be reflected on the next month's invoice.
8.2 Mode of Payment. Each payment under this Backup Fuel Agreement will
be made by interbank wire transfer to the bank address designated in writing by
Exxon or to such other address as Exxon may from time to time designate by
written notice.
8.3 Auditing. Each Party will have the right at reasonable hours to
examine the books, records, and charts of the other party to the extent
reasonably necessary to verify the accuracy of any invoice, payment,
measurement, calculation, or determination made pursuant to the provisions of
this Backup Fuel Agreement; provided, that if any such examination requires
access to confidential information, the release of which would be harmful to
Exxon's or Cogen's competitive position, Exxon or Cogen, as the case may be,
will select an examiner who is not in a position to benefit from such
confidential information and such examiner will execute an agreement to maintain
the confidentiality of the information to be examined. If any such examination
REVEALS, or if either Party discovers, any error or inaccuracy in its own or the
other Party's invoice, calculation, measurement or determination, then proper
adjustment and correction thereof will be made as promptly as practicable
thereafter, except that no adjustment or correction will be made if more than
one year has elapsed since the error or inaccuracy occurred.
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8.4 Failure to Pay. If Cogen fails to pay any amount payable to Exxon
hereunder when due, interest thereon will accrue and be payable from the date on
which payment was due until the date payment is made. The rate of such interest
will be the Prime Rate published weekdays in the Wall Street Journal, plus two
percent (2%), provided that the interest rate provided herein may never exceed
the highest rate of interest permitted by applicable law. If any such failure to
pay continues for ten (10) Days after receipt by Cogen and Financier of Exxon's
written protest, Exxon may suspend its performance under this Backup Fuel
Agreement and, in addition, if such failure to pay continues for thirty (30)
Days, Exxon may terminate this Backup Fuel Agreement upon written notice to
Cogen and the Financier; provided, however, that if Cogen in good faith disputes
the amount of any such bill or any part thereof, and pays to Exxon such amount
as it concedes to be correct, and at any time thereafter within ten (10) Days of
a demand by Exxon, furnishes good and sufficient surety bond of the Financier or
other security acceptable to Exxon, guaranteeing payment to Exxon of the amount
in dispute, then Exxon will not be able to suspend performance under this Backup
Fuel Agreement or seek to terminate this Backup Fuel Agreement. The exercise of
any such right will be in addition to any and all remedies otherwise available
to such Party.
8.5 Overpayment. If Cogen pays any amount shown due and owing upon the
invoice of Exxon, and such amount is
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subsequently determined by agreement, arbitration or judgment of court not to
have been due and owing when paid, Exxon will refund such amount to Cogen
together with interest from the date of payment to the date of refund at the
Prime Rate published weekdays in the Wall Street Journal, plus two percent (2%),
provided that the interest rate provided herein may never exceed the highest
rate of interest permitted by applicable law.
8.6. Records. Both Cogen and Exxon shall keep all invoices, receipts,
charts, computer printouts, punchcards, magnetic tapes, and other records
related to the volume and price of storage services and Butane sales made under
this Backup Fuel Agreement. Such records shall be made available for inspection
and copying by either Party or their representatives upon reasonable notice.
Each Party shall keep all such materials for a minimum of three (3) years from
the date of their preparation.
ARTICLE 9
POSSESSION, TITLE AND WARRANTY
9.1 Possession. Exxon's control and possession of Cogen Butane for the
account of Cogen shall commence upon passage of the Cogen Butane, Barrel by
Barrel, from railroad tankcar or vessel tankage used for the purpose of
delivering Cogen Butane to Exxon at the Butane Transfer Facilities and shall
terminate upon passage of the Cogen Butane which Cogen
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elects to receive, Barrel by Barrel, at Cogen's Receiving Point. Cogen through
its marine or rail transporter of Butane shall be in control and possession of
the Cogen Butane delivered hereunder, and responsible for any damage or injury
caused thereby, until the same shall have been delivered into the shore
receiving flange at the end of the Butane loading arm of the Butane Transfer
Facilities (or the railroad tankcar receiving point) and after both Cogen Butane
and Exxon Butane shall have been delivered to Cogen from the Butane Delivery
Facilities at Cogen's Receiving Point. Exxon shall be in control and possession
of the Exxon Butane until delivery to Cogen at Cogen's Receiving Point. Exxon
shall be responsible for any damage or injury caused by the Cogen Butane and
Exxon Butane during its possession.
9.2 Title. Title to the Cogen Butane delivered by Cogen to Exxon at the
Butane Transfer Facilities shall at all times remain in Cogen. Title to the
Exxon Butane (other than the initial annual fill of Exxon's Butane Storage
Facilities for use during the ensuing Winter Season in accordance with Section
2.1C hereof, and any subsequent fills should Exxon elect Supply Option B
pursuant to Section 5.3) shall pass when delivered at Cogen's Receiving Point.
Title to the Exxon Butane supplied pursuant to Section 2.1C and any subsequent
fills pursuant to Section 5.3 hereof shall pass when Exxon shall have notified
Cogen in writing that the Exxon Butane has
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been placed in the Butane Storage Facilities and Cogen shall have made payment
therefor.
9.3 Warranty. Cogen, as to all Cogen Butane delivered by it or on its
behalf to Exxon, and Exxon, as to all Exxon Butane delivered by it to Cogen,
warrant for themselves, their successors and assigns, that each will at the time
of delivery to the other party, have good and merchantable title to all such
Butane or the good right to deliver such Butane free and clear of all liens,
encumbrances and claims whatsoever, with the exception of the security interest
in Cogen's Butane held by the Financier or any successors-in-interest of the
Financier. Each party will indemnify the other, defend and save it harmless from
all suits, actions, debts, accounts, damages, costs, losses and expenses arising
at any time from or out of adverse claims to such Butane by any third party or
parties, including claims by any third party or parties for any royalties,
taxes, license fees or charges applicable to such Butane or to the delivery
thereof.
9.4 Requirements For Butane Shipments. All deliveries of Cogen Butane
to the Butane Transfer Facilities shall be subject to the Exxon and U.S. Coast
Guard LPG Ship Requirements set forth in Exhibit C, attached hereto and made a
part hereof for all purposes.
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ARTICLE 10
TERM
10.1 Effective Date. This Backup Fuel Agreement will be effective upon
its execution, but certain rights and obligations of each Party hereto will not
become effective, if at all, until the conditions relating to such Party's
performance defined in Article 12 are satisfied. When the conditions relating to
Cogen's obligations to purchase and store Butane are satisfied, Cogen will
provide a written notice to Exxon specifying the Date of Initial Commercial
operation. Subject to the provisions of Section 10.5, in no event will the term
of the Backup Fuel Agreement continue beyond the Evergreen Period.
10.2 Base Term. The Base Term of this Backup Fuel Agreement will
commence on the Date of Initial Commercial Operation and will continue for
twenty-five (25) Annual Periods, unless sooner terminated in accordance with the
terms hereof.
10.3 Renewal Terms. Following the completion of the twenty-five (25)
year Base Term, this Backup Fuel Agreement will be automatically renewed for two
successive Renewal Terms of five Annual Periods each, the first of which will
commence with the expiration of the Base Term, unless Cogen elects to terminate
this Backup Fuel Agreement at the expiration of the Base Term or at the
expiration of the first five-year Renewal Term. Termination by Cogen in
accordance with the provisions
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of this Article 10 will be valid only if Cogen provides Exxon written notice of
its intent to terminate at least four (4) Annual Periods prior to the expiration
of the Base Term or first five-year Renewal Term, as the case may be.
10.4 Evergreen Period. After the expiration of the second five-year
Renewal Term, this Backup Fuel Agreement will automatically extend into an
Evergreen Period which will continue until December 31, 2048, unless either
Party elects to terminate the Evergreen Period earlier. Either Party may
terminate the Evergreen Period at any time by giving at least five (5) Annual
Periods prior written notice to the other Party. In that event, termination of
the Evergreen Period will be effective five (5) years after the notice is given,
or at such other time as the Parties may agree. If neither Party terminates the
Evergreen Period earlier, the Evergreen Period will automatically terminate on
December 31, 2048. The automatic termination date of December 31, 2048, may not
be extended for any reason, including Force Majeure, except as provided in
Section 10.5.
10.5 Butane Disposal Period. Cogen shall cause the Cogen Butane and
Exxon Butane purchased by Cogen hereunder to be removed from the Butane Storage
Facilities prior to the expiration of this Backup Fuel Agreement. In the event
Cogen fails to so remove the Cogen Butane and Exxon Butane purchased by Cogen
hereunder prior thereto, Exxon shall have the right, at Exxon's option, to
either (i) dispose of such Cogen Butane
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and Exxon Butane purchased by Cogen hereunder in a commercially reasonable
manner and remit the proceeds of such sale, less any reasonable expenses
incurred by Exxon in connection with such sale, to Cogen or (ii) purchase such
Cogen Butane and Exxon Butane purchased by Cogen hereunder for its own account
at the then prevailing market price for Butane in the Linden, New Jersey area.
If, however, Cogen is prevented from removing the Cogen Butane and Exxon Butane
purchased by Cogen hereunder as a result of any cause within the reasonable
control of Exxon, Exxon shall be obligated to purchase the Cogen Butane and
Exxon Butane purchased by Cogen hereunder from Cogen at the then prevailing
market price for Butane in the Linden, New Jersey area.
ARTICLE 11
MEASUREMENT AND DELIVERY CONDITIONS
11.1 Measurement Facilities. Exxon's Butane Delivery Facilities shall
include a measuring station as depicted in Exhibit A hereto, which shall be
maintained and operated by Exxon. The measuring station shall be so equipped
with such meters, recording gauges, or other types of meter or meters of
standard make and design commonly acceptable in the industry, as are necessary
to accomplish the accurate measurement of Butane delivered by Exxon at Cogen's
Receiving Point hereunder. The determination of quantities delivered by Exxon
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to Cogen shall be based on such meter or gauge readings or the determination of
such quantities by standard practices.
11.2 Facilities Testing. Exxon, at Exxon's sole expense, shall test all
measuring equipment used in measuring deliveries hereunder at least quarterly.
Cogen shall have the right, at its sole expense, to request a test of any and
all such measuring equipment at any time between such quarterly tests. Each
Party shall give reasonable notice, but in no event less than five (5) business
Days notice in writing, to the other Party of tests of the accuracy of such
measuring equipment so that each Party may conveniently (at its own expense)
have its representative present at such tests. If such notice has been given,
the Party giving the notice may proceed whether or not the other Party is
present, and such test results shall be used until the next quarterly test or
requested test. If upon any test, the metering equipment is found to be
inaccurate by two percent (2%) or more, any measurement based upon such
registration shall be corrected at the rate of such inaccuracy for any period of
inaccuracy which is definitely known or agreed upon, or if not known or agreed
upon, then for a period extending back to one-half of the time elapsed since the
day of the last meter test. Following any such test, any measuring equipment
found to be inaccurate to any degree shall be adjusted immediately to measure
accurately.
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11.3 Shipment Accounts. All shipments of Cogen Butane for Cogen's account
shall be reported in Barrels corrected for temperature and specific gravity.
Upon receipt of Cogen Butane by Exxon at the Butane Transfer Facilities for
injection into the Butane Storage Facilities for Cogen's account, Exxon shall
prepare a Notification of Receipt showing the data necessary for the
identification of the incoming shipment. The Notification of Receipt will
include Cogen's name, date of receipt, mode of shipment and quantity of Cogen
Butane received for injection, as determined by an independent inspector using
ship's figures or Exxon's metering calculations. When quantities of Cogen Butane
and Exxon Butane sold to Cogen hereunder are withdrawn from the Butane Storage
Facilities and delivered to Cogen at Cogen's Receiving Point, Exxon shall
prepare a Notification of Delivery showing the data necessary for the
identification of the delivery. The Notification of Delivery will include
Cogen's name, date of delivery and quantity of Cogen Butane and Exxon Butane
delivered using Exxon's metering calculations. A copy of all Notifications of
Receipt and Notifications of Delivery shall be delivered to Cogen by Exxon
within ten (10) days after each receipt or delivery. Such notices shall be
deemed to be correct for all purposes unless objection thereto is given to
either Party by the other Party hereto within six (6) months after delivery of
such notice to Cogen. The Notices of Receipt and Notices of Delivery shall be
used to determine the amount of Cogen Butane
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contained in Exxon's Butane Storage Facilities at any given time.
11.4 Pressure. Butane or other backup fuel delivered to Cogen at Cogen's
Receiving Point shall be at a pressure sufficient to enter Cogen's facilities,
which shall be 450 psig, plus or minus 20 psig, but not higher than 600 psig.
11.5 Heating Content. The heating content of the Butane or other backup
fuel delivered by Cogen to Exxon and by Exxon to Cogen hereunder shall be
determined by Exxon in accordance with standard testing methods for each
shipment of Cogen Butane and on a daily basis for Exxon Butane delivered for
summer use. There shall be one test or sample by Exxon for each curtailment
period which requires the utilization of Butane in the winter. The results of
any tests to determine heating content shall be corrected to reflect actual
conditions of delivery. Any difference by an amount equal to or greater than
plus or minus 1/10% between the heating content of the Cogen Butane delivered by
Cogen to Exxon and, after commingling with Exxon Butane, the Cogen Butane
delivered by Exxon to Cogen at Cogen's Receiving Point shall be taken into
account by adjusting the quantity of the Butane delivered hereunder. if the
heating content of the Exxon Butane delivered during the Winter Season to Cogen
at Cogen's Receiving Point falls below the heating content specified in Exhibit
B hereto, the quantity of such Exxon Butane shall be adjusted to reflect such
lower heating content.
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11.6 Quality. Exxon's Butane Storage Facilities shall be operated in
such a manner that the Cogen Butane delivered to Cogen out of Exxon's Butane
Storage Facilities shall not be materially changed in quality from that of the
cogen Butane delivered by Cogen to such facilities, except for any change caused
by commingling the Cogen Butane with Exxon Butane. Exxon's deliveries of Butane
hereunder shall comply with the specifications set forth in Exhibit B. All Cogen
Butane delivered to Exxon shall comply with the specifications set forth in
Exhibit B. Exxon and Cogen shall provide a certificate of analysis to the other
for their respective deliveries of Butane hereunder. Exxon reserves the right,
at Exxon's sole expense, to perform an analysis of the Cogen Butane at Exxon's
Butane Storage Facilities prior to unloading and Exxon may refuse receipt of any
Cogen Butane that is found to be contaminated or not in conformity with such
qualities.
ARTICLE 12
ACTIONS REQUIRED TO SATISFY CERTAIN CONDITIONS
12.1 Governmental Authorizations. Cogen's obligations set forth herein
may be subject to the receipt of Governmental Authorizations. Cogen and Exxon
agree to act with due diligence and cooperate with each other in seeking any
such approvals or authorizations. Exxon agrees that the terms and conditions of
such orders, permits and authorizations must be acceptable to Cogen in its sole
discretion. Upon Cogen's
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receipt of any regulatory authorization or governmental permit that has a
potential adverse impact on Exxon, Cogen shall transmit to Exxon a copy of such
authorization or permit within ten (10) Days of receipt thereof.
12.2 Construction of Facilities. Cogen's obligations to purchase and
store Butane hereunder are subject to the construction and placing in service of
the Cogeneration Facility and other related facilities. To the extent Exxon is
responsible for such construction, Exxon agrees, subject to satisfaction of any
other applicable conditions herein relating to the performance of its
obligations hereunder, to act with due diligence in constructing and placing in
service such facilities.
12.3 Mutual Cooperation. Both Parties agree to cooperate with each other
and to keep each other informed regarding their progress in carrying out their
respective obligations under this Backup Fuel Agreement.
ARTICLE 13
FORCE MAJEURE
13.1 Definition. Except for the obligations of a Party to make payments
when due under this Backup Fuel Agreement, the Parties will be excused from
delays in performance or failures to perform their respective obligations
hereunder and will not be liable in damages or otherwise, if and only to the
extent that such delays or failures are caused
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by Force Majeure. The term "Force Majeure" means any cause beyond the reasonable
control of the affected Party, including, without limitation, storm, flood,
lightning, drought, earthquake, fire, explosion, civil disturbance, labor
dispute, act of God or the public enemy, or action of a court or governmental
authority. Financial distress of either Party, late delivery of materials or
equipment (unless itself caused by Force Majeure), or inadequate performance by
contractors (unless itself caused by Force Majeure) will not be considered Force
Majeure.
13.2 Burden of Proof. The burden of proof as to whether an event or
condition of Force Majeure has occurred will be upon the Party claiming that it
should be excused from performing its obligations hereunder due to the
occurrence of such an event or condition.
13.3 Condition. If either Party relies on Force Majeure -as a basis for
being excused from performance of its obligations under this Backup Fuel
Agreement, then the Party. relying on Force Majeure will:
A. Give prompt oral notice to the other Party, confirmed promptly in
writing, of the occurrence of the event or condition, with an
estimate of its expected duration and probable impact on the
performance of its obligations hereunder;
B. Exercise all reasonable efforts to continue to perform its
obligations hereunder;
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C. Expeditiously take action to correct or cure the event or
condition excusing performance to the extent reasonably
practicable;
D. Exercise all reasonable efforts to mitigate or limit damages to
the other Party; and
E. Give prompt oral notice to the other Party, confirmed promptly in
writing, of the cessation of the event or condition giving rise to
its excusal from performance.
13.4 Labor Disputes. This Article 13 will not require the settlement of
any strike, walkout, lockout, or other labor dispute on terms which, in the
judgment of the Party involved, are contrary to its interests. The settlement of
such labor disputes will be at the sole discretion of the Party involved.
ARTICLE 14
LIMITATION ON LIABILITY AND DISTRIBUTION OF RISKS
14.1 Limitation of Liability. Neither Exxon nor Cogen, nor their
respective officers, directors, partners, agents, employees, Affiliates, nor
their successors or assigns will be liable under this Backup Fuel Agreement to
the other Party or its officers, directors, partners, agents, employees,
Affiliates, or their successors or assigns, for any punitive, indirect, or
consequential losses, damages, or expenses, including loss of profits.
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14.2 Distribution of Risks Between Exxon and Cogen. Cogen will be
responsible for, and will indemnify, hold harmless and defend Exxon, its
officers, directors, partners, agents, employees, affiliates and their
representatives from and against any and all claims, losses, damages, penalties,
causes of action, suits and liability of every kind, including all expenses of
litigation, court costs and attorneys' fees from injury to or death to persons
(including Cogen's employees) or for damages or injury to property arising out
of the sale, transportation, delivery, transfer, storage or use of Butane while
the Butane is in Cogen's control and possession as set forth in Article 9 hereof
(unless such loss or damage results from the sole negligence or solely from the
willful misconduct of Exxon, its officers, directors, partners, agents,
employees, Affiliates or other representatives), and Exxon will be responsible
for, and will indemnify, hold harmless and defend Cogen, its officers,
directors, partners, agents, employees, affiliates and their representatives
from and against any and all claims, losses, damages, penalties, causes of
action, suits and liability of every kind, including all expenses of litigation,
court costs and attorneys' fees from injury to or death to persons (including
Exxon's employees) or for damages or injury to property arising out of the sale,
transportation, delivery, transfer, storage or use of Butane while the Butane is
in Exxon's control and possession as set forth in Article 9 hereof (unless such
loss or damage results
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from the sole negligence or solely from the willful misconduct of Cogen, its
officers, directors, partners, agents, employees, Affiliates or other
representatives). Notwithstanding anything in this Section 14.2 appearing to the
contrary, neither party hereto shall be relieved from liability (regardless of
whether possession and control of the Butane may at the time of loss or damage
be in the other party) for any losses or damages arising from the failure of
such party to deliver Butane meeting the specifications set forth in Exhibit B.
14.3 No Effect on Other Agreements. Other than damage or injury caused
by Cogen Butane and Exxon Butane during possession by Cogen or Exxon, nothing in
this Article 14 is intended to affect the liability and distribution of risk
provisions as set forth in the Ground Lease Agreement.
ARTICLE 15
INSURANCE
15.1 General Requirements. Cogen will carry at the effective date of
this Backup Fuel Agreement and will use its best efforts to maintain in force to
the end of this Backup Fuel Agreement, the following insurances with companies
satisfactory to Exxon:
(i) Workers' Compensation and Employer Liability For all its
employees who may at any time be on Exxon's Complex, workers'
compensation
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and employer's liability with limits of at least $100,000 per
accident;
(ii) Comprehensive General Liability. Cogen's normal and customary
comprehensive general liability insurance (including, without
limitation, contractual) with limits of at least $10 million
per occurrence for bodily injury and $10 million per occurrence
for property damages; and
(iii) Automobile Liability. Automobile liability insurance covering
owned, non-owned, and rented vehicles which may at any time
operate on Exxon's Complex, with limits of at least $10 million
for injury, death, or property damage resulting from each
occurrence.
Nothing contained in this Section 15.1 shall limit or waive Cogen's legal or
contractual responsibilities to Exxon or others.
15.2 Notices and Examination. If requested by Exxon, Cogen will have its
insurance carriers furnish to Exxon insurance certificates specifying the types
and amounts of coverage in effect, the expiration dates of each policy, and a
statement that no insurance will be cancelled or materially changed during the
term of this Backup Fuel Agreement without thirty (30) Days prior written notice
to Exxon. If requested
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by Exxon, Cogen will permit Exxon to examine the insurance policies, or at
Exxon's option, Cogen will furnish Exxon with certified copies of the insurance
policies.
15.3 Self-Insurance. Upon showing reasonable evidence of financial
ability to assume loss to Exxon, Cogen' may self-insure any or all of the
coverages shown above.
ARTICLE 16
GOVERNMENTAL AUTHORIZATIONS
16.1 Maintenance of Governmental Authorizations. The Parties will obtain
and maintain in effect all necessary Governmental Authorizations for their
activities under this Backup Fuel Agreement and will carry on their operations
in material compliance with all such Governmental Authorizations. Each Party
will cooperate with the other Party in obtaining, maintaining and complying with
any Governmental Authorizations necessary under this Backup Fuel Agreement.
Cogen will use reasonable efforts, but will have no obligations, to keep Exxon
advised of significant developments with respect to its major Governmental
Authorizations relating to the Cogeneration Facility.
16.2 Status of Cogeneration Facility. Cogen will promptly give Exxon
written notice if the Cogeneration Facility loses its qualifying cogeneration
facility status.
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ARTICLE 17
TERMINATION; DEFAULTS; RIGHT TO CURE
17.1 Termination of Other Agreements. Subject to the provisions of
Section 10.5, this Backup Fuel Agreement will automatically terminate if and
when the Improvements Removal Period, as defined in the Ground Lease Agreement,
commences or if and when the Ground Lease Agreement terminates. This Backup Fuel
Agreement will not terminate when the Steam Sale Agreement terminates, unless
the Steam Sale Agreement is terminated for cause under Section 11.5 thereof or
the termination of the Steam Sale Agreement triggers a termination of the Ground
Lease Agreement.
17.2 Change of Operations. If Exxon ceases all or substantially all
refining operations at Exxon's Complex, Exxon will have the option to terminate
this Backup Fuel Agreement six (6) months following Cogen's and the Financier's
receipt of Exxon's written termination notice, but only if Cogen, Exxon and the
Financier agree to mutually acceptable alternate arrangements for the delivery
of Butane to Cogen during the Winter Season. Cogen and Exxon agree that a
commitment by Exxon to have a third-party, acceptable to Exxon, Cogen and the
Financier, provide the winter backup fuel requirements hereunder until the
beginning of the Evergreen Period constitutes a mutually acceptable alternate
arrangement.
17.3 Other Exxon Rights to Terminate. Subject to Section 17.6, Exxon will
also have the right, at its option, to
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terminate this Backup Fuel Agreement upon the occurrence of any of the following
events:
A. Cogen defaults by failing to make timely payment pursuant to Article
8 hereof, which failure continues for thirty (30) Days after Exxon
gives Cogen and the Financier identified in Section 17.6 written
notice of such failure to pay; or
B. Cogen defaults by failing substantially to perform any material
obligation under this Backup Fuel Agreement other than the payment
of storage and supply charges, which failure continues for a period
of sixty (60) Days after Exxon gives Cogen and the Financier written
notice of such nonperformance; provided, however, if such default
may not reasonably be cured within such sixty (60) Day period, this
Backup Fuel Agreement will not terminate pursuant to this Section
17.3B, if Cogen diligently commences to cure such default within
such sixty (60) Day period and for so long as Cogen diligently
continues such efforts, unless the default continues uncured for six
(6) months after Exxon gives Cogen and the Financier such written
notice; or
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C. Exxon terminates the Steam Sale Agreement because of default by
Cogen; or
D. Cogen fails to complete the construction of the Cogeneration
Facility by January 1, 1998, in which event Exxon may terminate this
Backup Fuel Agreement by giving Cogen prompt written notice; or
E. Exxon terminates the Ground Lease Agreement pursuant to Article 16.1
thereof or the Steam Sale Agreement pursuant to Article 2.3 of such
agreement (dealing with failure by Cogen to commence Commercial
Operations by July 1, 1993, or make alternate arrangements), or
Cogen ceases to be obligated to comply with the Ground Lease
Agreement or Steam Sale Agreement for any reason other than a
termination of such Agreement (i) by Cogen due to a default by Exxon
thereunder, (ii) by Exxon (only) at the expiration of "Base Term"
(as defined in such Agreement) or of the first five year renewal
thereof, (iii) by Cogen because Exxon's External Steam Requirements
(as defined in such Agreement) from Cogen under the Steam Sale
Agreement have fallen below the level specified in Section 11.2E
thereof and the other conditions in such Section have been
satisfied; or (iv) by agreement of Cogen and Exxon; or
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F. This Backup Fuel Agreement enters its Evergreen Period and Exxon
gives Cogen at least five years written notice of termination
pursuant to Article 10.
17.4 Cogen's Right to Terminate. Cogen will have the right, at its
option to terminate this Backup Fuel Agreement upon the occurrence of any of the
following events:
A. Exxon defaults by failing substantially to perform any material
obligation under the Ground Lease Agreement, which failure
continues for a period of sixty (60) Days after Cogen gives
Exxon and its lenders and mortgagees identified in Section 16.4
thereof written notice of such nonperformance, subject to the cure
rights thereunder; or
B. Cogen terminates the Steam Sale Agreement because of default by
Exxon; or
C. Cogen terminates the Steam Sale Agreement under Article 11.2E of
such agreement (dealing with decreased need for Steam by Exxon); or
D. The Power Purchase Agreement is terminated for any reason and is
not replaced by a similar agreement to sell power; or
E. Cogen is unable to receive or maintain the Governmental
Authorizations necessary lawfully to construct, operate, and
maintain the Cogeneration
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Facility due to Force Majeure (and not due to repeated violations
by Cogen of such authorizations for reasons other than Force
Majeure); or
F. The Demised Premises, the Interconnection Areas, the Utility
Areas, or the Access Rights of Way, all as defined in the Ground
Lease Agreement, cannot be used for Cogen's purposes as specified
in Article 6 thereof and the Parties cannot relocate the
Interconnection Areas, Utility Areas or Access Rights of Way
pursuant to Section 2.6 thereof to their mutual satisfaction, or if
Cogen is unable (other than temporarily unable due to an emergency)
to obtain water, gas, or standby power for the Cogeneration
Facility; or
G. There is a partial taking allowing termination in accordance with
Section 13.3 of the Ground Lease Agreement; or
H. This Backup Fuel Agreement continues to the end of the Base Term,
or either Renewal Term, or into the Evergreen Period and Cogen
gives any of the notices of termination specified in Article 10.
I. Exxon defaults by failing substantially to perform any material
obligation under this Backup Fuel Agreement, which failure
continues for a period of sixty (60) Days after Cogen gives Exxon
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written notice of such nonperformance; provided, however, if such
default may not reasonably be cured within such sixty (60) Day
period, this Backup Fuel Agreement will not terminate pursuant to
this Section 17.4I, if Exxon diligently commences to cure such
default within such sixty (60) Day period and for so long as Exxon
diligently continues such efforts, unless the default continues
uncured for six (6) months after Cogen gives Exxon such written
notice.
Any notice from Cogen to Exxon of termination of this Backup Fuel Agreement will
be effective only if such notice either (i) is joined in by the Financier in
writing, if there is a Financier then in existence, or (ii) certifies on its
face that there is no Financier.
17.5 Automatic Termination. This Backup Fuel Agreement will
automatically terminate as of the effective date set forth in Section 17.7 below
if
A. The Backup Fuel Agreement continues in effect until the end of the
Evergreen Period; or
B. The Ground Lease Agreement terminates because of a full taking by
competent authority of the Leased Premises, as described in
Article 13 thereof; or
C. This Backup Fuel Agreement is rejected pursuant to Section 365 of
the Bankruptcy Code of 1978, as
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amended, or any successor provision thereto, in a case wherein
Cogen is the debtor.
17.6 The Financier, Lenders and Mortgagees. Exxon will not have the
right to terminate this Backup Fuel Agreement for default pursuant to Sections
17.3A, 17.3B, or 17.3C above, until Exxon (i) has provided the Financier
substantially the same notices which Exxon is obligated to provide to Cogen
pursuant to Sections 17.3A or 17.3B, or 17.7A; and (ii) has provided the
Financier the same right to cure such default as Cogen; and (iii) in the case of
defaults which are susceptible of being cured only if the Financier has access
to the Cogeneration Facility and the Leased Premises (and only in the case of
such defaults), has provided the Financier six (6) additional months subsequent
to the end of the period for the cure of any such default in Section 17.3B,
without extension for any period contemplated in Article 13, to cure such
default, provided that the Financier has pursued and continues to pursue with
diligence, continuity and good faith all actions to enable the Financier to
obtain access in order to cure, and to cure, such default. Exxon and Cogen
hereby grant to the Financier a non-exclusive license, irrevocable for the term
of this Backup Fuel Agreement, to have access to and to use the Cogeneration
Facility and the Leased Premises for the purpose of curing any default by Cogen
under clause (ii) above, or under Article 16 of the Ground Lease Agreement or
Article 11.4A (ii) of the Steam Sale Agreement, in any case in which
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such default is not subject to cure in a reasonably practicable manner without
access to the Cogeneration Facility and the Leased Premises. Cogen will have no
right to terminate this Backup Fuel Agreement pursuant to Section 17.4A or 17.4I
above, until Cogen (i) has provided any lender to whom Exxon has assigned this
Backup Fuel Agreement to secure a loan and has provided any mortgagee holding a
mortgage on all or any part of Exxon's Complex substantially the same notices
which Cogen is obligated to provide to Exxon pursuant to Section 17.4A or 17.4I,
and (ii) has provided such lender or mortgagee the same right to cure as Exxon,
provided that Exxon has previously given Cogen actual notice of the appropriate
contact person and address for any such lender or mortgagee.
17.7 Effective Date of Termination.
A. If an event described in Sections 17.3A or 17.3B occurs, or if the
termination described in Section 17.3C occurs, Exxon may promptly
give Cogen a written notice of termination which will be effective
upon receipt, subject to any cure period described therein.
B. If Cogen fails to complete the construction of the Cogeneration
Facility by the time provided in Section 17.3D, Exxon may give
Cogen the written notice of termination provided for in Section
17.3D, which will be effective upon
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receipt, subject to any cure period described therein.
C. If Exxon terminates the Ground Lease Agreement pursuant to Article
16.1 thereof or the Steam Sale Agreement pursuant to Article 2.3
thereof after the date of this-Backup Fuel Agreement, or if Cogen
ceases to be obligated to comply with the Ground Lease Agreement or
Steam Sale Agreement for any reason other than as specified in
Section 17.3E, in each case, Exxon may give Cogen prompt written
notice that Exxon is electing to terminate this Backup Fuel
Agreement as well, which will be effective upon receipt, subject to
any cure period described therein.
D. If Exxon gives Cogen notice of termination of this Backup Fuel
Agreement during the Evergreen Period pursuant to Article 10, this
Backup Fuel Agreement will terminate as provided in Article 10.
E. If a default described in Section 17.4A occurs, Cogen may promptly
give Exxon a second written notice of termination, which will be
effective upon receipt, subject to any cure period described
therein.
F. If any event described in Section 17.4B or 17.4C occurs, Cogen may
give Exxon prompt written
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notice of termination, which will be effective upon receipt,
subject to any cure period described therein.
G. If any event described in Sections 17.4D, 17.4E, 17.4F or 17.4G
occurs, Cogen may give Exxon prompt written notice, which will be
effective upon receipt, subject to any cure period described
therein.
H. If Cogen gives Exxon notice of termination of this Backup Fuel
Agreement during the Base Term, either Renewal Term, or during the
Evergreen Period pursuant to Article 10, this Backup Fuel Agreement
will terminate at the end of the subject period.
I. If the Evergreen Period continues in effect until December 31,
2048, this Backup Fuel Agreement will terminate on such date,
subject to the extension permitted for the disposition of Cogen
Butane and Exxon Butane sold to Cogen hereunder, if any.
J. If there is a full taking as described in Section 13.2 of the
Ground Lease Agreement, this Backup Fuel Agreement will terminate
on the date the governmental authority requires the Cogeneration
Facility to be shut down.
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K. If this Backup Fuel Agreement is rejected pursuant to Section 365
of the Bankruptcy Code of 1978, as amended, or any successor
provision thereto, in a case wherein Cogen is the debtor, this
Backup Fuel Agreement will terminate on the effective date of such
rejection.
L. If an event described in Section 17.41 occurs, Cogen may promptly
give Exxon a written notice of termination which will be effective
upon receipt, subject to any cure period described therein.
17.8 Cooperation. If this Backup Fuel Agreement is terminated for any
reason, the Parties will work together to achieve a smooth transition.
ARTICLE 18
NOTICE AND SERVICE
18.1 Notice. All notices, requests, demands and other communications
required or permitted under the terms of this Backup Fuel Agreement will be
sufficient in form if in writing and will be deemed to be duly given if
delivered by personal service, telegram, or mailed certified or registered first
class mail, postage prepaid, properly addressed to the Party entitled to receive
such notice pursuant to Section 18.3.
18.2 Date of Service.
A. Mail. If a notice is sent by registered or certified mail, it will
be deemed given within
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three (3) Days, excluding Saturdays, Sundays, or legal holidays of
the State of New Jersey, after deposit of the same in the United
States mail, postage prepaid, except as otherwise demonstrated by
a signed receipt.
B. Telegram. If a notice is given by telegram, it will be deemed
given eighteen (18) hours after delivery to the telegram company.
C. Personal Service. If a notice is given by personal service, it
will be deemed given upon the date of actual delivery to the
address of the Party to be notified.
18.3 Addresses. Notices may be sent to the Parties at the following
addresses:
A. Cogen: Cogen Technologies Linden Venture, L.P.
c/o Cogen Technologies, Inc.
1600 Smith Street
Suite 5000 - 50th Floor
Houston, Texas 77002
Attn: Mr. Robert C. McNair
President
B. Exxon: Exxon Corporation
c/o Exxon Company, U.S.A.
1400 Park Avenue
Linden, New Jersey 07036
Attn: Refinery Manager
or to such other and different persons or addresses as may be designated by the
Parties.
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ARTICLE 19
ENTIRETY OF CONTRACT; OTHER AGREEMENTS
19.1 Entire Agreement. This Backup Fuel Agreement supersedes all prior
oral and written agreements and understandings of the Parties relating to the
subject matters hereof. This Backup Fuel Agreement constitutes the entire
agreement and understanding of the Parties relating to the subject matters
hereof.
19.2 Other Agreements. This Backup Fuel Agreement does not supersede or
in any way diminish or enhance the rights and obligations of the Parties under
the Ground Lease Agreement and Steam Sale Agreement.
ARTICLE 20
CAPTIONS
20.1 All indices, titles, subject headings, section titles, and similar
items are provided for the purpose of reference and convenience and are not
intended to be inclusive, definitive, or to control the meaning, content, or
scope of this Backup Fuel Agreement.
ARTICLE 21
AMENDMENTS
21.1 No amendment or modification of the terms of this Backup Fuel
Agreement will be binding on either Exxon or Cogen unless reduced to writing and
signed by both Parties.
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ARTICLE 22
CONSENTS
22.1 Whenever either Party requests any consent, permission, or approval
which may be required or desired by that Party pursuant to the provisions
hereof, the other Party will not unreasonably withhold or postpone the grant of
such consent, permission, or approval.
ARTICLE 23
NONWAIVER
23.1 The various rights, remedies, options, and elections of Exxon and
Cogen as expressed herein are cumulative, and the failure of Exxon or Cogen to
enforce strict performance by the other Party of the provisions of this Backup
Fuel Agreement or to exercise any right, election, or option or to resort or
have recourse to any remedy herein conferred will not be construed or deemed to
be a waiver or a relinquishment of the future enforcement by Exxon or Cogen of
any such provisions, rights, options, elections, or remedies, but the same will
continue in full force and effect.
ARTICLE 24
SEVERABILITY
24.1 The invalidity or unenforceability of any provision of this Backup
Fuel Agreement shall not affect the validity and enforceability of any other
provision, and each
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provision of this Backup Fuel Agreement shall be enforced to the maximum extent
permitted by applicable law.
ARTICLE 25
RENEGOTIATION
25.1 Should any term or provision of this Backup Fuel Agreement be found
invalid by any court or regulatory body having jurisdiction thereover, the
Parties will immediately renegotiate in good faith such term or provision of
this Backup Fuel Agreement to eliminate such invalidity, consistent with the
intent of this Backup Fuel Agreement.
ARTICLE 26
ASSIGNMENT
26.1 By Exxon.
A. If Exxon sells the Exxon Complex, this Backup Fuel Agreement shall
be assigned to the purchaser of such complex. Exxon may also freely
assign, this Backup Fuel Agreement, which will be binding on and
inure to the benefit of the successors and assigns of Exxon. Upon
any such assignment, Cogen will attorn to and recognize such
successor and assignee of Exxon under this Backup Fuel Agreement.
B. If Exxon sells or otherwise transfers to any unaffiliated entity any
part of Exxon's Complex
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which contains the Butane Transfer Facilities, the Butane Delivery
Facilities or the Butane Storage Facilities, such entity shall be
obligated to enter into a separate backup fuel storage and supply
agreement with Cogen covering the storage and delivery of Butane.
The provisions of any separate agreement shall be substantially
similar to those of this Backup Fuel Agreement, with such entity
assuming the rights and obligations of Exxon for the remaining
term of this Backup Fuel Agreement with respect to the part of
Exxon's Complex so transferred, except that (i) Article 10 shall
reflect, as appropriate, that some of the Base Term of this Backup
Fuel Agreement shall have passed, (ii) Exhibits A, B and C shall
be amended, as appropriate, and (iii) the references to the Ground
Lease Agreement and the Steam Supply Agreement may or may not
continue to apply, depending on whether such entity succeeds to
Exxon's interest in the Ground Lease Agreement or the Steam Supply
Agreement.
26.2 By Cogen. Cogen will not assign, transfer, mortgage, pledge, or
hypothecate this Backup Fuel Agreement at any time, except that:
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A. Cogen may at any time assign, pledge, or hypothecate this
Agreement, provided that, in accordance with the terms of the
Ground Lease Agreement, the Ground Lease Agreement is
simultaneously assigned, pledged, or hypothecated to the same
entity by Cogen; and
B. Following two years after the Date of Initial Commercial Operation,
Cogen may assign or transfer this Backup Fuel Agreement to an
unrelated entity, provided that such unrelated entity will also
assume Cogen's rights and obligations under the Ground Lease
Agreement and Steam Sale Agreement, and (i) first deliver to Exxon
its written assumption agreement substantially in the form of
Exhibit D-1 to be bound by all of the provisions of this Backup
Fuel Agreement, the Ground Lease Agreement and Steam Sale
Agreement; (ii) have the personnel, experience, equipment and other
resources reasonably required to perform its obligation under this
Backup Fuel Agreement, the Ground Lease Agreement and Steam Sale
Agreement; (iii) be financially capable based upon reasonable
standards of performing its obligations under this Backup Fuel
Agreement, the Ground Lease Agreement and Steam Sale Agreement;
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and (iv) be in other respects reasonably acceptable to Exxon.
Subject to Section 26.4, this Backup Fuel Agreement will be
binding on and inure to the benefit of the successors and assigns
of Cogen.
26.3 Continuing Obligations. No assignment of this Backup Fuel Agreement
by Exxon or Cogen pursuant to Section 26.1 or 26.2 will operate to relieve Exxon
or Cogen of its obligations to the other under this Backup Fuel Agreement which
have accrued prior to the effective date of the assignment. An obligation will
be deemed to have accrued before the effective date of an assignment only if all
substantive elements of the obligation have accrued by that date. An assignment
of this Backup Fuel Agreement will relieve the assignor of any obligations to
the other Party under this Backup Fuel Agreement which have not accrued before
the effective date of the assignment; provided, however, that the assignor shall
continue to be obligated under this Backup Fuel Agreement if any such assignment
shall be ineffective.
26.4 Rights of the Financier and Other Mortgagees and Lenders.
A. With regard to the initial Financier (General Electric Power
Funding Corporation), Exxon upon request of such Financier will
first execute and deliver a consent to assignment substantially in
the form shown in Exhibit E. With respect to the
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designated Affiliate of General Electric Power Funding
Corporation, upon (a) any refinancing of the initial loan for the
construction of the Cogeneration Facility, (b) acknowledgement by
General Electric Power Funding Corporation in writing that it is
no longer the Financier to be recognized by Exxon for purposes of
this Backup Fuel Agreement and (c) the request of such designated
Affiliate, Exxon and Cogen will execute and deliver a recognition
agreement substantially in the form shown in Exhibit F.
Thereafter, if Cogen assigns, mortgages, pledges, or hypothecates
this Backup Fuel Agreement to secure a loan from another Financier
to be recognized as the Financier by Exxon for purposes of this
Backup Fuel Agreement, pursuant to Section 26.2 above, in
connection therewith Exxon will execute a similar consent to any
such assignment as may be reasonably requested by the other
Financier and Exxon will give the information specified in Section
26.5 below.
B. On instructions from the Financier, unless otherwise-directed by a
court of competent jurisdiction, Exxon will make all payments due
Cogen under this Backup Fuel Agreement in accordance with the
written instructions of the
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<PAGE>
Financier in conformity with its documentation with Cogen, and in
such event Exxon will not be liable to Cogen for such payments.
C. If Cogen becomes in default under any loan documentation with the
Financier or any successor or assign of Financier holding a
mortgage, pledge or hypothecation of Cogen's interest in this
Backup Fuel Agreement, the Financier or such successor or assign
may assume or cause a third party to assume Cogen's rights and
obligations under this Backup Fuel Agreement at any time, provided
that the Financier or such successor, assign, or third party must
first give Exxon reasonable written notice of such assumption,
which notice shall contain a request (which specifically
references this Section 26.4C) for a list of all defaults of Cogen
under this Backup Fuel Agreement, the Ground Lease Agreement and
the Steam Sale Agreement, at least thirty (30) Days in advance and
must first (i) enter into an agreement with Exxon agreeing to
assume Cogen's rights and obligations thereafter accruing under
this Backup Fuel Agreement, the Ground Lease Agreement and the
Steam Sale Agreement and to cure all existing defaults of Cogen
under this Backup Fuel Agreement, the Ground Lease Agreement
-64-
<PAGE>
and the Steam Sale Agreement that can be cured (including without
limitation paying all amounts owed by Cogen to Exxon, subject to
applicable caps on such amounts), pursuant to and as provided in
an assumption agreement substantially in the form of Exhibit D-2;
provided that the Financier or any nominee or designee of the
Financier holding the interest in this Backup Fuel Agreement for
the benefit of the Financier may enter into such an assumption
agreement substantially in the form of Exhibit D-3; (ii) have the
personnel, experience, equipment, and other resources reasonably
required to perform its obligations under this Backup Fuel
Agreement, the Ground Lease Agreement and Steam Sale Agreement;
(iii) be financially capable based upon reasonable standards of
performing its obligations under this Backup Fuel Agreement, the
Ground Lease Agreement and the Steam Sale Agreement, and (iv) be
in the other respects reasonably acceptable to Exxon. In such
event, Exxon will accept performance by such Financier, successor,
assign, or third party and the time limitation in Section 26.2
respecting assignment by Cogen will not apply to such Financier,
successor, assign, or third party. Similarly, if
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the general partner of Cogen becomes in default under its
partnership agreement with the designated Affiliate of General
Electric Power Funding Corporation, the designated Affiliate may
designate a new general partner of Cogen, provided that such new
general partner has the personnel, experience, equipment and other
resources reasonably required to perform its obligations under
this Backup Fuel Agreement, the Ground Lease Agreement and the
Steam Sale Agreement and is in other respects reasonably
acceptable to Exxon. Exxon agrees that General Electric Company
and General Electric Power Funding Corporation meet the
requirements of this Section 26.4C (ii), (iii), and (iv) (and the
comparable requirements of Section 26.4F (ii) (b), (c), and (d).
D. Following the assumption of Cogen's rights and obligations under
this Backup Fuel Agreement by the Financier or its successor,
assign, or a third party pursuant to Section 19.4C, such
Financier, successor, assign, or third party may assign its rights
and obligations under this Backup Fuel Agreement to any entity,
provided that such Financier, successor, assign, or third party
must first give Exxon reasonable written
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notice of such assignment at least thirty (30) Days in advance and
must first meet the requirements of Section 26.4C (i), (ii),
(iii), and (iv). Any such entity may with reasonable written
notice to Exxon at least thirty (30) Days in advance assign its
rights and obligations under this Backup Fuel Agreement to other
entities meeting the requirements of Section 26-4C (i), (ii),
(iii), and (iv). In such event, Exxon will accept performance by
such entity.
E. Notwithstanding any other provision of this Backup Fuel Agreement,
after the Financier or any successor, assign, third party or other
entity referred to in Section 26.4C or 26.4D above assumes
Cogen's rights and obligations under this Backup Fuel Agreement,
Exxon will retain all of its rights under this Backup Fuel
Agreement, including without limitation the right to terminate
this Backup Fuel Agreement for any of the reasons specified in
Article 17. Further, Cogen and the Financier (and its successors
and assigns) will give Exxon concurrent notice of any default by
Cogen and the exercise by Financier (and its successors and
assigns) of any remedy under any of the documentation between
Cogen and
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<PAGE>
Financier (and its successors and assigns) pertaining to the
Cogeneration Facility. If the Financier or any assignee of the
Financier becomes entitled to remove part or all of the
Cogeneration Facility from the Leased Premises, Exxon will not
interfere with the exercise of such right of approval.
F. In the event of the rejection of this Backup Fuel Agreement, the
Ground Lease Agreement and the Steam Sale Agreement prior to their
stated expiration dates pursuant to Section 365 of the Bankruptcy
Code of 1978, as amended, or any successor provision thereto, in a
case wherein Cogen is the debtor, Exxon will enter into a new
backup fuel agreement, a new ground lease of the Leased Premises
and a new steam sale agreement with the Financier or the same
nominee or designee of the Financier for the remainder of the term
of this Backup Fuel Agreement, the Ground Lease Agreement and
Steam Sale Agreement, respectively (assuming no rejection had
occurred), effective, in each case, as at the date of such
rejection and upon substantially the same covenants, agreements,
terms, provisions and limitations herein contained and therein
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contained (in each case, excluding a provision equivalent to this
Section 26.4F), provided:
(i) the Financier delivers a written request to Exxon for such new backup
fuel agreement, new ground lease and new steam sale agreement within
thirty (30) days from the date of such rejection, which written request
is accompanied by payment to Exxon of all amounts due to Exxon under
this Backup Fuel Agreement, the Ground Lease Agreement and the Steam
Sale Agreement and unpaid as at the date of such request and which
request identifies the party to act as purchaser under such new backup
fuel agreement, as lessee under such new ground lease and supplier under
the new steam sale agreement;
(ii) the Financier or such nominee or designee, who is to act as purchaser
under such new backup fuel agreement, as lessee under such new ground
lease and supplier under the new steam sale agreement must (a) cure all
existing defaults of Cogen under this Backup Fuel Agreement, the Ground
Lease Agreement and the Steam Sale Agreement that can be cured and that
would exist but for such
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rejection (including without limitation paying all amounts owed by Cogen
to Exxon, subject to the limitations of recovery set forth in Article 10
of the Ground Lease Agreement), (b) have the personnel, experience,
equipment, and other resources reasonably required to perform its
obligations under the new backup fuel agreement, new ground lease
agreement and the new steam sale agreement, (c) be financially capable
based upon reasonable standards of performing its obligations under the
new backup fuel agreement, new ground lease agreement and the new steam
sale agreement, and (d) be in the other respects reasonably acceptable
to Exxon;
(iii) such new backup fuel agreement, new ground lease agreement and new steam
sale agreement will expressly provide that Exxon will not be required to
deliver actual possession of the Leased Premises on the date of
execution and delivery thereof free of lessees, tenants or other
occupants;
(iv) such new backup fuel agreement, new ground lease agreement and new steam
sale agreement will expressly provide that with respect to
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all representations, warranties and covenants of Exxon under the new
backup fuel agreement, new ground lease agreement and new steam sale
agreement that refer to the "date hereof" or "effective date of this
Agreement" or words or phrases or provision of similar import, the same
refer to the date of this Backup Fuel Agreement, the Ground Lease
Agreement and of the Steam Sale Agreement, respectively, and not the date
of execution and delivery of such new backup fuel agreement, new ground
lease agreement and new steam sale agreement and it is agreed that Exxon
will not be obligated to remove any liens placed on the Leased Premises or
any other part of the Exxon Complex subsequent to the date hereof;
(v) the last sentence of Section 8.2 of such new ground lease agreement will
expressly exclude Cogen, the Ground Lease Agreement and persons claiming
by, through or under Cogen or its successors and assigns under the Ground
Lease Agreement (and actions or omissions of such persons) and claims and
actions of the same from the operation thereof; and
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(vi) the Financier or such nominee or designee enters into a new
backup fuel agreement, ground lease agreement and a new steam
sale agreement, unless the Backup Fuel Agreement, Ground
Lease Agreement and Steam Sale Agreement have been previously
terminated in accordance with their terms other than in the
event the Backup Fuel Agreement, Ground Lease Agreement and
Steam Sale Agreement are rejected pursuant to Section 365 of
the Bankruptcy Code of 1978, as amended, or any successor
provision thereto, in a case wherein Cogen is the debtor.
G. So long as there exists a Financier, Exxon and Cogen will not,
without the prior written consent of the Financier (which consent
will not be unreasonable delayed or withheld) enter into a written
amendment of this Backup Fuel Agreement.
26.5 Status Certificates. Either Party from time to time at the request
of the other Party will sign promptly a written certificate confirming that this
Backup Fuel Agreement has been duly authorized, is valid, and does not conflict
with the articles of incorporation, by-laws, or partnership agreement of the
Party in question, and stating whether the Backup Fuel Agreement is in full
force and effect; whether it has been modified or amended, and if so, the
substance of such
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modification or amendment; whether there have been any uncured defaults; whether
there are any offsets, counterclaims, or defenses to be asserted by that Party
against the other under this Backup Fuel Agreement; and such other information
as may be reasonably requested.
ARTICLE 27
COUNTERPARTS
27.1 This Backup Fuel Agreement may be executed in any number of
counterparts, and each executed counterpart will have the same force and effect
as an original instrument.
ARTICLE 28
CHOICE OF LAW
28.1 This Backup Fuel Agreement will be governed by and construed in
accordance with the laws of the State of New Jersey.
ARTICLE 29
AUTHORITY
29.1 Representations and Warranties of Exxon. Exxon hereby represents
and warrants to Cogen as follows:
A. Exxon is a corporation duly organized and existing in good
standing under the laws of the State of New Jersey.
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B. Exxon possesses all requisite power and authority to enter into and
perform this Backup Fuel Agreement and to carry out the
transactions contemplated herein.
C. No suit, action or arbitration, of legal, administrative or other
proceeding is pending against Exxon that would affect the validity
or enforceability of this Backup Fuel Agreement or the ability of
Exxon to materially fulfill its commitments hereunder.
29.2 Representations and Warranties of Cogen. Cogen hereby represents
and warrants to Exxon as follows:
A. Cogen is a limited partnership duly organized and existing under
the laws of the State of Delaware and is duly qualified to do
business in the State of New Jersey.
B. Cogen possesses all requisite power and authority to enter into and
perform this Backup Fuel Agreement and to carry out the
transactions contemplated herein.
C. No suit, action or arbitration, or legal, administrative or other
proceeding is pending against Cogen that would affect the validity
or enforceability of this Backup Fuel Agreement or the ability of
Cogen to materially fulfill its commitments hereunder.
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<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Backup Fuel Agreement
to be signed by their respective officers duly authorized as of the day and year
first set forth above.
ATTESTED BY: EXXON CORPORATION
/s/ M.M. Kubin By: /s/ R. W. Upchurch, Jr.
- ------------------------ ------------------------------
Assistant Secretary of R. W. Upchurch, Jr.
Exxon Corporation Vice President of
Exxon Corporation, U.S.A., a
Division of Exxon Corporation
COGEN TECHNOLOGIES LINDEN VENTURE,
L.P. (D/B/A COGEN TECHNOLOGIES
LINDEN VENTURE, LIMITED PARTNERSHIP)
By: COGEN TECHNOLOGIES LINDEN,
LTD., (D/B/A COGEN TECHNOLOGIES
LINDEN, LIMITED PARTNERSHIP),
General Partner
By: COGEN TECHNOLOGIES, INC.
ATTEST: General Partner
/s/ Elaine G. Campbell By: /s/ Lawrence D. Thomas
- ------------------------- -----------------------------------
Assistant Secretary Lawrence D. Thomas
Vice President
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ACKNOWLEDGEMENT
STATE OF TEXAS S
S SS.
COUNTY OF HARRIS S
BE IT REMEMBERED, That on this 4th of October, 1991, before me, the
subscriber, a notary public, personally appeared R.W. UPCHURCH, JR., who being
by me duly sworn on his oath, deposed and made proof to my satisfaction, that he
is an Assistant Secretary of Exxon Corporation, the Corporation named in the
within instrument; that R. W. UPCHURCH, JR., is Vice President of Exxon
Company, U.S.A., a Division of Exxon Corporation; that the execution, as well as
the making of this instrument, has been duly authorized pursuant to a resolution
of the Board of Directors of Exxon Corporation; that the deponent well knows the
corporate seal of Exxon Corporation; and that the seal affixed to said
instrument is the proper corporate seal and was thereto affixed and said
instrument signed and delivered by R. W. UPCHURCH, JR., as and for the voluntary
act and deed of Exxon Corporation, in presence of deponent, who thereupon
subscribed his name thereto as attesting witness.
Given under my signature and seal of office this 4th day of October,
1991.
/s/ Tricia Dougharty
---------------------------
NOTARY PUBLIC in and for
HARRIS COUNTY, TEXAS
My commission expires:
10/15/94
- ------------------------
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<PAGE>
ACKNOWLEDGEMENT
STATE OF TEXAS
SS.
COUNTY OF HARRIS
BE IT REMEMBERED, That on this 27th day of September, 1991, before me, the
subscriber, a notary public, personally appeared Lawrence D. Thomas who is the
Vice President of Cogen Technologies, Inc., General Partner of Cogen
Technologies Linden, Ltd., (D/B/A Cogen Technologies Linden, Limited
Partnership), which is the General Partner of Cogen Technologies Linden Venture,
L.P., a Delaware limited partnership (D/B/A Cogen Technologies Linden Venture,
Limited Partnership), who I am satisfied is the person who signed this
instrument, and he acknowledged that he signed, sealed with the corporate seal,
and delivered the same as such officer aforesaid, and that this instrument is
the voluntary act and deed of such corporation, on behalf of Cogen Technologies
Linden Venture, L.P.
Given under my signature and seal of office this 27th day of September,
1991.
/s/ ELAINE A. CAMPBELL
---------------------------
NOTARY PUBLIC IN AND FOR
HARRIS COUNTY, TEXAS
My Commission expires:
July 27, 1993
- -------------------------
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EXHIBIT 10.7
GROUND LEASE AGREEMENT
BETWEEN
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
(d/b/a COGEN TECHNOLOGIES LINDEN VENTURE, LIMITED PARTNERSHIP)
AND
EXXON CORPORATION
AUGUST 1, 1990
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE HEADING PAGE
- ------- ------- ----
<C> <S> <C>
1 Definitions........................................ 3
2 Demised Premises and Additional Rights............. 11
3 Mortgage Priority.................................. 17
4 Term............................................... 17
5 Rent............................................... 24
6 Use of Premises and Ownership of Improvements...... 27
7 Exxon's Cogeneration Unit.......................... 31
8 Quiet Enjoyment.................................... 33
9 Taxes.............................................. 35
10 Environmental Responsibility....................... 36
11 Liens.............................................. 46
12 Permitted Encumbrances on Leasehold Interests
and Improvements................................. 47
13 Eminent Domain..................................... 48
14 Limitation on Liability and Distribution of Risks.. 49
15 Insurance.......................................... 54
16 Termination........................................ 56
17 Removal of Improvements............................ 66
18 Nonwaiver.......................................... 68
19 Force Majeure...................................... 68
20 Assignment and Subletting.......................... 70
21 Exxon's Complex, Property, and Operations.......... 84
22 Notice and Service................................. 85
23 Consent Not to be Unreasonably Withheld............ 87
24 Amendments......................................... 87
25 Choice of Law...................................... 87
26 Renegotiation...................................... 87
27 Other Agreements................................... 88
28 No Commission ..................................... 88
29 Captions........................................... 89
30 Counterparts....................................... 89
31 Authority.......................................... 89
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT HEADING PAGE
- ------- ------- ----
<S> <C> <C>
A Exxon's Property................................... 96
B Demised Premises................................... 97
C Projection Easement Area........................... 102
D Interconnection and Utility Areas.................. 103
E Access Rights of Way............................... 104
F Selected Governmental Authorizations for the
Cogeneration Facility............................ 106
G-1 Assumption Agreement............................... 107
G-2 Assumption Agreement............................... 109
G-3 Assumption Agreement............................... 111
H Consent to Assignment.............................. 114
I Consent to Leasehold Mortgage...................... 118
J Recognition Agreement.............................. 122
</TABLE>
<PAGE>
GROUND LEASE AGREEMENT
This Ground Lease Agreement is made and entered into effective August 1, 1990,
by and between Exxon Corporation, a New Jersey Corporation ("Exxon") and Cogen
Technologies Linden Venture, L.P., doing business in New Jersey as Cogen
Technologies Linden Venture, Limited Partnership ("Cogen"), a Delaware limited
partnership (collectively "Parties").
Exxon, operating through its division Exxon Company, U.S.A., owns, operates and
maintains its Bayway Refinery and, operating through Exxon Chemical Americas, a
division of Exxon Chemical Company (a division of Exxon), owns, operates and
maintains its Bayway Chemical Plant. The Bayway Refinery and Bayway Chemical
Plant (collectively "Exxon's Complex") are located on "Exxon's Property" (as
defined in Article 1 below) in Linden, New Jersey. Additionally, Exxon owns,
operates, and maintains its Linden Marketing Terminal ("Exxon's Marketing
Terminal") and Linden Technology Center ("Exxon's Technology Center") in Linden,
New Jersey.
Cogen Technologies, Inc., has entered into a Power Purchase Agreement dated
April 14, 1989 ("Power Purchase Agreement") with Consolidated Edison Company of
New York, Inc. ("Consolidated Edison"). Under the Power Purchase Agreement Cogen
Technologies, Inc. proposes to sell to Consolidated Edison electricity from a
cogeneration facility
<PAGE>
Ground Lease Agreement - 2 -
("Cogeneration Facility") to be located in Linden, New Jersey. The Power
Purchase Agreement was approved by the Public Service Commission of the State of
New York and became effective in September, 1989 and has been assigned to Cogen.
The Cogeneration Facility is contemplated, but not required, to be a qualifying
cogeneration facility as defined in Section 3(18) of the Federal Power Act and
the regulations thereunder. Cogen and Consolidated Edison contemplate that the
Power Purchase Agreement will remain in force for twenty-five years from the
Date of Initial Commercial Operation (as defined in Article 1 below) and
possibly for two additional five-year renewal terms.
Cogen desires to construct, own, operate, and maintain the Cogeneration Facility
on part of the land on which Exxon's Bayway Refinery is located and to lease
from Exxon the "Demised Premises" (as defined in Article 1 below) upon which the
Cogeneration Facility will be located. Exxon is willing to lease the Demised
Premises to Cogen and to grant Cogen such easements and rights-of-way as are
reasonably necessary for the construction, operation, maintenance, repair,
replacement and removal of the Cogeneration Facility and related improvements in
partial consideration of Cogen's contemporaneously entering into the Steam Sale
Agreement (as defined in Article 1 below) for the sale of steam to Exxon from
the Cogeneration Facility for use at Exxon's Complex, Exxon's Marketing Terminal
and Exxon's Technology Center. The parties to this Ground Lease Agreement and
the Steam Sale Agreement acknowledge and agree
<PAGE>
Ground Lease Agreement - 3 -
that both such agreements are interdependent, as provided in both such
agreements.
Exxon and Cogen contemplate that Exxon may elect to install its own cogeneration
unit (the "Exxon System," as defined in Article 1 below) on the Demised
Premises. Cogen is willing to accommodate the Exxon System on the Demised
Premises and, on terms to be negotiated, to construct and operate the Exxon
System for Exxon.
Now, therefore, in consideration of the mutual covenants contained herein and
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms will have the following meanings:
"Access Rights of Way" means the nonexclusive access easement granted to Cogen
for ingress and egress on, over and across, those portions of Exxon's Property
(exclusive of the Demised Premises and the tank fields referred to in Section
2.11 below), more particularly described in Exhibit E, to give Cogen vehicular
and pedestrian access to the Demised Premises and to enable Cogen to construct,
operate, maintain, repair, replace, and remove the Improvements and the Exxon
System, if applicable.
<PAGE>
Ground Lease Agreement - 4 -
"Affiliate" means a corporation or other entity that directly or indirectly,
through one or more intermediaries, controls or is controlled by, or is under
common control with, another corporation or other entity.
"Annual Period" means any one of a succession of consecutive twelve month
periods, the first of which will begin on the Date of Initial Commercial
Operation.
"Base Term" of the Ground Lease means that part of the term of the Ground Lease
beginning with the Date of Initial Commercial Operation, and continuing for a
period of twenty-five Annual Periods, unless sooner terminated.
"Cogeneration Facility" means the cogeneration facility to be constructed by
Cogen on the Demised Premises. The Cogeneration Facility excludes the Exxon
System.
"Commercial Operation" means the production of electricity by Cogen at the
Cogeneration Facility upon the completion of such testing of the Cogeneration
Facility as Cogen determines is required by prudent electrical practices, and
the supply of steam at the points where Cogen's steam supply system connects to
Exxon's steam pipeline at Exxon's existing steam headers.
<PAGE>
Ground Lease Agreement - 5 -
"Construction Period" means that part of the term of the Ground Lease from the
commencement of the Ground Lease in accordance with Section 4.3A to the Date of
Initial Commercial Operation.
"CPI" means the Consumer Price Index for all Urban Consumers for the New York-
Northern New Jersey Metropolitan Area, published by the Bureau of Labor
Statistics of the U.S. Department of Labor (all items figure - 1982-1984 = 100).
"Date of Initial Commercial operation" means the first day of the month which
immediately follows the date Cogen designates in writing to Consolidated Edison
as the initial date of Commercial Operation of its Cogeneration Facility.
"Demised Premises" means those two parcels of land, totalling approximately
12.77 acres, on the site of Exxon's Bayway Refinery at Linden, New Jersey. The
Demised Premises are described more particularly in Exhibit B, and upon the
commencement of the Construction Period are to be leased to Cogen pursuant to
this Ground Lease Agreement. The Demised Premises do not include the
Interconnection Areas, Utility Areas, Staging Areas, and Access Rights of Way.
"ECRA" means the New Jersey Environmental Cleanup Responsibility Act, NJSA
13:1K-6 et seq., together with related regulations, as such Act and regulations
may be amended from time to time.
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Ground Lease Agreement - 6 -
"Evergreen Period" means that part of the term of the Ground Lease immediately
following the Renewal Terms and preceding the Improvements Removal Period, if
any.
"Exxon's Complex" means Exxon Company, U.S.A.'s Bayway Refinery and Exxon
Chemical America's Bayway Chemical Plant, both located at Linden, New Jersey.
Exxon's Complex excludes Exxon's Marketing Terminal and Exxon's Technology
Center.
"Exxon's Marketing Terminal" means Exxon's Linden Marketing Terminal located in
Linden, New Jersey.
"Exxon's Property" means all the land upon which Exxon's Complex is situated, as
more particularly described in Exhibit A. Exxon's Property includes the Demised
Premises, Interconnection Areas, Utility Areas, Staging Areas, and Access Rights
of Way.
"Exxon System" means Exxon's own cogeneration unit consisting of one gas
turbine, one waste heat recovery system, one back-pressure steam turbine and
appurtenant facilities which might be installed on the Demised Premises, as more
fully described in Section 7.1.
"Exxon's Technology Center" means Exxon's Linden Technology Center, located at
Linden, New Jersey.
"Financier" initially means General Electric Power Funding Corporation (as
construction lender or as agent for itself and other
<PAGE>
Ground Lease Agreement - 7 -
construction lenders), and may also mean any other entity subsequently extending
credit to Cogen for the construction, operation, maintenance, repair,
replacement, or removal of the Cogeneration Facility and other Improvements, or
any entity subsequently providing funds for the refinancing or taking-out of
such loans, and the nominees or designees of any such entities; provided that,
at no time will Exxon be obligated to recognize more than one such entity as the
Financier to whom duties are owed, or rights are granted, under this Ground
Lease Agreement and the Steam Sale Agreement. The parties anticipate that after
General Electric Power Funding Corporation is the Financier, a specific
designated Affiliate of General Electric Power Funding Corporation will become
the Financier and that such designated Affiliate will also become a limited
partner in Cogen. Exxon will recognize as the Financier for purposes of this
Ground Lease Agreement and the Steam Sale Agreement (i) General Electric Power
Funding Corporation, until such time as General Electric Power Funding
Corporation notifies Exxon in writing that such designated Affiliate should be
considered to be the Financier, and (ii) thereafter, the designated Affiliate,
until such time as such designated Affiliate notifies Exxon in writing that
Cogen has the right to designate another entity as the Financier, and (iii)
thereafter, such other entity as Cogen may designate in writing from time to
time. Exxon will not be required to recognize as the Financier any partner of
Cogen other than such designated Affiliate of General Electric Power Funding
Corporation.
<PAGE>
Ground Lease Agreement - 8 -
"Force Majeure" means a cause beyond the reasonable control of the affected
Party, as more fully defined in Article 19.
"Governmental Authorizations" means any and all licenses, permits, certificates
and other authorizations required by applicable federal, state, or local law.
"Ground Lease" means the creation of a leasehold estate in the Demised Premises
as provided for in this Ground Lease Agreement. The Ground Lease will commence
with the beginning of the Construction Period pursuant to Section 4.3A.
"Ground Lease Agreement" means this agreement, including all exhibits and
amendments thereto that may be made from time to time.
"Improvements" means the Cogeneration Facility and all related improvements
constructed or placed by Cogen on the Demised Premises, the Interconnection
Areas, or the Utility Areas, but not including the Exxon System which may be
installed upon the Demised Premises but owned by Exxon, as more fully described
in Section 7.1.
"Improvements Removal Period" means that part of the term of the Ground Lease
for the removal of the Improvements at the end of the Ground Lease pursuant to
Section 4.7.
"Interconnection Areas" means those portions of Exxon's Property (exclusive of
the Demised Premises and the tank fields referred to in
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Ground Lease Agreement - 9 -
Section 2.11), more particularly described in Exhibit D, on, over, and under
which Cogen will have a nonexclusive easement and right of way to construct,
operate, maintain, repair, replace and remove Cogen's electrical and steam
interconnections from its Cogeneration Facility to the facilities of Exxon,
Consolidated Edison and those other purchasers of steam or electricity that may
be served through such Interconnection Areas described in Exhibit D and, with
Exxon's prior written consent with respect to the routing and location of
additional interconnections for additional purchasers of steam or electricity
from the Cogeneration Facility, to the facilities of such additional purchasers
of steam or electricity.
"Memorandum of Lease" means a written summary of this Ground Lease Agreement,
and any amendments, suitable for recordation, as more fully described in
Section 2.8.
"Party" means Cogen or Exxon, as the case may be, and its permitted successors
and assigns.
"Power Purchase Agreement" means that certain Power Purchase Agreement dated
April 14, 1989, executed by and between Cogen Technologies, Inc. and
Consolidated Edison (which Power Purchase Agreement has been assigned to Cogen)
under which electric energy generated at the Cogeneration Facility will be sold
by Cogen for purchase by Consolidated Edison, including all exhibits and
amendments thereto that may be made from time to time.
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Ground Lease Agreement - 10 -
"Renewal Term" means either of two periods of the term of the Ground Lease
immediately following the Base Term, as more fully described in Section 4.5.
"Staging Areas" means those specific portions of Exxon's Property (exclusive of
the Demised Premises and the tank fields referred to in Section 2.11) to which
Exxon from time to time grants Cogen temporary access for the storage of
material and equipment used by Cogen for the construction, operation,
maintenance, repair, replacement, or removal of the Improvements or the Exxon
System, if applicable.
"Steam Sale Agreement" means the agreement of even date herewith between Cogen
and Exxon for the sale of steam from the Cogeneration Facility, including all
exhibits and amendments thereto that may be made from time to time.
"Three Turbine Rating" means the power output rating which Cogen's Cogeneration
Facility would obtain utilizing three GE MS-7000 gas turbines.
"Utility Areas" means those portions of Exxon's Property (exclusive of the
Demised Premises and the tank fields referred to in section 2.11), more
particularly described in Exhibit D, on, over, under, or across which Cogen will
have a nonexclusive easement and right of way to construct, operate, maintain,
repair, replace, and remove structures, wires, pipes, lines, equipment and other
materials relating to water transfer between the two parcels of the Demised
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Ground Lease Agreement - 11 -
Premises, stormwater discharge, wastewater discharge and other utilities serving
the Cogeneration Facility (other than water, gas and standby power supplied to
Cogen by public utilities).
ARTICLE 2
DEMISED PREMISES AND ADDITIONAL RIGHTS
2.1 Demised Premises. Upon the occurrence of the conditions described in
Section 4.3, and on the other terms of this Ground Lease Agreement, Exxon
will lease, let and demise to Cogen and Cogen will lease from Exxon the
Demised Premises. Cogen and Exxon are considering redefining by mutual
agreement the precise boundaries of the north parcel of the Demised Premises
in order to facilitate the placement of certain water tanks that will be
part of the Cogeneration Facility. In that event, Exhibit B will be amended
to reflect the new boundaries of the Demised Premises.
2.2 Additional Rights. To facilitate Cogen's use of the Demised Premises, Exxon
grants to Cogen certain additional rights to use the Interconnection Areas
and Utility Areas, certain Access Rights of Way over Exxon's Property, and
certain temporary rights to use Staging Areas, all as more specifically set
forth in Sections 2.3, 2.4, 2.5, 2.6, and 2.7 below. Additionally, Exxon
grants to Cogen a nonexclusive easement which will run with the land to
allow for the construction, operation, maintenance, repair, replacement and
removal of certain air cooling towers which will be part of the Cogeneration
Facility and which will
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Ground Lease Agreement - 12 -
extend beyond the perimeter of the Demised Premises, as shown in Exhibit C.
All additional rights referred to in this Section 2.2 will be ancillary to
the lease of the Demised Premises, and unless otherwise provided for herein,
the term of these additional rights will extend until the termination of the
Ground Lease.
2.3 Rights to Use Interconnection Areas. Exxon grants Cogen a nonexclusive
easement and right of way on, over, across and under the Interconnection
Areas of Exxon's Property, as specifically described in accordance with
Section 2.6, for Cogen to construct, operate, maintain, repair, replace and
remove Cogen's electrical and steam interconnections from its Cogeneration
Facility to the facilities of Exxon, Consolidated Edison and those other
purchasers of steam or electricity that may be served through such
Interconnection Areas described in Exhibit D and, with Exxon's prior written
consent with respect to the routing and location of additional
interconnections for additional purchasers of steam or electricity from the
Cogeneration Facility, to the facilities of such additional purchasers of
steam or electricity.
2.4 Rights to Use Utility Areas. Exxon grants Cogen a nonexclusive easement and
right of way on, over, under and across the Utility Areas of Exxon's
Property, as specifically described in accordance with Section 2.6, for
Cogen to construct, operate, maintain, repair, replace and remove
structures, wires, pipes, lines, equipment and other materials relating to
water transfer
<PAGE>
Ground Lease Agreement - 13 -
between the two parcels of the Demised Premises, stormwater discharge, waste
water discharge and other utilities serving the Cogeneration Facility (other
than water, gas and standby power supplied to Cogen by public utilities).
2.5 Access Rights of Way. Exxon grants Cogen the nonexclusive easement referred
to as the Access Rights of Way for ingress and egress on, over and across
Exxon's Property, as specifically described in accordance with Section 2.6,
to give Cogen vehicular and pedestrian access to the Demised Premises and to
enable Cogen to construct, operate, maintain, repair, replace and remove
Cogen's Improvements and the Exxon System, if applicable. Under normal
conditions, Cogen and its invitees will park on the Demised Premises. During
turnarounds and other unusual circumstances Exxon at Cogen's request will
designate additional areas for parking by Cogen and its invitees to meet
their reasonable needs.
2.6 Locations of the Interconnection Areas. Utility Areas, and Access Rights of
Way.
A. The initial locations of the Interconnection and Utility Areas are
described in Exhibit D. The initial Access Rights of Way are described in
Exhibit E. The easements described in Exhibits D and E will run with the
land.
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Ground Lease Agreement - 14 -
B. Cogen, with the prior written consent of Exxon and subject to Section
2.11, may change the specific boundary lines and dimensions for the
Interconnection Areas and Utility Areas, during construction and from
time to time thereafter during the term of this Ground Lease Agreement,
to enable Cogen to service new customers or to accommodate changed
operating circumstances. Additionally, at any time during the term of the
Ground Lease Agreement, Cogen, at the request of Exxon, will relocate the
Interconnection Areas, Utility Areas, and Access Rights of Way, or any
portion thereof, to other mutually agreeable locations on Exxon's
Property to enable Exxon to accommodate changed operating circumstances
or to sell part of Exxon's Property to a third party free of encumbrances
related to the easements over the Interconnection Areas, Utility Areas,
or to the Access Rights of Way. Any such relocation at the request of
Exxon will be solely at Exxon's expense and will be accomplished without
any unreasonable interruption of Cogen's operation. Any redetermination
or relocation of the Interconnection Areas, Utility Areas, or Access
Rights of Way under the provisions of this Section 2.6B will be
negotiated in good faith by the Parties and will be specifically
described in an instrument executed by the Parties in recordable form as
an amendment to this Ground Lease Agreement.
2.7 Rights to Use Staging Areas. Subject to Section 2.11, Exxon agrees, from
time to time as reasonably requested by Cogen, to
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Ground Lease Agreement - 15 -
grant to Cogen temporary access rights to those specific portions of Exxon's
Property that Exxon may designate as Staging Areas for the storage of
material and equipment used by Cogen for the construction, operation,
maintenance, repair, replacement or removal of the Improvements or the Exxon
System, if applicable. Cogen may install temporary security fencing around
the Staging Areas, subject to the right of Exxon and authorized third
persons, if any, to gain access. Exxon's granting to Cogen temporary access
from time to time to such Staging Areas will not be considered amending this
Ground Lease Agreement.
2.8 Memorandum of Lease. The Parties will execute and acknowledge, from time to
time, upon the request of either Party, (i) a Memorandum of Lease,
describing the material provisions of this Ground Lease Agreement, including
the priorities established by Article 3, and setting forth a description of
the Demised Premises, the Interconnection Areas, the Utility Areas and the
Access Rights of Way and referring to the Staging Areas and (ii) any
amendments to the Memorandum of Lease, reflecting amendments to this Ground
Lease Agreement, including those instruments prepared pursuant to Section
2.6 above. The Memorandum of Lease, and any such amendments, will be
recorded in the appropriate records of real property of Union County, New
Jersey. When the Ground Lease terminates or, if it fails to commence
(pursuant to Section 4.3) at that time, the Parties will execute and
acknowledge for recordation one or more instruments to clear
<PAGE>
Ground Lease Agreement - 16 -
Exxon's Property of all encumbrances or clouds created by this Ground Lease
Agreement.
2.9 Safety and Security. Each Party, and authorized third persons such as
Contractors and government officials, gaining access to the facilities of
the other Party under this Ground Lease Agreement will abide by the other
Party's safety and security rules and regulations then current and
generally applicable to all employees and contractors, including those
relating to obtaining required work permits.
2.10 Cooperation. Each Party will cooperate with the other so that exercise of
its rights under this Article 2 will not unreasonably interfere with the
operations and rights of the other and of authorized third parties, such as
contractors and government officials. Exxon will extend reasonable
cooperation to public utilities providing water, gas, and standby power to
the Cogeneration Facility and the Exxon System, if applicable, to
facilitate the provision of such services to the Cogeneration Facility and
the Exxon System, if applicable.
2.11 Tank Fields. This Ground Lease Agreement will not give Cogen any easement,
right of way, access or other rights respecting the two tank fields
identified in Exhibit A as the Rahway River Tank Field and the Forty-Acre
Tank Field and this Ground Lease Agreement will not create any encumbrances
or clouds on such tank fields.
<PAGE>
Ground Lease Agreement - 17 -
ARTICLE 3
MORTGAGE PRIORITY
3.1 Predetermined Areas. The Ground Lease will be a prior encumbrance against
Exxon's Property (except for the tank fields referred to in Section 2.11)
with respect to any mortgages or other liens that may subsequently be placed
upon Exxon's Property. The recording of the Memorandum of Lease will
establish the priority of this Ground Lease and this Ground Lease will have
preference and precedence and be superior and prior to any such subsequent
mortgage or lien on Exxon's Property.
3.2 Redetermined Areas. The amendments to this Ground Lease Agreement and the
amendments to the Memorandum of the Ground Lease by the execution of the
instruments referred to in Section 2.6 to reflect any redetermined or
relocated Interconnection Areas, Utility Areas or Access Rights of Way will
have preference and precedence and be superior to and prior to any mortgage
or other lien on such redetermined or relocated Areas or Access Rights of
Way that are recorded subsequent to the date of recordation of the
Memorandum of Lease.
ARTICLE 4
TERM
4.1 Term of Ground Lease. This Ground Lease Agreement will be
effective upon its execution, but the leasehold estate created
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Ground Lease Agreement - 18 -
under this Ground Lease Agreement will not become effective, if at all,
until the conditions defined in Section 4.3A are met. When these conditions
are met and the Ground Lease commences, the Parties will execute an
amendment to the Memorandum of Lease identifying the date of Commencement of
the Ground Lease. In no event will the term of the Ground Lease continue
beyond December 31, 2050. Cogen's access under this Ground Lease Agreement
to Exxon's Property before the commencement of the Ground Lease is by
license from Exxon, as provided in Section 4.2B, but not pursuant to the
Ground Lease or any other lease.
4.2 Site Preparation.
A. Exxon will remove the existing propane tanks, the trailers and the
corrugated fabrication building from the Demised Premises and will
relocate the existing railroad spurs and fire water line from the Demised
Premises to locations off the Demised Premises and will install new
propane tanks off the Demised Premises. Cogen will reimburse Exxon
promptly for Exxon's reasonable expenses associated with the relocation
of the railroad spurs and fire water line and with removal and
replacement of the propane tanks, to be verified by appropriate
supporting data and not to exceed an aggregate sum of $5.5 million.
Before Exxon begins such site preparation work, Exxon will provide to
Cogen for Cogen's information and comment a written schedule showing by
month the character, timing, and magnitude of the out-of-pocket expenses
and firm financial
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Ground Lease Agreement - 19 -
commitments (such as firm orders) Exxon anticipates incurring in
connection with this site preparation work. Exxon will update this
schedule to reflect any significant changes as the work progresses. On a
monthly basis Cogen will reimburse Exxon for such out-of-pocket expenses
actually incurred by Exxon and will provide Exxon with deposits,
irrevocable letters of credit, or other financial assurances reasonably
satisfactory to Exxon to cover such firm financial commitments as Exxon
makes them. Exxon will complete its site preparation work by November 1,
1990, except for the propane tank work which Exxon will complete by June
1, 1991, or by such later dates as suggested in writing by Cogen after
Cogen reviews Exxon's schedule of the work.
B. Cogen will remove the existing foundations and the concrete bunkers from
the Demised Premises and all other objects which Cogen elects to remove
from the Demised Premises. Cogen may commence such site preparation work
as soon as the fluidized catalytic cracking unit turnaround and
associated cleanup are completed, presently estimated to be August 1,
1990, and Cogen is hereby granted a license to enter upon the Demised
Premises for such purposes commencing upon the completion of such
turnaround and cleanup. Subject to Section 5.4, Cogen will bear the
expense of the site preparation work which it performs, except that
pursuant to Article 10 Exxon will be primarily responsible for any
environmental remediation incident to such site preparation work.
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Ground Lease Agreement - 20 -
C. The Parties anticipate that they will be doing some site preparation
work on the Demised Premises concurrently, and they will cooperate with
each other to facilitate their site preparation work.
D. At any time prior to the commencement of the Construction Period under
Section 4.3 below, if Cogen is unable to obtain financing or the
necessary Governmental Authorizations, Cogen may elect not to commence
the Construction Period by giving Exxon at least thirty days prior
written notice. In such event, the Parties will be discharged from all
unaccrued obligations under this Ground Lease Agreement as of the
expiration of such thirty-day period and Cogen will remove its equipment
and materials.
4.3 Construction Period.
A. When Cogen receives the necessary commitments from the Financier and
those Governmental Authorizations identified in Exhibit F for the
construction and operation of its Cogeneration Facility, Cogen will give
Exxon written notice to that effect, together with supporting
documentation reasonably requested by Exxon. After Cogen has demonstrated
that it has obtained such Governmental Authorizations and commitments
from the Financier, Exxon will promptly give Cogen written notice
allowing Cogen to commence construction of the Cogeneration Facility.
Cogen may make the required demonstration by giving
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Ground Lease Agreement - 21 -
Exxon copies of such Governmental Authorizations and a letter from the
Financier to the effect that the Financier has entered into a loan
agreement with Cogen to finance construction of the Cogeneration
Facility. The Ground Lease will commence on the day that Exxon gives
written notice to Cogen allowing Cogen to commence construction of the
Cogeneration Facility. The period of time from the commencement of the
Ground Lease to the Date of Initial Commercial Operation as described in
Section 4.3B below may be referred to as the "Construction Period." The
Parties anticipate that during the Construction Period Exxon may perform
some of its site preparation work referred to in Section 4.2 above, but
Exxon will not unreasonably interfere with Cogen's construction of the
Cogeneration Facility.
B. When construction and testing satisfactory to Cogen of the Cogeneration
Facility are substantially completed, Cogen will promptly commence
Commercial operation, as defined in Article 1, of the Cogeneration
Facility and will give Exxon written notice of the Date of Initial
Commercial Operation, as defined in Article 1.
C. The Construction Period must begin by January 1, 1994, or the Ground
Lease will not commence and in such event the Parties will be discharged
from all unaccrued obligations under this Ground Lease Agreement. The
Construction Period must be concluded by January 1, 1998, or Exxon may
terminate this Ground Lease pursuant to Section 16.1D. These time limits
may
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Ground Lease Agreement - 22 -
be extended by written agreement of the Parties, but not for any other reason,
including Force Majeure (except Force Majeure which affects Exxon so as to
prevent the commencement of the Construction Period by January 1, 1994 or its
completion by January 1, 1998).
4.4 Base Term. The Base Term of the Ground Lease will commence on the Date of
Initial Commercial operation and will continue for twenty-five Annual
Periods, unless sooner terminated in accordance with the terms hereof.
4.5 Renewal Terms. Following the completion of the twenty-five year Base Term,
the Ground Lease will be automatically renewed for two successive Renewal
Terms of five Annual Periods each, the first of which will commence with the
expiration of the Base Term, unless Cogen elects to terminate this Ground
Lease at the expiration of the Base Term or at the expiration of the first
five-year Renewal Term. Termination by Cogen in accordance with the
provisions of this Section 4.5 will be valid only if Cogen provides Exxon
written notice of its intent to terminate at least four years prior to the
expiration of the Base Term or first five-year Renewal Term, as the case may
be.
4.6 Evergreen Period. After the expiration of the second five-year Renewal
Term, this Ground Lease will automatically extend into an Evergreen Period
which will continue until December 31, 2048, unless either Party elects to
terminate the Evergreen Period
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Ground Lease Agreement - 23 -
earlier. Either Party may terminate the Evergreen Period at any time by
giving at least five years prior written notice to the other Party. In that
event, termination of the Evergreen Period will be effective five years
after the notice is given, or at such other time' as the Parties may agree.
If neither Party terminates the Evergreen Period earlier, the Evergreen
Period will automatically terminate on December 31, 2048, and the
Improvements Removal Period of this Ground Lease will come into force
pursuant to Section 4.7. The automatic termination date of December 31,
2048, may not be extended for any reason, including Force Majeure.
4.7 Improvements Removal Period.
A. Upon the expiration or other termination of the Construction Period, Base
Term, any Renewal Term, or the Evergreen Period, the term of this Ground
Lease will be extended, unless one of the exceptions described below in
Section 4.7B applies, to allow Cogen promptly to remove the Improvements,
for one additional term (the "Improvements Removal Period") to terminate
upon the earlier to occur of (i) twenty-four months after the
commencement of the Improvements Removal Period, or (ii) the date Cogen
provides written notice to Exxon that Cogen has completed the removal of
the Improvements pursuant to Article 17 below.
B. The term of this Ground Lease will not be extended to include the
Improvements Removal Period if Cogen neither desires nor is
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Ground Lease Agreement - 24 -
required by Exxon to remove the Improvements pursuant to the terms of
Article 17, or if there is a full taking by competent authority of the
Demised Premises as described in Article 13.
C. In no event will the Ground Lease continue in force beyond December 31,
2050, for any reason, including Force Majeure.
Article 5
RENT
5.1 Base Rent
A. Before the commencement of the Construction Period the Ground Lease will
not be in effect and Cogen will owe no rent. From the commencement of the
Construction Period until the Improvements Removal Period, Cogen will pay
to Exxon as rent hereunder the following amounts (unless the rent is
reduced or abated pursuant to Section 5.1C below):
(i) during the Construction Period, the sum of $15,957.00 per month,
adjusted for inflation pursuant to Section 5.2, payable monthly, in
advance; and
(ii) during the Base Term and any Renewal Terms and Evergreen Period,
the sum of $31,914.00 per month, adjusted for inflation pursuant to
Section 5.2 and thereafter reduced during the first ten years of the
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Ground Lease Agreement - 25 -
Base Term as described in Section 5.4, and payable monthly, in
advance.
B. During the Improvements Removal Period, Cogen will pay Exxon the rent
specified in Section 5.1A(i) above, unless the rent is abated pursuant to
Section 5.1C below, or unless the Improvements Removal Period is
triggered by any of the events described in Sections 16.2A, 16.2B, or
16.2C below, in which case Cogen will owe Exxon no rent during the
Improvements Removal Period.
C. The rent may be reduced under the circumstances described in Section 13.3
(Partial Taking) and rent for partial months will be prorated. If Cogen
terminates this Ground Lease pursuant to Sections 16.2D, 16.2E, 16.2F, or
16.2G, Cogen will be released from all obligations to pay rent after
Cogen gives Exxon the two year written notice called for in Section 16.5G
(including any Improvements Removal Period), as long as Cogen continues
to supply Exxon's steam requirements as called for in Article 3 of the
Steam Sale Agreement.
D. Cogen will make its monthly rent payments to Exxon by the first day of
each month at the address specified in Article 22 or such other addresses
as Exxon may designate.
<PAGE>
Ground Lease Agreement - 26 -
5.2 Inflation Adjustment
A. The rent specified in Section 5.1 will be adjusted each calendar year by
multiplying the specified rent by the factor y/z, where y is the Consumer
Price Index ("CPI") for all Urban Consumers for the New York-Northern New
Jersey Metropolitan Area, published by the Bureau of Labor Statistics of
the U.S. Department of Labor (all items figure - 1982-1984 = 100) for the
month Of September immediately preceding the year in question and z is
the CPI for December 1988 (which CPI for December 1988 is 126.0).
B. If the CPI is discontinued for any reason, the Bureau of Labor Statistics
will be requested to furnish a new index comparable to the CPI, together
with information which will make possible the conversion to the new index
in computing the adjusted rent hereunder. If for any reason the Bureau of
Labor Statistics does not furnish such an index and such information,
Exxon and Cogen instead will agree upon and use such other index or
comparable statistics on the cost of living for the New York-Northern New
Jersey Metropolitan Area as may be computed and published by an agency of
the United States or a responsible financial periodical of recognized
authority.
5.3 Interest. If Cogen fails to pay all or a portion of any rent payment within
the time stated in this Article 5, Cogen will owe Exxon interest on the
unpaid portion, which interest will accrue
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Ground Lease Agreement - 27 -
from the date due until paid at two percent (2%) over the bank prime loan
rate as reported in Federal Reserve Statistical Release H.15 (or a successor
publication of similar authority, if Statistical Release H.15 is
discontinued) for the day the payment becomes due; provided, however, in no
event will this rate of interest exceed the maximum rate of interest
permissible under the laws of the State of New Jersey.
5.4 Rent Reduction. During the first ten years of the Base Term, the rent
described in Section 5.1A (ii), that is, $31,914.00 per month adjusted for
inflation, will be reduced each month by the fixed sum $9,807.00 (which will
not be adjusted for inflation); provided, however, that in no event will
Cogen's monthly rental fall below zero. The purpose of this reduction will
be to offset partially Cogen's expenditures in removing the concrete bunkers
from the Demised Premises.
ARTICLE 6
USE OF PREMISES AND OWNERSHIP OF IMPROVEMENTS
6.1 Use Limited. During the term of this Ground Lease, Cogen will use the
Demised Premises, the Interconnection Areas, the Utility Areas, the Staging
Areas, the projection easement area shown in Exhibit C, and the Access
Rights of Way for the construction, operation, maintenance, repair,
replacement, and removal of the Improvements, and (if applicable) the Exxon
System, for uses reasonably related thereto and for no other purpose.
<PAGE>
Ground Lease Agreement - 28 -
6.2 Reliability. Safe and Lawful Use In its activities under this Ground Lease
Agreement, Cogen will not commit any act which constitutes a nuisance, and
will comply with all applicable and duly adopted laws, ordinances, rules and
public authority regulations and all applicable material safety codes and
recognized industry safety standards. The uses described in Section 6.1 will
not inherently be considered to constitute a nuisance. Cogen will design,
operate, and maintain the Improvements to meet safety and reliability
standards consistent with steam supply to a major industrial complex. Exxon
will have the right to review and comment on the reliability provisions of
Cogen's design and Cogen will work with Exxon so that the above safety and
reliability requirements are adequately addressed. In addition, Exxon will
have the right to review and approve any Improvements installed within any
easements granted by Exxon to Cogen hereunder from the perspective of
maintenance access, emergency access and impact on existing or future
equipment and improvements of Exxon, which approval shall not be
unreasonably withheld.
6.3 Maintenance of Governmental Authorizations. Cogen will obtain and maintain
all necessary Governmental Authorizations for its activities under this
Ground Lease Agreement and will carry on its operations in material
compliance with all such Governmental Authorizations, except that if any
environmental monitoring or remediation of Exxon's Property becomes
necessary, Exxon will obtain and maintain all Governmental Authorizations
needed for
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Ground Lease Agreement - 29 -
such environmental monitoring or remediation. Each Party will cooperate with
the other Party in obtaining, maintaining and complying with any
Governmental Authorizations necessary under this Ground Lease Agreement.
Cogen will use reasonable efforts, but will have no obligation, to keep
Exxon advised of significant developments with respect to its major
Governmental Authorizations relating to the Improvements.
6.4 Cogen's Right to Apply for Variance or Contest.
A. Cogen will have the right, without expense to Exxon, to apply for a
variance or exception or to contest, the validity or application of any
law, ordinance, order, rule, regulation, requirement or Governmental
Authorization with which Cogen is responsible for compliance under
Sections 6.2 or 6.3 above, provided that Cogen has no knowledge after
reasonable inquiries that such application or contest would result in
significant detriment to Exxon. If legally required and consented to by
Exxon in writing, Cogen may make such applications or contests in the
name of Exxon. Cogen will notify Exxon reasonably in advance of such
applications or contests, and will keep Exxon advised of their status and
outcome. If by the terms of any such law, ordinance, order, rule,
regulation, requirement, or Governmental Authorization, compliance
therewith may legally be delayed pending the prosecution of any such
proceedings and Cogen has no knowledge after reasonable inquiries that
delay will result in significant detriment to Exxon, Cogen may delay
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Ground Lease Agreement - 30 -
such compliance until the final determination of such proceeding.
B. Exxon will cooperate with Cogen with respect to any appropriate papers or
other instruments which may be necessary or proper to permit Cogen to
apply for such variance or exception or to contest the validity or
application of any such law, ordinance, order, rule, regulation,
requirement, or Governmental Authorization and will cooperate with Cogen
in such application or contest, all at Cogen's expense.
6.5 Ownership of Improvements. Cogen will be the owner or lessee of all
Improvements, which will retain their character as personal property and
will remain the property of Cogen, regardless of the manner of installation
or affixation of the Improvements to the Demised Premises, the
Interconnection Areas, the Utility Areas and the projection easement area
shown in Exhibit C. Exxon will have no legal or equitable ownership interest
in the Improvements arising from this Ground Lease Agreement, and Exxon
hereby subordinates any and all statutory, constitutional or common law
landlord's liens affecting all or any portion of the Improvements to any
liens and security interests of the Financier. Upon Cogen's request, Exxon
will execute such documents as may be reasonably required to confirm the
foregoing waiver and subordination. Nothing in this Ground Lease Agreement
will preclude the Financier or any other person holding a security interest
in any of the Improvements from removing the same in the
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Ground Lease Agreement - 31 -
event of default by Cogen under any leasehold mortgage or any security
agreement related thereto.
6.6 Status of Cogeneration Facility and Power Purchase Agreement. Cogen will
promptly give Exxon written notice if the Cogeneration Facility loses its
qualifying cogeneration facility status or if there is a notice of default
under or material amendment to the Power Purchase Agreement.
ARTICLE 7
EXXON'S COGENERATION UNIT
7.1 Exxon System.
A. Subject to the terms and conditions of this Section 7.1, Cogen agrees
that Exxon may construct, operate, maintain, repair, replace, and remove
its own cogeneration unit, which may be referred to as the Exxon System,
consisting of one gas turbine, one waste heat recovery system, one back-
pressure steam turbine and appurtenant facilities, upon the Demised
Premises. The Parties anticipate that Cogen will construct, operate,
maintain, repair, replace, and remove the Exxon System for Exxon pursuant
to Paragraph 7.1C. Therefore, Cogen agrees to accommodate the Exxon
System in Cogen's design for Cogen's Cogeneration Facility, so that at a
future date, should Exxon elect to install the Exxon System, it will be
compatible with Cogen's Cogeneration Facility. Further, Exxon will be
allowed
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Ground Lease Agreement - 32 -
to review and comment upon Cogen's design of Cogen's Cogeneration
Facility and Cogen's plan for seeking Governmental Authorizations for
Cogen's Cogeneration Facility as such may impact the design and
Governmental Authorizations for the Exxon System. Exxon will reimburse
Cogen for any expenses reasonably incurred by Cogen as a result of the
construction, operation, maintenance, repair, replacement and removal of
the Exxon System.
B. Cogen will seek to obtain, at Cogen's sole expense, the necessary
environmental Governmental Authorizations relating to air emissions for
the Exxon System as part of Cogen's permitting efforts for Cogen's
Cogeneration Facility. Cogen is now planning to include five GE MS-7000
EA gas turbines in its Cogeneration Facility. In the event Cogen is
unable to obtain such environmental Governmental Authorizations relating
to air emissions of the Exxon System because Cogen's Cogeneration
Facility is planned as a plant with a gross power output rating in excess
of the power output rating which would have been obtained utilizing three
GE MS-7000 EA gas turbines (the "Three Turbine Rating"), Cogen will
redesign Cogen's Cogeneration Facility so as to enable Cogen to obtain
such environmental Governmental Authorizations for the Exxon System. If
such environmental Governmental Authorizations for the Exxon System
cannot be obtained by Cogen even if Cogen redesigns its cogeneration
Facility as a plant with a gross rating equal to the Three Turbine
Rating, then Cogen will not have any further
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Ground Lease Agreement - 33 -
obligation to seek environmental Governmental Authorizations for the
Exxon System, but instead may design and develop its Cogeneration
Facility as a plant with a gross rating not exceeding the Three Turbine
Rating.
C. If Cogen is successful in obtaining the environmental Governmental
Authorizations for the Exxon System, and if Exxon elects to install the
Exxon System, the Parties will negotiate in good faith an agreement under
which Cogen or its contractors will construct, operate, maintain, repair,
replace, and remove (as applicable) the Exxon System and under which
Cogen will be reimbursed for actual expenses plus a reasonable
administrative fee associated therewith.
D. Nothing in this Article 7 is intended to release Cogen from any of its
obligations under the Steam Sale Agreement.
ARTICLE 8
QUIET ENJOYMENT
8.1 Environmental Condition of Exxon's Property. Exxon has conducted a limited
investigation with respect to the environmental condition of the Demised
Premises and has disclosed to Cogen the character and results of that
investigation in a letter dated May 1, 1990. Cogen has conducted its own
environmental survey, including soil and water sampling, of the Demised
Premises, and has disclosed to Exxon the results of that survey. Cogen has
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Ground Lease Agreement - 34 -
caused a title search to be performed and a title insurance commitment to be
issued with respect to the Demised Premises and the Access Rights of Way.
Exxon has disclosed to Cogen certain data collected in 1985 and related to
the environmental condition of the Demised Premises and will disclose to
Cogen additional 1985 data related to the initial locations of the
Interconnection Areas, the Utility Areas, and the Access Rights of Way.
Exxon, without the benefit of an independent investigation, is not aware of
any outstanding judgments, pending litigation, or notices of violation
relating to Exxon's Property which would preclude the construction,
operation, maintenance, repair, replacement and removal of the Cogeneration
Facility, but Exxon does not warrant that there are no such judgments,
litigation, or notices, and subject to Section 10.1A Exxon does not warrant
that the Demised Premises or any other relevant parts of Exxon's Property
can be used for or are suitable for Cogen's purposes.
8.2 Cogen's Possession. Exxon has owned and continuously occupied the Demised
Premises since 1907 and, to the best of Exxon's knowledge, no one is now
questioning or challenging Exxon's rights of possession and ownership of the
Demised Premises. Exxon will be responsible for any valid lien or judgment
against the Demised Premises existing on the effective date of this Ground
Lease Agreement. So long as Cogen is in compliance with this Ground Lease
Agreement, during the term of the Ground Lease Cogen will have quiet,
undisturbed, and continued possession of the Demised Premises, and the
agreed use of the Interconnection Areas, the
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Ground Lease Agreement - 35
Utility Areas, the Staging Areas, and the Access Rights of Way free from any
claims against or actions of Exxon and all persons claiming under, by, or
through Exxon.
8.3 Access. Properly accredited representatives of either Party will, with
reasonable notice under the circumstances, have reasonable access to those
facilities of the other Party necessary in order, in the case of Exxon, to
make inspections and, in the case of both Parties, to obtain information
required in connection with this Ground Lease Agreement, the Steam Sale
Agreement, the Power Purchase Agreement, and any other agreements between
the Parties. Each Party will make reasonable efforts to avoid interference
with the operations of the other Party.
ARTICLE 9
TAXES
9.1 Parties' Responsibility. During the term of the Ground Lease, Cogen will
pay all taxes, assessments or charges levied against and solely attributable
to the Improvements. Exxon will pay all property taxes, assessments or like
charges otherwise relating to the Demised Premises, the Exxon System, the
Interconnection Areas, the Utility Areas, the Staging Areas and the Access
Rights of Way. In the event the taxing authorities fail or refuse to issue a
separate tax bill to Cogen covering only the Improvements, Cogen will be
responsible only for such taxes, assessments and charges solely attributable
to the Improvements.
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Ground Lease Agreement - 36 -
9.2 Tax Appeals. Either Party will have the right, with the other Party's
knowledge, to contest or review all such taxes, assessments and charges by
legal proceedings, or in such other manner as it may deem suitable. If
either Party contests any such tax, assessment or charge, such Party may
withhold or defer payment or pay under protest, but such contesting Party
will protect the other Party, Exxon's Property, and the Improvements from
any lien by adequate surety bond or other appropriate security. Each Party
will give reasonable cooperation to the other in any proceedings brought by
the other to contest taxes.
9.3 Failure to Pay. Should either Party fail to pay when due the taxes,
assessments or charges which such Party is responsible for pursuant to
Section 9.1 above, the other Party may, at its option and without waiving
any other rights such Party may have under the terms of this Ground Lease
Agreement or provided by law, pay such taxes, assessments or charges,
together with all penalties and interest which may have been added thereto.
Any such amounts so paid will become immediately due and payable upon
demand by the Party paying the same.
ARTICLE 10
ENVIRONMENTAL RESPONSIBILITY
10.1 Overall Environmental Liability. In order to facilitate segregation of
Cogen's and Exxon's operations, Cogen will construct its Cogeneration
Facility with concrete paving covering substantially all of the Demised
Premises, in accordance with
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Ground Lease Agreement - 37 -
normal construction practices, and, subject to Sections 14.1 and 20.3,
overall environmental liability will be allocated between the Parties as
follows:
A. If any environmental remediation of the Demised Premises is necessary
for the construction of the Cogeneration Facility, Exxon will be
primarily responsible for such remediation, as described in Section
10.6, and will bear the direct expense of such remediation, except that
Exxon will not be responsible to any entity for any resulting loss,
damage, or expense associated with any delays in or other impacts on the
construction, operation, maintenance, repair, replacement, or removal of
the Cogeneration Facility or other equipment or facilities of Cogen.
Additionally, Exxon will be liable for any other direct environmental
loss, damage, or expense (including those relating to third-party
claims) of Exxon or Cogen relating to Exxon's Property and resulting
solely from conditions existing before Cogen commences site preparation
activities on Exxon's Property or solely from the actions or inactions
of Exxon or its invitees on Exxon's Property after the effective date of
this Ground Lease Agreement.
B. Cogen will be liable for any direct environmental loss, damage, or
expense (including those relating to third-party claims) of Cogen or
Exxon relating to Exxon's Property and which Exxon can demonstrate
result solely from the actions or inactions of cogen or its invitees on
Exxon's Property.
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Ground Lease Agreement - 38 -
C. If an environmental loss, damage, or expense relating to Exxon's
Property results jointly from the causes described above in Sections
10.1A and 10.1B, each Party will bear its share of liability according
to the degree to which the causes for which it is responsible
contributed to the loss, damage, or expense.
D. Direct environmental loss, damage and expense will include all such
losses, damages, and expenses, including fines, reasonable out-of-pocket
expenses, costs of litigation, attorneys fees, costs of removing liens
imposed by governmental authorities, and costs of necessary remediation
such as necessary disposal or treatment of contaminated soil or ground
water. Direct environmental expenses will also include reasonable costs
of settling any third-party claims, provided the other Party agrees in
writing with such settlements. Direct environmental loss, damage and
expense will not include punitive, indirect, or consequential losses,
damages, or expenses referred to in Section 14.1.
10.2 Third Party Claims. Cogen and Exxon will cooperate and assist each other in
defending any environmental claims relating to Exxon's Property and made
against both Parties, and in pressing related claims or counterclaims
against third parties, where appropriate. In order to reduce transactional
costs, Cogen and Exxon will negotiate in good faith to determine which
Party will have primary responsibility for handling of any such claim.
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Ground Lease Agreement - 39 -
10.3 Triggering ECRA. Any action which would cause any entity to comply with
ECRA with respect to all or any part of Exxon's Property may be referred to
as triggering ECRA with respect to Exxon's Property, or simply triggering
ECRA. Exxon may trigger ECRA at any time with respect to all or any part of
Exxon's Property. Cogen will not take at any time any action which would
trigger ECRA with respect to any of Exxon's Property, except that Cogen may
trigger ECRA with respect to the Demised Premises (and perhaps a butane
supply line extending to the Demised Premises and the electrical
interconnect lines from the Cogeneration Facility and the land underlying
those lines) at any time more than two years after the Date of Initial
Commercial Operation.
10.4 Cogen's ECRA Liability. If Cogen at any time triggers ECRA with respect to
any of Exxon's Property other than the Demised Premises (and perhaps a
butane supply line extending to the Demised Premises and the electrical
interconnect lines from the Cogeneration Facility and the ground underlying
those lines), or if Cogen triggers ECRA with respect to the Demised
Premises before or within two years after the Date of Initial Commercial
operation, unless the action which causes Cogen to trigger ECRA is beyond
Cogen's control (including bankruptcy of Cogen or foreclosure of the liens
of the Financier), Cogen will be deemed to be in default under this Ground
Lease Agreement and will be liable for and will promptly reimburse Exxon
for all expenses which Exxon reasonably incurs because of such triggering
of ECRA, up to a maximum of $10 million. Exxon will not be entitled to be
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Ground Lease Agreement - 40 -
paid any other sums for damages to Exxon arising from such breach by Cogen.
Payment by Cogen of such expenses of Exxon (up to the maximum of $10
million), however, will not be deemed to cure such default by Cogen
pursuant to the first sentence of this Section 10.4, but instead Exxon, in
addition to the right to be so paid, shall be entitled to terminate this
Ground Lease for such default pursuant to Section 16.1A, but subject to the
Financier's cure right described in Section 16.4B. If Cogen triggers ECRA
with respect to the Demised Premises (and perhaps a butane supply line
extending to the Demised Premises and the electrical interconnect lines
from the Cogeneration Facility and the land underlying those lines) before
or within two years after the Date of Initial Commercial Operation because
of a cause beyond its control (including bankruptcy of Cogen or foreclosure
of the liens of the Financier), or if Cogen triggers ECRA with respect to
the Demised Premises (and perhaps a butane supply line extending to the
Demised Premises and the electrical interconnect lines from the
Cogeneration Facility and the land underlying those lines) more than two
years and less than fifteen years after the Date of Initial Commercial
Operation, Cogen will not be deemed to be in default of this Ground Lease
Agreement, but will be liable for and will promptly reimburse Exxon for all
expenses reasonably incurred by Exxon in order to comply with ECRA, up to a
maximum of $2 million. The $10 million maximum and the $2 million maximum
will not apply to Cogen's liability under Sections 10.1 and 10.2 above.
Cogen's obligation under this Section 10.4 to reimburse Exxon promptly for
expenses reasonably incurred by Exxon will apply to
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Ground Lease Agreement - 41 -
all such expenses (up to the $10 million or $2 million cap, as applicable),
whether related to the Demised Premises or to other parts of Exxon's
Property and whether related to environmental conditions caused by Exxon or
by any other entity. If Cogen triggers ECRA with respect to the Demised
Premises more than fifteen years after the Date of Initial Commercial
Operation, or if Exxon triggers ECRA, Cogen will not be obligated to
reimburse Exxon for any of Exxon's expenses in complying with ECRA except
to the extent that Cogen may be liable for such expenses under Sections
10.1 or 10.2 above.
10.5 ECRA Cooperation. If either Party anticipates that ECRA will be triggered
with respect to all or any part of Exxon's Property, that Party will
promptly give the other Party reasonable notice to enable it to prepare for
such triggering of ECRA. Subject to the provisions of sections 10.1, 10.2,
10.3, 10.4 and 20.3, Exxon will be primarily responsible for ECRA
compliance with respect to Exxon's Property, including the Demised
Premises, even if ECRA is triggered by Cogen. This compliance will include
without limitation interacting with the New Jersey Department of
Environmental Protection, making ECRA filings, developing and implementing
sampling and cleanup plans if necessary, posting financial assurances,
entering into administrative consent orders if appropriate, and the other
actions mandated by ECRA. If ECRA is triggered, both Parties will cooperate
with each other by providing appropriate data, affidavits, and other
information and documentation to facilitate ECRA compliance. Exxon will
have
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Ground Lease Agreement - 42 -
complete discretion with respect to the course of action which it takes to
comply with ECRA, but Exxon subject to Section 14.1 will exert reasonable
efforts to mitigate the financial impact of ECRA compliance on Cogen. Cogen
will have the right to review and comment on Exxon's plans for complying
with ECRA and Exxon will work with Cogen to mitigate the impact of ECRA
compliance on the operation of the Cogeneration Facility. Additionally,
Cogen will have the right to conduct its own independent testing of soil
and ground water on the Demised Premises and on any land within one hundred
feet of the Demised Premises. Cogen will give Exxon reasonable access to
the Demised Premises to facilitate compliance with ECRA.
10.6 General Cooperation. If any environmental remediation (other than
remediation under ECRA, which is covered by Section 10.5) becomes necessary
before or during the term of the Ground Lease with respect to the Demised
Premises, Interconnection Areas, Utility Areas, or Access Rights of Way,
Exxon will be primarily responsible subject to the provisions of Sections
10.1 and 10.2 for that remediation and for related interactions with
regulatory authorities. If any such remediation becomes necessary, both
Parties will cooperate with each other by providing appropriate data,
affidavits, and other information, documentation and assistance to
facilitate the remediation. Exxon will have complete discretion with
respect to the course of action which it takes to effect the remediation,
but Exxon will exert reasonable efforts to mitigate the financial impact of
any such remediation
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Ground Lease Agreement - 43 -
on Cogen, subject to Section 14.1. Cogen will have the right to review and
comment on Exxon's plans for the remediation and Exxon will work with Cogen
to mitigate the impact of any such remediation on the construction,
construction schedule, and operation of the Cogeneration Facility. Cogen
will give Exxon reasonable access to the Demised Premises to facilitate any
such remediation. At Exxon's request, Cogen will dispose of any
contaminated soil or other contaminated materials that Exxon determines
should be removed from the Demised Premises.
10.7 Cogen's Net Worth. From the Date of Initial Commercial Operation to the
termination of the Ground Lease and until Cogen has discharged its
obligations under ECRA, if any, Cogen will maintain a net worth which, when
combined with the net worth of its general partner or general partners,
will total at least $50 million. Net worth includes all items which would
be included, in accordance with generally accepted accounting principles,
under the capital portion of the balance sheet of Cogen and also includes
the amount of any letter of credit in favor of Exxon, supporting a
guarantee of Cogen's obligations under this Ground Lease Agreement, and
issued by an entity with a long term debt rating of A or better. Net worth
shall not include any letter of credit in favor of Exxon issued for the
purpose provided in Section 10.8. In no circumstance shall this Section
10.7 be construed to require the provision of a letter of credit in an
amount in excess of $50 million in respect of Cogen's obligation to
maintain a net worth of at least $50 million, calculated as provided above.
If Cogen
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Ground Lease Agreement - 44 -
needs to include a letter of credit to maintain a net worth of $50 million,
Cogen will so advise Exxon and Cogen will not be obligated to maintain such
letter of credit unless Exxon so requests.
10.8 Letter of Credit. With regard to liability under the provisions of Section
10.4 which results from action taken or directed by any Financier, Exxon
may require the Financier to either (i) provide a letter of credit
substantially in the form of the letter of credit being issued by General
Electric Capital Corporation described below or (ii) make such other
arrangements as are reasonably satisfactory to Exxon. With respect to the
initial Financier recognized by Exxon for purposes of this Ground Lease
Agreement, General Electric Power Funding Corporation, Exxon will accept
the letter of credit issued on the date hereof by General Electric Capital
Corporation, an Affiliate of General Electric Power Funding Corporation,
for the account of Cogen in favor of Exxon (or any replacement letter of
credit as provided below), which letter of credit provides that Exxon may
draw thereunder in various circumstances, including the impending expiry
date thereof without Exxon having been furnished with a substantially
similar replacement letter of credit issued by General Electric Corporation
or one of its wholly-owned Affiliates or, if General Electric Power Funding
Corporation or one of its Affiliates is no longer the Financier recognized
by Exxon for purposes of this Ground Lease Agreement, by the Financier so
recognized, provided such Financier has a long term debt rating of
<PAGE>
Ground Lease Agreement - 45 -
A or better and is otherwise reasonably acceptable to Exxon. Such letter of
credit also provides that in the event ECRA is triggered prior to January
1, 2013, by an action taken or directed by any Financier and that prior to
the 30th day before such date no determination has been made as to one or
both of (a) the obligation of Exxon to remediate or (b) the expense
thereof, Exxon may draw the full amount available thereunder. It is agreed
that, if Exxon draws under such letter of credit or any such replacement
letter of credit because of any of the reasons specifically described
above, Exxon will enter into an escrow agreement among Cogen, Exxon, the
issuer of such letter of credit and an escrow agent (which must be
reasonably satisfactory to Exxon) nominated by Cogen pursuant to which such
escrow agent will hold the proceeds of such draw for disbursement in
various circumstances (which must be reasonably satisfactory to Exxon),
including the delivery to such escrow agent of a certificate substantially
similar to Exhibit B-1, Exhibit B-2, Exhibit B-3 or Exhibit B-4, as the
case may be, to the aforementioned letter of credit issued by General
Electric Capital Corporation on the date hereof. All fees and disbursements
of the escrow agent will be paid by Cogen. Funds held by the escrow agent
will (subject to protection criteria reasonably acceptable to Exxon) be
invested for the benefit and risk of Cogen.
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Ground Lease Agreement - 46 -
ARTICLE 11
LIENS
11.1 If any mechanics', materialmen's or other liens are filed against Exxon's
Property or any part thereof, by reason of labor performed or materials
furnished to Cogen in the construction, operation, maintenance, repair,
replacement or removal of the Improvements, Cogen will, at Cogen's own
cost, cause such lien or liens to be satisfied, removed, cancelled,
erased, discharged of record, bonded or otherwise secured against,
together with any notices of lien that may have been filed, either by
payment thereof, by bonding the lien in accordance with the laws of the
State of New Jersey or by such other means as may be acceptable to Exxon.
Should Cogen fail to discharge any such lien or otherwise fail to satisfy
Exxon with respect thereto, Exxon may, at its option, have the lien
removed by bonding same or satisfying same, all at Cogen's expense, which
will be in addition to any other remedies provided in this Ground Lease
Agreement. Cogen will at no time cause or permit a mortgage or any other
security instrument of any nature to become a lien against any part of
Exxon's Property, except as otherwise provided in Article 12.
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Ground Lease Agreement - 47 -
ARTICLE 12
PERMITTED ENCUMBRANCES ON
LEASEHOLD INTERESTS AND IMPROVEMENTS
12.1 General. Subject to Cogen's obligation in Article 10 not to trigger ECRA
before or within two years after the Date of Initial Commercial operation
due to causes within its control, Cogen may, subject to Article 20, at any
time and from time to time during the term of this Ground Lease Agreement
and without the consent of Exxon, encumber Cogen's interest in the
leasehold estate created by this Ground Lease Agreement, in the additional
rights granted to Cogen pursuant to Sections 2.2, 2.3, 2.4, 2.5, 2.6, and
2.7 above, and in the Improvements by way of a lien, security agreement,
UCC filing, chattel mortgage, leasehold mortgage, or permitted assignment
containing such provisions as Cogen may deem fit and proper. Cogen
recognizes that ECRA regulations currently provide that execution of a
mortgage, filing of a lien, granting a security interest, assigning a
lease to secure a loan, and refinancing a debt not including a sale and
lease back generally would not trigger ECRA, but that certain sales or
transfers of the Improvements, the Ground Lease, or certain partnership
interests with respect to Cogen could trigger ECRA.
<PAGE>
Ground Lease Agreement - 48 -
ARTICLE 13
EMINENT DOMAIN
13.1 Distribution of Award. If the Demised Premises, the Interconnection
Areas, the Utility Areas, the Staging Areas or the Access Rights of Way
are taken or condemned, in whole or in part, by any competent authority,
the Parties will cooperate in applying for and in prosecuting any claim
for such taking. Any award, after deduction of all expenses, including
attorney's fees, incurred in connection therewith, payable to both Exxon
and Cogen (or if required, to the Financier) will be distributed as
follows:
A. The portion of the award relating to the taking of Cogen's rights
under this Ground Lease Agreement, lost profits of Cogen, the
Improvements and, if applicable, the expense of dismantling and moving
the Improvements will be paid to Cogen; and
B. The portion of the award relating to the lost benefits of steam from the
Cogeneration Facility and to the value of the land constituting the
Demised Premises, the Interconnection Areas, the Utility Areas, the
Staging Areas and the Access Rights of Way will be paid to Exxon.
13.2 Full Taking. In the event of a full taking of the Demised
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Ground Lease Agreement - 49 -
Premises, the Ground Lease will automatically terminate on the date such
authority requires the Cogeneration Facility to be shut down.
13.3 Partial Taking. In the event of a partial taking of the Demised Premises,
or a full or partial taking of the Interconnection Areas, the Utility
Areas, the Staging Areas or the Access Rights of Way by any competent
authority which renders the continuation of normal operations at the
Cogeneration Facility impossible, impracticable, or unduly onerous, Cogen
may elect to terminate the Ground Lease under the provisions of Sections
16.2G and 16.5G. If this Ground Lease is not so terminated, it will
continue in full force and effect as to those portions of the Demised
Premises, the Interconnection Areas, the Utility areas, the Staging Areas
and the Access Rights of Way not taken, and the rent payable hereunder
will be proportionately and equitably reduced.
ARTICLE 14
LIMITATION ON LIABILITY AND DISTRIBUTION OF RISKS
14.1 Limitation on Liability for Damages. Neither Exxon nor Cogen, nor their
respective officers, directors, partners, agents, employees, Affiliates,
nor their successors or assigns will be liable under this Ground Lease
Agreement to the other Party or its officers, directors, partners, agents,
employees, Affiliates, or their successors or assigns, for any punitive,
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Ground Lease Agreement - 50 -
indirect, or consequential losses, damages, or expenses, including loss of
profits.
14.2 Distribution of Risks Between Exxon and Cogen.
A. Cogen will compensate Exxon for any loss of or damage to Exxon's Bayway
Refinery, Bayway Chemical Plant, Marketing Terminal, Technology Center,
or any other property of Exxon sustained by Exxon arising out of or in
connection with the ownership, construction, operation, maintenance,
repair, replacement, or removal of the Improvements, limited, however,
to the amount provided for in Section 14.2D plus any amounts Cogen may
recover for such loss or damage from its vendors, contractors,
subcontractors, or others. Subject to the limitations of Section 14.5,
Cogen will make reasonable efforts to recover such damages or losses
from vendors, contractors, subcontractors, and others.
B. Cogen will be responsible for and will hold Exxon harmless from
liability resulting from loss of or damage to the Improvements or any
other property of Cogen located on the Demised Premises or Exxon's
Property sustained by Cogen, whether or not such loss or damage is
caused by the negligence of Exxon, its officers, directors, partners,
agents, employees, Affiliates, or their representatives.
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Ground Lease Agreement - 51 -
C. Except as provided otherwise herein, Cogen agrees to indemnify, hold
harmless and defend Exxon, its officers, directors, partners, agents,
employees, Affiliates, and their representatives from and against any
and all claims, losses, damages, causes of action, suits, and liability
of every kind, including all expenses of litigation, court costs, and
attorney's fees, for injury to or death of any person (including Cogen's
employees), or for damage to any property, arising out of or in
connection with the ownership, construction, operation, maintenance,
repair, replacement, or removal of the Improvements, where the injury or
death or damage is caused by the negligence of Cogen, its officers,
directors, partners, agents, employees, Affiliates, or their
representatives as well as the contributory negligence of Exxon, its
officers, directors, partners, agents, employees, Affiliates, or their
representatives with Cogen or any third party, except that Cogen assumes
no liability for the sole negligent acts of Exxon. It is the express
intention of the Parties that the indemnity provided for in this Section
14.2C is intended by Cogen to indemnify and protect Exxon from the
consequences of Exxon's own negligence, where that negligence is a
concurring cause of the injury, death, or damage. Furthermore, the
indemnity provided for in this Section 14.2C will have no application to
any claim, loss, damage, cause of action, suit, and liability where the
injury, death, or damage results from the sole negligence of Exxon
<PAGE>
Ground Lease Agreement - 52 -
unmixed with the fault of Cogen, its officers, directors, partners,
agents, employees, Affiliates, or their representatives.
D. Cogen's indemnity obligations, pursuant to Sections 14.2A and 14.2C,
will be initially limited to $10 million and then adjusted every five
years from the effective date of this Ground Lease Agreement by
application of the CPI-based formula set forth in Section 5.2 above and
by rounding the results to the nearest $100,000. The limitation applies
solely to the provisions of Sections 14.2A and 14.2C and does not affect
any other responsibility of Cogen, including its environmental
obligations under Article 10 above.
14.3 Cooperation. Exxon will furnish Cogen with written notification as soon as
practicable after Exxon becomes aware of any event or circumstances which
might give rise to such indemnification; provided, however, the failure of
Exxon to give such written notification will not waive any rights under
this Article 14, except to the extent the rights of Cogen are actually
prejudiced. At Exxon's request, Cogen will defend any suit asserting a
claim covered by this indemnity and will pay all associated costs and
expenses (including reasonable attorneys fees and expenses) that may be
incurred in enforcing this indemnity. Exxon may, at its own expense,
retain separate counsel and participate in the defense of any such suit or
action. Cogen will not compromise or settle a claim hereunder
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Ground Lease Agreement - 53 -
without the prior written consent of Exxon; provided, however, that in the
event such a consent is withheld, then the liability of Cogen will be
limited to the aggregate of the amount of the proposed compromise or
settlement, the amount of counsel fees and expenses outstanding at the time
such consent is withheld, and the amount of any outstanding claim against
which indemnification applies and which is not covered by the proposed
compromise or settlement (together with all costs and expenses associated
with such outstanding claim). Thereafter, Exxon will reimburse Cogen upon
demand, for the amount of any additional liability, counsel fees and
expenses incurred by Cogen over and above the amounts described above after
the time such consent shall have been withheld.
14.4 Dispute of Obligation. To the extent Cogen disputes its obligation to
indemnify Exxon, it will not be considered a breach of this Ground Lease
Agreement for Cogen to fail to perform under this Article 14 until such
time as Cogen is determined to have the obligation to indemnify under
this Article 14 pursuant to an agreement reached by the Parties or by
judicial determination.
14.5 Vendors. Contractors, and Subcontractors. Exxon retains the right to
pursue any claim that it may have against any of Cogen's vendors,
contractors, or subcontractors, arising out of or in connection with the
ownership, construction, operation, maintenance, repair, replacement, or
removal of the
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Ground Lease Agreement - 54 -
Improvements, except that with respect to claims based on such activities
between the effective date of this Ground Lease Agreement and two years
after the Date of Initial Commercial Operation, Exxon agrees to waive all
liability relating to such activities in excess of $10 million that Cogen's
contractor Ebasco Constructors, Inc. and the vendors, contractors and
subcontractors of Ebasco Constructors, Inc. may have to Exxon under any
legal theory for any losses, damages, or expenses, including any punitive,
indirect, or consequential losses, damages, or expenses, including loss of
profits. Cogen retains the right to pursue any claim that it may have
against any of Exxon's vendors, contractors, or subcontractors, arising out
of or in connection with their activities at Exxon's Complex, except that
with respect to claims based on such activities between the effective date
of this Ground Lease Agreement and two years after the Date of Initial
Commercial Operation, Cogen agrees to waive all liability relating to such
activities in excess of $10 million that any such entity may have to Cogen
under any legal theory for any losses, damages, or expenses, including
punitive, indirect, or consequential losses, damages, or expenses,
including loss of profits.
ARTICLE 15
INSURANCE
15.1 General Requirements. Cogen will carry at the effective date
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Ground Lease Agreement - 55
of this Ground Lease Agreement and will use its best efforts to maintain in
force to the end of this Ground Lease, the following insurances with
companies satisfactory to Exxon:
(i) Workers' Compensation and Employer Liability
For all its employees who may at any time be on Exxon's Property,
workers' compensation and employer's liability with limits of at
least $100,000 per accident;
(ii) Comprehensive General Liability
Cogen's normal and customary comprehensive general liability
insurance (including without limitation contractual) with limits of
at least $10 million per occurrence for bodily injury and $10 million
per occurrence for property damage; and
(iii) Automobile Liability
Automobile liability insurance covering owned, non-owned, and rented
vehicles which may at any time operate on Exxon's Property, with
limits of at least $10 million for injury, death, or property damage
resulting from each occurrence.
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Ground Lease Agreement - 56 -
Nothing contained in this Section 15.1 shall limit or waive Cogen's legal
or contractual responsibilities to Exxon or others.
15.2 Notices and Examination. If requested by Exxon, Cogen will have its
insurance carriers furnish to Exxon insurance certificates specifying the
types and amounts of coverage in effect, the expiration dates of each
policy, and a statement that no insurance will be canceled or materially
changed during the term of this Ground Lease without thirty days prior
written notice to Exxon. If requested by Exxon, Cogen will permit Exxon to
examine the insurance policies, or at Exxon's option, Cogen will furnish
Exxon with certified copies of the insurance policies.
15.3 Self-Insurance. Upon showing reasonable evidence of financial ability to
assume loss to Exxon, Cogen may self-insure any or all of the coverages
shown above.
ARTICLE 16
TERMINATION
16.1 Exxon's Right to Terminate. Subject to Section 16.4, Exxon will have the
right, at its option, to terminate the Ground Lease upon the occurrence of
any of the following events:
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Ground Lease Agreement - 57 -
A. Cogen-defaults by failing to make timely payment of rent pursuant to
Article 5 hereof, which failure continues for sixty days after Exxon
gives Cogen and the Financier identified in Section 16.4 written notice
of such failure to pay, or Cogen defaults by triggering ECRA in
violation of Section 10.4; or
B. Cogen defaults by failing substantially to perform any material
obligation under this Ground Lease Agreement, other than the payment of
rent or forbearance from triggering ECRA covered in Section 16.1A, which
failure continues for a period of sixty days after Exxon gives Cogen and
the Financier identified in Section 16.4 written notice of such
nonperformance; provided, however, if such default may not reasonably be
cured within such sixty-day period, this Ground Lease will not terminate
pursuant to this Article 16.1B, if Cogen diligently commences to cure
such default within such sixty-day period and for so long as Cogen
diligently continues such efforts, unless the default continues uncured
for six months after Exxon gives Cogen and the Financier identified in
Section 16.4 such written notice; or
C. Exxon terminates the Steam Sale Agreement because of default by Cogen;
or
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Ground Lease Agreement - 58 -
D. Cogen fails, after the Construction Period has commenced, to conclude
the Construction Period by January 1, 1998, in which event Exxon may
terminate this Ground Lease by giving Cogen prompt written notice; or
E. Exxon terminates the Steam Sale Agreement pursuant to Article 2.3 of
such agreement (dealing with failure by Cogen to commence Commercial
operations by July 1, 1993, or make alternate arrangements), or Cogen
ceases to be obligated to comply with the Steam Sale Agreement for any
reason other than a termination of such Agreement (i) by Cogen due to a
default by Exxon thereunder, (ii) by Exxon (only) at the expiration of
"Base Term" (as defined in such Agreement) or of the first five year
renewal thereof, (iii) by Cogen because Exxon's External Steam
Requirements (as defined in such Agreement) from Cogen under such
Agreement have fallen below the level specified in Section 11.2E of such
Agreement and the other conditions in such Section have been satisfied,
or (iv) by agreement of Cogen and Exxon; or
F. The Ground Lease enters its Evergreen Period and Exxon gives Cogen at
least five years written notice of termination pursuant to Section 4.6.
16.2 Cogen's Right to Terminate. Cogen will have the right, at its
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Ground Lease Agreement - 59 -
option, to terminate the Ground Lease upon the occurrence of any of the
following events:
A. Exxon defaults by failing substantially to perform any material
obligation under this Ground Lease Agreement, which failure continues
for a period of sixty days after Cogen gives Exxon and its lenders and
mortgagees identified in Section 16.4 written notice of such
nonperformance; provided, however, if such default may not reasonably be
cured within such sixty-day period, this Ground Lease will not terminate
pursuant to this Section 16.2A, if Exxon diligently commences to cure
such default within such sixty-day period and for so long as Exxon
diligently continues such efforts, unless the default continues uncured
for six months after Cogen gives Exxon and its lenders and mortgagees
identified in Section 16.4 such written notice; or
B. Cogen terminates the Steam Sale Agreement because of default by Exxon;
or
C. Cogen terminates the Steam Sale Agreement under Article 11.2E of such
agreement (dealing with decreased need for Steam by Exxon); or
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Ground Lease Agreement - 60 -
D. The Power Purchase Agreement is terminated for any reason and is not
replaced by a similar agreement to sell power; or
E. Cogen is unable to receive or maintain the Governmental Authorizations
necessary lawfully to construct, operate, and maintain the Cogeneration
Facility due to Force Majeure (and not due to repeated violations by
Cogen of such authorizations for reasons other than Force Majeure); or
F. The Demised Premises, the Interconnection Areas, the Utility Areas, or
the Access Rights of Way cannot be used for Cogen's purposes as
specified in Article 6 and the Parties cannot relocate the
Interconnection Areas, Utility Areas or Access Rights of Way pursuant to
Section 2.6 to their mutual satisfaction, or if Cogen is unable to
obtain water, gas, or standby power for the Cogeneration Facility; or
G. There is a partial taking allowing termination in accordance with
Section 13.3; or
H. The Ground Lease continues to the end of the Base Term, or either
Renewal Term, or into the Evergreen Period and Cogen gives any of the
notices of termination specified in Article 4.
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Ground Lease Agreement - 61 -
Any notice from Cogen to Exxon of termination of the Ground Lease will be
effective only if such notice either (i) is joined in by the Financier in
writing, if there is a Financier then in existence, or (ii) certifies on
its face that there is no Financier.
16.3 Automatic Termination. The Ground Lease will automatically terminate as of
the effective date set forth in Section 16.5 below if
A. The Ground Lease continues in effect to December 31, 2050; or
B. There is a full taking by competent authority of the Demised Premises,
as described in Article 13; or
C. This Ground Lease Agreement is rejected pursuant to Section 365 of the
Bankruptcy Code of 1978, as amended, or any successor provision thereto,
in a case wherein Cogen is the debtor.
16.4 The Financier, Lenders and Mortgagees.
A. Exxon will have no right to terminate this Ground Lease for default
pursuant to Sections 16.1A, 16.1B, or 16.1C above, until Exxon (i) has
provided the Financier substantially the same notices which Exxon is
obligated to provide to
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Ground Lease Agreement - 62 -
Cogen pursuant to Sections 16.1A or 16.1B, or 16.5A; and (ii) has
provided the Financier the same right to cure such default as Cogen; and
(iii) in the case of defaults which are susceptible of being cured only
if the Financier has access to the Demised Premises, the Improvements,
the Interconnection Areas, the Utility Areas and the Access Rights of
Way (and only in the case of such defaults), has provided the Financier
six additional months subsequent to the end of the period for the cure
of any such default in Section 16.1B, without extension for any period
contemplated in Article 19, to cure such default, provided that the
Financier has pursued and continues to pursue with diligence, continuity
and good faith all actions to enable the Financier to obtain access in
order to cure, and to cure, such default. Exxon and Cogen hereby grant
to the Financier a non-exclusive license, irrevocable for the term of
the Ground Lease, to have access to and to use the Demised Premises, the
Improvements, the Interconnection Areas, the Utility Areas and the
Access Rights of Way for the purpose of curing any default by Cogen
under clause (ii) above, or under Article 11.4A (ii) of the Steam Sale
Agreement, in any case in which such default is not subject to cure in a
reasonably practicable manner without access to the Demised Premises,
the Improvements, the Interconnection Areas, the Utility Areas and the
Access Rights of Way. Cogen will have no right to terminate this Ground
Lease pursuant to Section 16.2A above, until Cogen (i) has provided any
lender to whom Exxon has assigned this
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Ground Lease Agreement - 63 -
Ground Lease Agreement to secure a loan and has provided any mortgagee
holding a mortgage on all or any part of Exxon's Property substantially
the same notices which Cogen is obligated to provide to Exxon pursuant
to Section 16.2A, and (ii) has provided such lender or mortgagee the
same right to cure as Exxon, provided that Exxon has previously given
Cogen actual notice of the appropriate contact person and address for
any such lender or mortgagee.
B. In the event Cogen defaults pursuant to the terms of the first sentence
of Section 10.4, Exxon agrees not to terminate this Ground Lease if the
Financier, within sixty days after receiving notice of such default,
pays to Exxon the sums provided for in such first sentence of Section
10.4 and thereafter takes appropriate steps to foreclose upon or
otherwise obtain title to or possession of the Cogeneration Facility.
16.5 Effective Date of Termination.
A. If an event described in Sections 16.1A or 16.1B occurs, or if the
termination described in Section 16.1C occurs, Exxon may promptly give
Cogen a written notice of termination (which, in the case of triggering
ECRA, will be the first written notice) which will trigger immediately
the commencement of the Improvements Removal Period described
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Ground Lease Agreement - 64 -
in Section 4.7 and the Ground Lease will terminate when the Improvements
Removal Period terminates.
B. If Cogen fails to conclude the Construction Period by the time provided
in Section 16.1D, Exxon may give Cogen the written notice provided for
in Section 16.1D, which notice will trigger immediately the commencement
of the Improvements Removal Period described in Section 4.7 and the
Ground Lease will terminate when the Improvements Removal Period
terminates.
C. If Exxon terminates the Steam Sale Agreement pursuant to Article 2.3 of
such agreement after this Ground Lease has commenced, or if Cogen ceases
to be obligated to comply with the Steam Sale Agreement for any reason
other than as specified in Section 16.1E, in each case, Exxon may give
Cogen prompt written notice that Exxon is electing to terminate the
Ground Lease as well, and this written notice will trigger immediately
the commencement of the Improvements Removal Period and the Ground Lease
will terminate when the Improvements Removal Period terminates.
D. If Exxon gives Cogen notice of termination of the Ground Lease during
the Evergreen Period pursuant to Section 4.6, the Improvements Removal
Period will commence on the date specified in the notice and the Ground
Lease will terminate when the Improvements Removal Period terminates.
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Ground Lease Agreement - 65 -
E. If a default described in Section 16.2A occurs, Cogen may promptly
give Exxon a second written notice which will trigger immediately the
commencement of the Improvements Removal Period and the Ground Lease
will terminate when the Improvements Removal Period terminates.
F. If any event described in Section 16.2B or 16.2C occurs, Cogen may give
Exxon prompt written notice which will trigger immediately the
commencement of the Improvements Removal Period and the Ground Lease
will terminate when the Improvements Removal Period terminates.
G. If any event described in Sections 16.2D, 16.2E, 16.2F or 16.2G occurs,
Cogen may give Exxon prompt written notice. This notice will trigger the
commencement of the Improvements Removal Period immediately, if the
Ground Lease is in the Construction Period, otherwise two years after
such notice is given, and the Ground Lease will terminate when the
Improvements Removal Period terminates.
H. If Cogen gives Exxon notice of termination of the Ground Lease during
the Base Term, either Renewal Term, or during the Evergreen Period
pursuant to Sections 4.5 or 4.6, the Improvements Removal Period will
commence on the date specified in the notice and the Ground Lease will
terminate when the Improvements Removal Period terminates.
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Ground Lease Agreement - 66 -
I. If the Evergreen Period continues in effect until December 31, 2048, the
Improvements Removal Period will commence on January 1, 2049, and the
Ground Lease will terminate when the Improvements Removal Period
terminates, and in any event not later than December 31, 2050.
J. If there is a full taking as described in section 13.2, there will be no
Improvements Removal Period and the Ground Lease will terminate on the
date the governmental authority requires the Cogeneration Facility to be
shut down.
K. If this Ground Lease Agreement is rejected pursuant to Section 365 of
the Bankruptcy Code of 1978, as amended, or any successor provision
thereto, in a case wherein Cogen is the debtor, the Ground Lease will
terminate on the effective date of such rejection.
16.6 Cooperation. If the Ground Lease is terminated for any reason, the Parties
will work together to achieve a smooth transition.
ARTICLE 17
REMOVAL OF IMPROVEMENTS
17.1 During the Improvements Removal Period or as soon as is practicable
following any rejection described in Section 16.3C (subject to any rights
of Financier, its nominee, or designee
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Ground Lease Agreement - 67 -
in the Improvements) Cogen may, and will, at Exxon's written request given
not later than any termination of the Construction Period, Base Term, any
Renewal Term, or the Evergreen Period pursuant to Section 16.1 above, or at
Exxon's written request given within and not later than thirty days after
any other termination of the Construction Period, Base Term, any Renewal
Term or the Evergreen Period, at Cogen's expense, remove all or any portion
of the Improvements from Exxon's Property and will restore Exxon's Property
to as near its original condition as is practicable, except that Cogen may
cut off, blank, and leave in place any below-ground utility and
interconnection services in the Interconnection Areas or Utility Areas (but
not on the Demised Premises). Any such below-ground utility and
interconnection services that contain or have contained any hydrocarbon or
other hazardous substance will be purged and cleaned by Cogen to Exxon's
satisfaction prior to blanking. In the event Exxon does not request such
removal and any of the Improvements are not removed, all such Improvements
will be deemed abandoned to Exxon without any payment being due from Exxon
and Cogen will have no further liability with regard thereto. In the event
that Exxon requests removal and Cogen fails to remove all or any portion of
the Improvements, Exxon may remove such Improvements at Cogen's expense.
<PAGE>
Ground Lease Agreement - 68 -
ARTICLE 18
NONWAIVER
18.1 The various rights, remedies, options, and elections of Exxon and Cogen
as expressed herein are cumulative, and the failure of Exxon or Cogen to
enforce strict performance by the other Party of the provisions of this
Ground Lease Agreement or to exercise any right, election, or option or
to resort or have recourse to any remedy herein conferred will not be
construed or deemed to be a waiver or a relinquishment of the future
enforcement by Exxon or Cogen of any such provisions, rights, options,
elections, or remedies, but the same will continue in full force and
effect.
ARTICLE 19
FORCE MAJEURE
19.1 Definition. Except for the obligations of a Party to make payments when
due under this Ground Lease Agreement, the Parties will be excused from
delays in performance or failures to perform their respective obligations
hereunder and will not be liable in damages or otherwise, if and only to
the extent that such delays or failures are caused by Force Majeure. The
term "Force Majeure" means any cause beyond the reasonable control of the
affected Party, including, without limitation, storm, flood, lightning,
drought, earthquake, fire, explosion, civil disturbance, labor dispute,
act of God or the public
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Ground Lease Agreement - 69 -
enemy, or action of a court or governmental authority. Financial distress
of either Party, late delivery of materials or equipment (unless itself
caused by Force Majeure), or inadequate performance by contractors (unless
itself caused by Force Majeure) will not be considered Force Majeure.
19.2 Burden of Proof. The burden of proof as to whether an event or condition
of Force Majeure has occurred will be upon the Party claiming that it
should be excused from performing its obligations hereunder due to the
occurrence of such an event or condition.
19.3 Condition. If either Party relies on Force Majeure as a basis for being
excused from performance of its obligations under this Ground Lease
Agreement, then the Party relying on Force Majeure will:
A. Give prompt oral notice to the other Party, confirmed promptly in
writing, of the occurrence of the event or condition, with an estimate
of its expected duration and probable impact on the performance of its
obligations hereunder;
B. Exercise all reasonable efforts to continue to perform its obligations
hereunder;
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Ground Lease Agreement - 70 -
C. Expeditiously take action to correct or cure the event or condition
excusing performance to the extent reasonably practicable;
D. Exercise all reasonable efforts to mitigate or limit damages to the
other Party; and
E. Give prompt oral notice to the other Party, confirmed promptly in
writing, of the cessation of the event or condition giving rise to its
excusal from performance.
19.4 Labor Disputes. This Article 19 will not require the settlement of any
strike, walkout, lockout, or other labor dispute on terms which, in the
judgment of the Party involved, are contrary to its interests. The
settlement of such labor disputes will be at the sole discretion of the
Party involved.
ARTICLE 20
ASSIGNMENT AND SUBLETTING
20.1 By Exxon. Exxon may freely assign this Ground Lease Agreement, which will
be binding on and inure to the benefit of the successors and assigns of
Exxon. Upon any such assignment, Cogen will attorn to and recognize such
successor and assignee of Exxon as lessor under this Ground Lease
Agreement.
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Ground Lease Agreement - 71 -
20.2 By Cogen. Cogen will not grant any subleases under this Ground Lease
Agreement. Cogen will not assign, transfer, mortgage, pledge, or
hypothecate this Ground Lease Agreement at any time, except that
A. Cogen may at any time assign, mortgage, pledge, or hypothecate this
Ground Lease Agreement in accordance with Article 12, provided that such
transaction is accomplished in a way that does not trigger ECRA with
respect to any part of Exxon's Property (unless the transaction is
caused by a foreclosure, which is permitted any time under Section 20.4C
below even if the foreclosure triggers ECRA); and
B. Following two years after the Date of Initial Commercial Operation,
Cogen may assign or transfer this Ground Lease Agreement to an
unrelated entity, provided that such unrelated entity will also assume
Cogen's rights and obligations under the Steam Sale Agreement, and (i)
first deliver to Exxon its written assumption agreement substantially in
the form of Exhibit G-1 to be bound by all of the provisions of this
Ground Lease Agreement and the Steam Sale Agreement; (ii) have the
personnel, experience, equipment and other resources reasonably required
to perform its obligations under this Ground Lease Agreement and the
Steam Sale Agreement; (iii) be financially capable based upon reasonable
standards of performing its obligations under this Ground Lease
Agreement and the Steam
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Ground Lease Agreement - 72 -
Sale Agreement; and (iv) be in other respects reasonably acceptable to
Exxon. Subject to Section 20.4, this Ground Lease Agreement will be
binding on and inure to the benefit of the successors and assigns of
Cogen.
20.3 Continuing Obligations.
A. No assignment of this Ground Lease Agreement by Exxon or Cogen pursuant
to Section 20.1 or 20.2 or Article 21 will operate to relieve Exxon or
Cogen of its obligations to comply with ECRA, or of any obligations to
the other under this Ground Lease Agreement which have accrued prior to
the effective date of the assignment. An obligation will be deemed to
have accrued before the effective date of an assignment only if all the
substantive elements of the obligation have accrued by that date. An
assignment of this Ground Lease Agreement will relieve the assignor of
any obligations to the other Party under this Ground Lease Agreement
which have not accrued before the effective date of the assignment;
provided, however, that the assignor shall continue to be obligated
under this Ground Lease Agreement if any such assignment shall be
ineffective. Once Cogen or Exxon has complied with ECRA, such party will
not be responsible to the other party for any additional compliance with
ECRA, even if ECRA clean-up standards subsequently change.
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Ground Lease Agreement - 73 -
B. If Exxon assigns this Ground Lease Agreement to an entity having a net
worth of at least $250 million and an investment grade bond rating,
Exxon will be relieved at the time of such assignment from any and all
obligations to Cogen (which have not accrued before the effective date
of the assignment as described in Section 20.3A) arising from or
relating to the environmental condition or any contamination of Exxon's
Property, whether such obligations are based on this Ground Lease
Agreement, or on any applicable federal, state, or local statute or
regulation, or on common law, or on any other legal theory or cause of
action.
C. If Exxon assigns this Ground Lease Agreement to an entity which does
not have a net worth of at least $250 million and an investment grade
rating, Cogen may maintain a claim against Exxon arising from or
relating to the environmental condition or any contamination of Exxon's
Property only if such claim can be brought under applicable federal,
state, or local statute or regulation (except ECRA, which Exxon is
obligated to comply with under Section 20.3A), or common law (and not
under this Ground Lease Agreement, which is covered by Section 20.3A)
and only if all of these conditions are met:
(i) Cogen first diligently pursues legal remedies which
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Ground Lease Agreement - 74 -
Cogen may have with respect to such environmental condition or
contamination against the entity to whom Exxon assigned the Ground
Lease Agreement and subsequent assignees, if applicable;
(ii) Such assignee or subsequent assignees do not meet their
obligations to Cogen arising from or relating to the environmental
condition or contamination of Exxon's Property; and
(iii) Cogen provides written notice to Exxon of its claim against Exxon
within two years after the effective date of the termination of
this Ground Lease Agreement (which will be no later than December
31, 2050).
D. As used in Sections 20.3B and 20.3C, net worth includes all items which
would be included, in accordance with generally accepted accounting
principles, under the equity portion of the balance sheet of the entity
in question. Investment grade bond rating means that the entity has an
investment grade bond rating by either Moody's or Standard & Poor's or
equivalent measure of financial stability.
20.4 Rights of the Financier and Other Mortgagees and Lenders.
A. With regard to the initial Financier (General Electric
Power Funding Corporation), Exxon upon request of such
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Ground Lease Agreement - 75 -
Financier (i) will first execute and deliver a consent to assignment
substantially in the form shown in Exhibit H, and (ii) will execute and
deliver, upon the commencement of the Construction Period (as defined in
Section 4.3A) and termination of the consent to assignment, a consent to
leasehold mortgage substantially in the form shown in Exhibit I. With
respect to the designated Affiliate of General Electric Power Funding
Corporation, upon (a) any refinancing of the initial loan for the
construction of the Cogeneration Facility, (b) acknowledgment by General
Electric Power Funding Corporation in writing that it is no longer the
Financier to be recognized by Exxon for purposes of this Ground Lease
Agreement and (c) the request of such designated Affiliate, Exxon and
Cogen will execute and deliver a recognition agreement substantially in
the form shown in Exhibit J. Thereafter, if Cogen assigns, mortgages,
pledges, or hypothecates this Ground Lease Agreement and the leasehold
estate to secure a loan from another Financier to be recognized as the
Financier by Exxon for purposes of this Ground Lease Agreement, pursuant
to Section 20.2 above, in connection therewith Exxon will execute a
similar consent to any such assignment as may be reasonably requested by
the other Financier and Exxon will give the information specified in
Section 20.5 below.
B. On instructions from the Financier, unless otherwise directed by a
court of competent jurisdiction, Exxon will make all payments due Cogen
under this Ground Lease
<PAGE>
Ground Lease Agreement - 76 -
Agreement in accordance with the written instructions of the Financier
in conformity with its documentation with Cogen, and in such event Exxon
will not be liable to Cogen for such payments.
C. If Cogen becomes in default under any loan documentation with the
Financier or any successor or assign of Financier holding a mortgage,
pledge or hypothecation of Cogen's interest in this Ground Lease
Agreement, the Financier or such successor or assign may assume or cause
a third party to assume Cogen's rights and obligations under this Ground
Lease Agreement at any time, provided that the Financier or such
successor, assign, or third party must first give Exxon reasonable
written notice of such assumption, which notice shall contain a request
(which specifically references this Section 20.4C) for a list of all
defaults of Cogen under this Ground Lease Agreement and the Steam Sale
Agreement, at least thirty days in advance and must first (i) enter into
an agreement with Exxon agreeing to assume Cogen's rights and
obligations thereafter accruing under this Ground Lease Agreement and
the Steam Sale Agreement and to cure all existing defaults of Cogen
under this Ground Lease Agreement and the Steam Sale Agreement that can
be cured (including without limitation paying all amounts owed by Cogen
to Exxon, subject to the caps set forth in Article 10 and in Exhibit
G-3, if applicable) pursuant to and as provided in an assumption
agreement
<PAGE>
Ground Lease Agreement - 77 -
substantially in the form of Exhibit G-2; provided that the Financier or
any nominee or designee of the Financier holding the interest in this
Ground Lease Agreement for the benefit of the Financier may enter into
such an assumption agreement substantially in the form of Exhibit G-3;
(ii) have the personnel, experience, equipment, and other resources
reasonably required to perform its obligations under this Ground Lease
Agreement and the Steam Sale Agreement; (iii) be financially capable
based upon reasonable standards of performing its obligations under this
Ground Lease Agreement and the Steam Sale Agreement, and (iv) be in the
other respects reasonably acceptable to Exxon. In such event, Exxon will
accept performance by such Financier, successor, assign, or third party
and the time limitation in Section 20.2 respecting assignment by Cogen
will not apply to such Financier, successor, assign, or third party.
Similarly, if the general partner of Cogen becomes in default under its
partnership agreement with the designated Affiliate of General Electric
Power Funding Corporation (as described in Article 1), the designated
Affiliate may designate a new general partner of Cogen, provided that
such new general partner has the personnel, experience, equipment and
other resources reasonably required to perform its obligations under
this Ground Lease Agreement and the Steam Sale Agreement and is in other
respects reasonably acceptable to Exxon. Exxon agrees that General
Electric Company and General Electric Power Funding
<PAGE>
Ground Lease Agreement - 78 -
Corporation meet the requirements of this Section 20.4C (ii), (iii), and
(iv) (and the comparable requirements of Section 20.4F (ii) (b), (c),
and (d)).
D. Following the assumption of Cogen's rights and obligations under this
Ground Lease Agreement by the Financier or its successor, assign, or a
third party pursuant to Section 20.4C, such Financier, successor,
assign, or third party may assign its rights and obligations under this
Ground Lease Agreement to any entity, provided that such Financier,
successor, assign, or third party must first give Exxon reasonable
written notice of such assignment at least thirty days in advance and
must first meet the requirements of Section 20.4C (i), (ii), (iii), and
(iv). Any such entity may with reasonable written notice to Exxon at
least thirty days in advance assign its rights and obligations under
this Ground Lease Agreement to other entities meeting the requirements
of Section 20.4C (i), (ii), (iii), and (iv). In such event, Exxon will
accept performance by such entity.
E. Notwithstanding any other provision of this Ground Lease Agreement,
after the Financier or any successor, assign, third party or other
entity referred to in Section 20.4C or 20.4D above assumes Cogen's
rights and obligations under the Ground Lease Agreement, Exxon will
retain all of its rights under this Ground Lease Agreement, including
without
<PAGE>
Ground Lease Agreement - 79 -
limitation the right to terminate the Ground Lease for any of the
reasons specified in Article 16. Further, Cogen and the Financier (and
its successors and assigns) will give Exxon concurrent notice of any
default by Cogen and the exercise by Financier (and its successors and
assigns) of any remedy under any of the documentation between Cogen and
Financier (and its successors and assigns) pertaining to the
Cogeneration Facility. If the Financier or any assignee of the Financier
becomes entitled to remove the Improvements from Exxon's Property, Exxon
will not interfere with the exercise of such right of removal.
F. In the event of the rejection of this Ground Lease Agreement and the
Steam Sale Agreement prior to their stated expiration dates pursuant to
Section 365 of the Bankruptcy Code of 1978, as amended, or any successor
provision thereto, in a case wherein Cogen is the debtor, Exxon will
enter into both a new ground lease of the Demised Premises and a new
steam sale agreement with the Financier or the same nominee or designee
of the Financier for the remainder of the term of this Ground Lease
Agreement and the Steam Sale Agreement, respectively (assuming no
rejection had occurred), effective, in each case, as at the date of such
rejection and upon substantially the same covenants, agreements, terms,
provisions and limitations herein contained and therein
<PAGE>
Ground Lease Agreement - 80 -
contained (in each case, excluding a provision equivalent to this
Section 20.4F), provided:
(i) the Financier delivers a written request to Exxon for such new
ground lease and new steam sale agreement within thirty days from
the date of such rejection, which written request is accompanied
by payment to Exxon of all amounts due to Exxon under this Ground
Lease Agreement and the Steam Sale Agreement and unpaid as at the
date of such request and which request identifies the party to act
as lessee under such new ground lease and supplier under the new
steam sale agreement;
(ii) the Financier or such nominee or designee who is to act as lessee
under such new ground lease and supplier under the new steam sale
agreement must (a) cure all existing defaults of Cogen under this
Ground Lease Agreement and the Steam Sale Agreement that can be
cured and that would exist but for such rejection (including
without limitation paying all amounts owed by Cogen to Exxon,
subject to the limitations of recovery set forth in Article 10),
(b) have the personnel, experience, equipment, and other resources
reasonably required to perform its obligations under the new
ground lease agreement and the new steam sale agreement, (c) be
financially capable based upon
<PAGE>
Ground Lease Agreement - 81 -
reasonable standards of performing its obligations under the new
ground lease agreement and the new steam sale agreement, and (d)
be in the other respects reasonably acceptable to Exxon;
(iii) such new ground lease agreement and new steam sale agreement will
expressly provide that Exxon will not be required to deliver
actual possession of the Demised Premises on the date of execution
and delivery thereof free of lessees, tenants or other occupants;
(iv) such new ground lease agreement and new steam sale agreement will
expressly provide that with respect to all representations,
warranties and covenants of Exxon under the new ground lease
agreement and new steam sale agreement that refer to the "date
hereof" or "effective date of this Agreement" or words or phrases
or provisions of similar import, the same refer to the date of
this Ground Lease Agreement and of the Steam Sale Agreement,
respectively, and not the date of execution and delivery of such
new ground lease agreement and new steam sale agreement and it is
agreed that Exxon will not be obligated to remove any liens placed
on the Demised Premises or any other part of Exxon's Property
subsequent to the date hereof;
<PAGE>
Ground Lease Agreement - 82 -
(v) the last sentence of Section 8.2 of such new ground lease
agreement will expressly exclude Cogen, this Ground Lease
Agreement and persons claiming by, through or under Cogen or its
successors and assigns under this Ground Lease Agreement (and
actions or omissions of such persons) and claims and actions of
the same from the operation thereof; and
(vi) the Financier or such nominee or designee enters into both a new
ground lease agreement and a new steam sale agreement, unless the
Steam Sale Agreement has been previously terminated in accordance
with its terms other than in the event the Steam Sale Agreement is
rejected pursuant to Section 365 of the Bankruptcy Code of 1978,
as amended, or any successor provision thereto, in a case wherein
Cogen is the debtor.
G. If Cogen acquires the fee title to the Demised Premises, or Exxon
acquires Cogen's leasehold estate in the Demised Premises, or a third
party acquires both the fee title and the leasehold estate in the
Demised Premises, so long as any leasehold mortgage or other mortgage
relating to Exxon's Property is in effect, Cogen and Exxon intend that
to the extent permitted by law the fee title to the Demised Premises and
the leasehold estate of Cogen in the Demised Premises created by this
Ground Lease Agreement will remain
<PAGE>
Ground Lease Agreement - 83 -
separate, and will not merge without the prior written consent of the
Financier and any other affected mortgagee.
H. So long as there exists a Financier, Exxon and Cogen will not, without
the prior written consent of the Financier (which consent will not be
unreasonably delayed or withheld) enter into a written amendment of this
Ground Lease Agreement; provided, however, that no such consent of the
Financier will be required for a redefinition of the Demised Premises
pursuant to Section 2.1 above, or for changes in the projection easement
described in Exhibit C, or for changes and relocations of the
Interconnection Areas, Utility Areas, and Access Rights of Way pursuant
to Section 2.6B above.
I. The Financier's name may be added to the loss payable endorsement of any
insurance policies which Cogen carries pursuant to Article 15. In the
event of a casualty loss or condemnation, Cogen's share of the proceeds
from any such insurance policies or from a condemnation proceeding may
be paid to the Financier and the Financier may apply Cogen's share of
such proceeds in accordance with the terms of the leasehold mortgage.
20.5 Status Certificates. Either Party from time to time at the request of the
other Party will sign promptly a written certificate confirming that this
Ground Lease Agreement has
<PAGE>
Ground Lease Agreement - 84 -
been duly authorized, is valid, and does not conflict with the articles of
incorporation, by-laws, or partnership agreement of the Party in question,
and stating whether the Ground Lease Agreement is in full force and effect;
whether it has been modified or amended, and if so, the substance of such
modification or amendment; whether there have been any uncured defaults;
whether there are any offsets, counterclaims, or defenses to be asserted by
that Party against the other under this Ground Lease Agreement; and such
other information as may be reasonably requested.
ARTICLE 21
EXXON'S COMPLEX, PROPERTY, AND OPERATIONS
21.1 Sale or Other Transfer. At any time Exxon may sell or transfer all or any
part of Exxon's Complex or Exxon's Property to any Affiliate of Exxon or
any third party. Exxon recognizes that in such event Exxon may be
obligated to comply with ECRA.
21.2 Operations. At any time Exxon may increase, reduce, discontinue, or
change the character of its operations at Exxon's Complex.
<PAGE>
Ground Lease Agreement - 85 -
ARTICLE 22
NOTICE AND SERVICE
22.1 Notice. All notices, requests, demands and other communications required
or permitted under the terms of this Ground Lease Agreement will be
sufficient in form if in writing and will be deemed to be duly given if
delivered by personal service, telegram, or mailed certified or
registered first class mail, postage prepaid, properly addressed to the
Party entitled to receive such notice pursuant to Section 22.3.
22.2 Date of Service.
A. Mail. If a notice is sent by registered or certified mail, it will be
deemed given within three days, excluding Saturdays, Sundays, or legal
holidays of the State of New Jersey, after deposit of the same in the
United States mail, postage prepaid, except as otherwise demonstrated by
a signed receipt.
B. Telegram. If a notice is given by telegram, it will be deemed given
eighteen hours after delivery to the telegram company.
<PAGE>
Ground Lease Agreement - 86 -
C. Personal Service. If a notice is given by personal service, it will be
deemed given upon the date of actual delivery to the address of the
Party to be notified.
22.3 Addresses. Notices may be sent to the Parties at the following addresses:
A. Lessee: Cogen Technologies Linden
Venture, L.P.
c/o Cogen Technologies, Inc.
1600 Smith Building
Suite 5000 - 50th Floor
Houston, Texas 77002
Attn.: Mr. Robert C. McNair
President
B. Lessor: Exxon Corporation
c/o Exxon Company, U.S.A.
1400 Park Avenue,
Linden, New Jersey 07036
Attn.: Refinery Manager
or to such other and different persons or addresses as may be designated by
the Parties.
<PAGE>
Ground Lease Agreement - 87 -
ARTICLE 23
CONSENT NOT TO BE UNREASONABLY WITHHELD
23.1 Whenever either Party requests any consent, permission, or approval which
may be required or desired by that Party pursuant to the provisions
hereof, the other Party will not unreasonably withhold or postpone the
grant of such consent, permission, or approval.
ARTICLE 24
AMENDMENTS
24.1 No amendment or modification of the terms of this Ground Lease Agreement
will be binding on either Exxon or Cogen unless reduced to writing and
signed by both Parties.
ARTICLE 25
CHOICE OF LAW
25.1 This Ground Lease Agreement will be governed by and construed in accordance
with the laws of the State of New Jersey.
ARTICLE 26
RENEGOTIATION
26.1 Should any term or provision of this Ground Lease Agreement be
<PAGE>
Ground Lease Agreement - 88 -
found invalid by any court or regulatory body having jurisdiction
thereover, the Parties will immediately renegotiate in good faith such term
or provision of the Ground Lease Agreement to eliminate such invalidity,
consistent with the intent of this Ground Lease Agreement.
ARTICLE 27
OTHER AGREEMENTS
27.1 This Ground Lease Agreement and the Steam Sale Agreement supersede all
prior oral and written agreements and understandings of the Parties
relating to the subject matters hereof. This Ground Lease Agreement and
the Steam Sale Agreement constitute the entire agreement and
understanding of the Parties relating to the subject matters hereof.
ARTICLE 28
NO COMMISSION
28.1 No real estate agent or broker has negotiated this Ground Lease Agreement
and no real estate commission, finder's fee or similar fee will be due
and payable if the transaction covered hereby is consummated. Exxon and
Cogen hereby agree to indemnify and hold the other Party harmless against
all entities (if any there be) claiming any real estate commission,
finder's fee or similar fee under or through the
<PAGE>
Ground Lease Agreement - 89 -
indemnifying Party as a result of the transaction covered hereby.
ARTICLE 29
CAPTIONS
29.1 All indices, titles, subject headings, section titles, and similar items
are provided for the purpose of reference and convenience and are not
intended to be inclusive, definitive, or to control the meaning, content,
or scope of this Ground Lease Agreement.
ARTICLE 30
COUNTERPARTS
30.1 This Ground Lease Agreement may be executed in any number of counterparts,
and each executed counterpart will have the same force and effect as an
original instrument.
ARTICLE 31
AUTHORITY
31.1 Representations and Warranties of Exxon. Exxon hereby represents and
warrants to Cogen as follows:
A. Exxon is a corporation duly organized and existing in good standing
under the laws of the State of New Jersey.
<PAGE>
Ground Lease Agreement - 90 -
B. Exxon possesses all requisite power and authority to enter into and
perform this Ground Lease Agreement and to carry out the transaction
contemplated herein.
C. No suit, action or arbitration, or legal, administrative or other
proceeding is pending against Exxon that would affect the validity or
enforceability of this Ground Lease Agreement or the ability of Exxon to
materially fulfill its commitments hereunder.
31.2 Representations and Warranties of Cogen. Cogen hereby represents and
warrants to Exxon as follows:
A. Cogen is a limited partnership duly organized and existing under the
laws of the State of Delaware and is duly qualified to do business in
the State of New Jersey.
B. Cogen possesses all requisite power and authority to enter into and
perform this Ground Lease Agreement and to carry out the transactions
contemplated herein.
C. No suit, action or arbitration, or legal, administrative or other
proceeding is pending against Cogen that would affect the validity or
enforceabilty of this Ground Lease Agreement or the ability of Cogen to
materially fulfill its commitments hereunder.
<PAGE>
Ground Lease Agreement - 91 -
IN WITNESS WHEREOF, the Parties have caused this Ground Lease Agreement to be
signed by their respective officers duly authorized as of the day and year first
set forth above.
ATTESTED BY: EXXON CORPORATION
/s/ R.L. Holmberg By: /s/ R.W. Upchurch, Jr.
- --------------------------- --------------------------
Assistant Secretary of R. W. Upchurch, Jr.
Exxon Corporation Vice President of
Exxon Company, U.S.A., A
Division of Exxon Corporation
ACKNOWLEDGMENT
STATE OF TEXAS )
) ss.
COUNTY OF HARRIS )
BE IT REMEMBERED, That on this 9th day of August, 1990, before me, the
subscriber, a notary public, personally appeared R. L .HOLMBERG, who being by me
duly sworn on his oath, deposed and made proof to my satisfaction, that he is an
Assistant Secretary of Exxon Corporation, the Corporation named in the within
instrument;
<PAGE>
Ground Lease Agreement - 92 -
that R. W. UPCHURCH, JR., is Vice President of Exxon Company, U.S.A., a
Division of Exxon Corporation; that the execution, as well as the making of this
instrument, has been duly authorized pursuant to a resolution of the Board of
Directors of Exxon Corporation; that the deponent well knows the corporate seal
of Exxon Corporation; and that the seal affixed to said instrument is the proper
corporate seal and was thereto affixed and said instrument signed and delivered
by R. W. UPCHURCH, JR., as and for the voluntary act and deed of Exxon
Corporation, in presence of deponent, who thereupon subscribed his name thereto
as attesting witness.
Given under my hand and seal of office this 9th day of August, 1990.
/s/ Estaleeta Watson
----------------------------
NOTARY PUBLIC in and for
HARRIS COUNTY, TEXAS
My commission expires: July 30, 1992
-------------------
[SEAL APPEARS HERE]
<PAGE>
Ground Lease Agreement - 93 -
COGEN TECHNOLOGIES
LINDEN VENTURE, L.P.
(D/B/A COGEN TECHNOLOGIES
LINDEN VENTURE, LIMITED
PARTNERSHIP)
By: COGEN TECHNOLOGIES LINDEN, LTD.
(D/B/A COGEN TECHNOLOGIES LINDEN,
LIMITED PARTNERSHIP), General
Partner
By: COGEN TECHNOLOGIES, INC.
General Partner
ATTEST:
/s/ Mary Ann McLendon By: /s/ Robert C. McNair
- ----------------------------- ----------------------------------
Title: Assistant Secretary Robert C. McNair
President
ACKNOWLEDGEMENT
STATE OF TEXAS )
) SS.
COUNTY OF HARRIS )
BE IT REMEMBERED, That on this 6th day of August, 1990,
<PAGE>
Ground Lease Agreement - 94 -
before me, the subscriber, a notary public, personally appeared Robert C. McNair
who is the President of Cogen Technologies, Inc., General Partner of Cogen
Technologies Linden, Ltd., (D/B/A Cogen Technologies Linden, Limited
Partnership), which is the General Partner of Cogen Technologies Linden Venture,
L. P., a Delaware limited partnership (D/B/A Cogen Technologies Linden Venture,
Limited Partnership), who I am satisfied is the person who signed this
instrument, and he acknowledged that he signed, sealed with the corporate seal,
and delivered the same as such officer aforesaid, and that this instrument is
the voluntary act and deed of such corporation, on behalf of Cogen Technologies
Linden Venture, L. P.
[SEAL APPEARS HERE] /s/ Estaleeta Watson
------------------------------
Notary Public
<PAGE>
OPERATION AND MAINTENANCE AGREEMENT
By and Between
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
AS "OWNER"
AND
GENERAL ELECTRIC COMPANY,
AS "OPERATOR"
June 6, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
I. DEFINITIONS................................................. 2
Actual kWh.................................................. 2
Affiliate................................................... 2
Agreement................................................... 2
Annual Fee Adjustment Amount or "AFAA"...................... 2
Annual Operating Plan....................................... 2
Applicable Adjustment Amount................................ 2
Approved Annual Operating Plan.............................. 2
Approved O&M Plan........................................... 2
Approved Operating Budget................................... 2
Backup Fuel Agreement....................................... 2
Base Index.................................................. 2
Bayonne Approved Operating Budget........................... 2
Bayonne Facility............................................ 2
Bayonne O&M Agreement....................................... 3
Bayway...................................................... 3
Camden Approved Operating Budget............................ 3
Camden Facility............................................. 3
Camden O&M Agreement........................................ 3
Capital Improvements........................................ 3
Cogen....................................................... 3
Con Ed...................................................... 3
Confidential Information.................................... 3
Constant Personnel.......................................... 3
Consumables................................................. 3
CPI Adjusted Payments....................................... 3
Defaulting Party............................................ 3
Default Rate................................................ 3
Dependable Maximum Net Capability (DMNC).................... 4
Direct Costs................................................ 4
DMNC Test................................................... 4
Effective Hourly Rate....................................... 4
Electricity................................................. 4
Equipment................................................... 4
Event of Default............................................ 4
Execution Date.............................................. 4
Existing O&M Agreement...................................... 4
Existing O&M Agreement Termination Date..................... 4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
Exxon........................................................ 4
Facility..................................................... 4
Facility Data................................................ 4
Facility Manager............................................. 5
FERC......................................................... 5
FM kWh....................................................... 5
Force Majeure................................................ 5
Forced Outage................................................ 5
Fourth Year Termination Fee.................................. 5
Fuel......................................................... 5
Gas Service Agreement........................................ 5
GE........................................................... 5
GE Equipment................................................. 5
GE O&M Personnel............................................. 5
GE O&M Personnel Overhead.................................... 6
Ground Lease................................................. 6
Key Personnel................................................ 6
Key Regional Office Personnel................................ 6
kW........................................................... 6
kWh.......................................................... 6
Lender....................................................... 6
Linden Approved Operating Budget............................. 6
Major Overhauls.............................................. 6
Non-Defaulting Party......................................... 6
North American............................................... 6
O&M Fee...................................................... 6
O&M Plan..................................................... 6
Operating Budget............................................. 6
Operating Procedures......................................... 6
Operator..................................................... 6
Operator Confidential Information............................ 7
Operator Indemnitees......................................... 7
Operator Personnel........................................... 7
Operator Personnel Overhead.................................. 7
OSHA......................................................... 7
Overhead Percentage Rate..................................... 7
Owner........................................................ 7
Owner Confidential Information............................... 7
Owner Indemnitees............................................ 7
Parts........................................................ 7
Parts Discount............................................... 7
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
Permitted Transferee........................................ 7
Plant Manager............................................... 7
POPI........................................................ 7
Power Purchase Agreement.................................... 7
Project Year................................................ 8
Prudent Utility Practices................................... 8
PSE&G....................................................... 8
Published Price............................................. 8
PURPA....................................................... 8
Qualifying Cogeneration Facility............................ 8
Regional Office............................................. 8
Reimbursable Costs.......................................... 9
Related Agreements.......................................... 9
Repairs..................................................... 9
Scheduled Outages........................................... 9
Security Deposit Agreement.................................. 9
Services.................................................... 9
Services Discount........................................... 9
Seventh Year Termination Fee................................ 9
Site........................................................ 9
Special Improvements........................................ 9
Steam Purchase Contracts.................................... 9
Steam Purchasers............................................ 10
Target DMNC................................................. 10
Termination Agreement....................................... 10
Test Plan................................................... 10
Transition Stage............................................ 10
Transition Stage Operating Budget........................... 10
Transition Stage Operating Plan............................. 10
Transition Stage Plan....................................... 10
Unscheduled Maintenance..................................... 10
W-2 Wages................................................... 10
Water Supply Agreement...................................... 10
Work........................................................ 10
II. RESPONSIBILITIES OF OPERATOR................................. 10
2.1 Services Generally.................................. 10
2.2 Compliance with Related Agreements.................. 16
2.3 QE Status........................................... 16
2.4 Annual Operating Plan............................... 16
2.5 Monthly Summary..................................... 17
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
2.6 Emergencies............................................ 18
2.7 Inspections............................................ 18
2.8 Operating Procedures and Training...................... 19
2.9 Transition Stage....................................... 20
2.10 Limited Authority...................................... 21
III. RESPONSIBILITIES OF OWNER................................... 21
3.1 Services, Operation, Obligations....................... 22
3.2 Payments............................................... 22
3.3 Right to Perform Upon Operator's Default............... 22
IV. OPERATING COSTS AND EXPENSES................................ 22
4.1 Procedure for Incurring Costs.......................... 23
4.2 Procedure for Payment of Direct Costs.................. 23
4.3 Limitation on Ability to Incur Direct Costs............ 23
4.4 Payment for Special Improvements....................... 23
4.5 Payment for Unscheduled Maintenance.................... 24
4.6 Payment for Major Overhauls............................ 24
4.7 Payment for Capital Improvements....................... 24
4.8 GE Equipment........................................... 25
4.9 Wage Increases in Excess of CPI........................ 25
V. PAYMENTS TO OPERATOR........................................ 25
5.1 O&M Fee................................................ 26
5.2 Reimbursable Costs..................................... 29
5.3 CPI Adjustment......................................... 29
5.4 Procedure for Payment of Reimbursable Costs............ 29
5.5 Late Payments.......................................... 29
VI. FACILITY PERFORMANCE, LIQUIDATED DAMAGES AND
BONUS....................................................... 29
6.1 Annual Fee Adjustment Amount........................... 30
6.2 Quarterly Meetings..................................... 33
6.3 Partial Project Year................................... 33
6.4 Payment of Annual Fee Adjustment Amount................ 34
6.5 Application of CPI Adjustment.......................... 34
6.6 Change in Conditions or Circumstances.................. 34
6.7 First and Second Project Years......................... 34
6.8 Employee Bonuses....................................... 34
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
VII. WARRANTY; CORRECTION OF DEFECTS............................. 34
7.1 Warranty............................................. 34
7.2 Consequence of Breach................................ 35
7.3 Vendor Warranties.................................... 35
VIII. TERM......................................................... 35
IX. TERMINATION.................................................. 36
9.1 Event of Default..................................... 36
9.2 Termination upon Breach.............................. 37
9.3 Termination for Insolvency........................... 37
9.4 Owner's Additional Remedies.......................... 38
9.5 Transfer of Operations Upon Termination.............. 38
9.6 Condition of Facility Upon Termination............... 38
9.7 Survival of Obligations.............................. 39
X. INSURANCE.................................................... 39
10.1 Operator Insurance Coverage.......................... 39
10.2 Owner Insurance Coverage............................. 40
10.3 Form and Content of Insurance........................ 41
10.4 Additional Requirements.............................. 42
XI. NOTIFICATIONS................................................ 43
XII. ASSIGNMENT; LENDER'S RIGHTS.................................. 45
12.1 Assignment........................................... 45
12.2 Lender's Rights...................................... 45
12.3 Estoppel Certificates................................ 47
12.4 Legal Opinion........................................ 47
XIII. INDEMNIFICATION.............................................. 47
13.1 Operator Indemnity................................... 47
13.2 Owner Indemnity...................................... 48
13.3 No Limitation........................................ 49
XIV. REPRESENTATIONS AND WARRANTIES............................... 49
14.1 Representations and Warranties of Owner.............. 49
14.2 Representations and Warranties of Operator........... 49
XV. BOOKS, RECORDS AND REPORTS................................... 50
15.1 Books and Records....................................... 50
</TABLE>
-v-
<PAGE>
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
15.2 Reports............................................. 51
XVI. FORCE MAJEURE................................................ 51
16.1 Force Majeure....................................... 51
16.2 Effect of Force Majeure............................. 52
16.3 Extended Force Majeure.............................. 52
16.4 Payments to Operator During an Event of Force
Majeure............................................ 52
XVII. LIMITATION OF LIABILITY...................................... 52
17.1 Operator............................................ 52
17.2 Owner............................................... 53
XVIII. RESOLUTION OF DISPUTES....................................... 53
18.1 Resolution by Parties............................... 53
18.2 Mediation by Expert................................. 54
18.3 Arbitration......................................... 56
18.4 Selection of Arbitrators............................ 56
18.5 Notice.............................................. 56
18.6 Award............................................... 57
18.7 Survival............................................ 57
XIX. CONFIDENTIALITY AND INTELLECTUAL PROPERTY.................... 57
19.1 Confidential Information............................ 57
19.2 Return of Confidential Information.................. 58
19.3 Continuation of Confidentiality Obligations......... 58
19.4 Ownership of Confidentiality Information............ 58
19.5 Intellectual Property............................... 58
XX. MISCELLANEOUS................................................ 59
20.1 Governing Law....................................... 59
20.2 Severability........................................ 59
20.3 Entire Agreement.................................... 59
20.4 Amendments.......................................... 59
20.5 Waiver.............................................. 59
20.6 Original and Counterparts........................... 60
20.7 Independent Contractor.............................. 60
20.8 Limited Recourse.................................... 60
20.9 Captions............................................ 60
20.10 Exhibits............................................ 60
20.11 Effectiveness of Agreement.......................... 60
</TABLE>
-vi-
<PAGE>
Section Page
------- ----
Exhibit A Monthly O&M Report Format
Exhibit B Assignment
Exhibit C Consent and Agreement
Exhibit D Recognition Agreement
Exhibit B Schedule of Parts and Services for GE Equipment
-vii-
<PAGE>
OPERATION AND MAINTENANCE AGREEMENT
-----------------------------------
This Agreement is entered into this 6th day of June, 1997 (the
"Execution Date"), by and between Cogen Technologies Linden Venture, L. P., a
Delaware limited partnership, doing business in New Jersey as Cogen Technologies
Linden Venture ("Owner"), and General Electric Company, a corporation organized
and existing under the laws of the State of New York ("Operator").
W I T N E S S E T H:
WHEREAS, Owner owns the Facility (as defined herein); and
WHEREAS, Owner and North American Energy Services Company ("North
American") entered into that certain Operation and Maintenance Agreement dated
effective as of December ____, 1991 (the "Existing O&M Agreement"), pursuant to
which North American operates and maintains the Facility for Owner in accordance
with the terms thereof; and
WHEREAS, Owner and North American entered into that certain Agreement
to Terminate Operation and Maintenance Agreement dated June 4th,1997 (the
"Termination Agreement"), pursuant to which Owner has the fight to terminate the
Existing O&M Agreement by delivery of written notice to North American in
accordance with the terms thereof; and
WHEREAS, Owner intends to terminate the Existing O&M Agreement
pursuant to the terms of the Termination Agreement; and
WHEREAS, Owner desires to engage the services of an entity qualified
and competent to operate and maintain the Facility after the Existing O&M
Agreement Termination Date; and
WHEREAS, Operator has represented that it is qualified and capable to
operate and maintain gas-fired, combined cycle cogeneration facilities such as
the Facility; and
WHEREAS, Owner desires to appoint Operator and Operator desires to
operate and maintain the Facility after the Existing O&M Agreement Termination
Date; and
WHEREAS, Owner and Operator desire to enter into this Agreement in
order to set forth their agreements relative to the operation and maintenance of
the Facility starting on the Existing O&M Agreement Termination Date;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
I.
DEFINITIONS
The following definitions shall apply to this Agreement:
Actual kWh shall have the meaning set forth in Section 6.1(a) hereof.
----------
Affiliate shall mean any person or corporation or other entity that,
---------
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, another person or corporation or
entity. The term "control" with respect to any entity means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such entity, whether through the ownership of voting
securities, by contract or otherwise.
Agreement shall mean this Operation and Maintenance Agreement,
---------
including all Exhibits attached hereto, as the same may be amended from time to
time in accordance herewith.
Annual Fee Adjustment Amount or "AFAA" shall have the meaning set
-------------------------------------
forth in Section 6.1 hereof
Annual Operating Plan shall have the meaning set forth in Section
---------------------
2.4(a) hereof.
Applicable Adjustment Amount shall have the meaning set forth in
----------------------------
Section 5.3 hereof.
Approved Annual Operating Plan shall have the meaning set forth in
------------------------------
Section 2.4(a) hereof.
Approved O&M Plan shall have the meaning set forth in Section 2.4(a)
-----------------
hereof.
Approved Operating Budget shall have the meaning set forth in Section
-------------------------
2.4(a) hereof.
Backup Fuel Agreement shall mean that certain Backup Fuel Storage and
---------------------
Supply Agreement dated as of October 4, 1991, by and between Owner and Exxon, as
amended from time to time.
Base Index shall have the meaning set forth in Section 5.3 hereof
----------
Bayonne Approved Operating Budget shall mean an Approved Operating
---------------------------------
Budget for the Bayonne Facility as set forth in Section 2.4 of the Bayonne O&M
Agreement.
Bayonne Facility shall mean the cogeneration plant owned by Cogen
----------------
Technologies NJ Venture located in Bayonne, New Jersey.
-2-
<PAGE>
Bayonne O&M Agreement shall mean that certain Operation and
---------------------
Maintenance Agreement dated of even date herewith, by and between Cogen
Technologies NJ Venture, as "Owner," and Operator, as "Operator," relating to
the Bayonne Facility.
Bayway shall mean Bayway Refining Company, a Delaware corporation.
------
Camden Approved Operating Budget shall mean an Approved Operating
--------------------------------
Budget for the Facility as set forth in Section 2.4 hereof.
Camden facility shall mean the cogeneration plant owned by Camden
---------------
Cogen L.P. located in Camden, New Jersey.
Camden O&M Agreement shall mean that certain Operation and Maintenance
--------------------
Agreement dated of even date herewith, by and between Camden Cogen L.P., as
"Owner," and Operator, as "Operator," relating to the Camden Facility.
Capital Improvements shall have the meaning set forth in Section
--------------------
2.1(2) hereof
Cogen shall mean Cogen Technologies, Inc., a Texas corporation.
-----
Con Ed shall mean Consolidated Edison Company of New York,
------
Inc., a corporation organized under the Transportation Corporations Law of the
State of New York.
Confidential Information shall have the meaning set forth in Section
------------------------
19.1 hereof
Constant Personnel shall mean, at the time of determination, such
------------------
Operator Personnel and GE O&M Personnel as were employed on the first day of the
then current Project Year and are also scheduled to be employed in the same
positions on the first day of the next Project Year pursuant to the Approved
Annual Operating Plan for such next Project Year.
Consumables shall mean, collectively, all items consumed or needing
-----------
regular periodic replacement during operation and maintenance of the Facility,
including, but not limited to, spare parts, water treatment chemicals,
lubricants, office supplies, air filters, gaskets, hand tools, and all other
consumable materials and parts required for the normal operation of the
Facility, but not including Fuel and water.
CPI Adjusted Payments shall have the meaning set forth in Section 5.3
---------------------
hereof.
Defaulting Party shall have the meaning set forth in Section 9.2
----------------
hereof.
Default Rate shall mean the lesser of (i) the rate of interest
------------
announced by The Chase Manhattan Bank, N.A., from time to time, at its principal
office located at 1 Chase Manhattan Plaza, New York, New York 10081 (or any
successor financial institution), as its
-3-
<PAGE>
prime commercial lending rate, plus 1% or (ii) the maximum lawful nonusurious
----
rate of interest that may be charged under applicable law.
Dependable Maximum Net Capability (DMNC) shall have the meaning
---------------------------------------
ascribed to such term in the Power Purchase Agreement.
Direct Costs shall mean those costs incurred by Operator for goods and
------------
services in connection with the operation and maintenance of the Facility which
are paid directly by Owner to the vendor of such goods and services.
DMNC Test shall have the meaning set forth in Section 6.1(b) hereof.
---------
Effective Hourly Rate shall mean, as of the date of determination, the
---------------------
sum of (i) the aggregate then current effective hourly rate for all salaried
Constant Personnel and (ii) the aggregate then current straight time hourly
rates for all hourly paid Constant Personnel.
Electricity shall have the meaning ascribed to such term in the Power
-----------
Purchase Agreement.
Equipment shall mean any and all materials, supplies, equipment and
---------
facilities, of whatever nature, intended to become or which are a part of the
Facility.
Event of Default shall have the meaning set forth in Section 9.1
----------------
hereof.
Execution Date shall have the meaning set forth in the preamble of
--------------
this Agreement.
Existing O&M Agreement shall have the meaning set forth in the
----------------------
preamble of this Agreement.
Existing O&M Agreement Termination Date shall mean the date, if ever,
---------------------------------------
on which Owner terminates the Existing O&M Agreement pursuant to the Termination
Agreement.
Exxon shall mean Exxon Corporation, a New Jersey corporation.
-----
Facility shall mean (i) the 715 megawatt (name plate) natural gas
--------
fired, combined cycle cogeneration plant owned by Owner located on the Site for
the export and sale of electric power and steam, including all buildings,
interconnections, utilities and Equipment located on the Site and other related
facilities furnished by Owner and located on the Site and (ii) the steam
pipelines connected to Steam Purchasers' facilities.
Facility Data shall mean all facility and equipment design data
-------------
pertaining to the Facility, including, without limitation, plant data manuals,
equipment user/maintenance manuals, facility drawings and system descriptions,
inspection reports and operating plans.
-4-
<PAGE>
Facility Manager shall mean Operator's employee, who shall be present
----------------
on the Site during regular business hours on all business days to oversee the
operation, maintenance, inspection and repair of the Facility and all parts
thereof, and who shall be authorized to make decisions on behalf of Operator.
The Facility Manager shall serve as Operator's single point of contact for all
matters regarding the operation, maintenance, inspection and repair of the
Facility.
FERC shall mean the Federal Energy Regulatory Commission.
----
FM kWh shall have the meaning set forth in Section 6.1(a) hereof.
------
Force Majeure shall have the meaning set forth in Section 16.1 hereof.
-------------
Forced Outage shall mean an outage of the Facility which is not a
-------------
Scheduled Outage.
Fourth Year Termination Fee shall have the meaning set forth in
---------------------------
Article VIII hereof.
Fuel shall mean natural gas, butane or any other fuel suitable for
----
operating the Facility.
Gas Service Agreement shall mean that certain Gas Service Agreement
---------------------
dated as of July 13, 1990, between Owner and PSE&G and Elizabethtown Gas
Company, as amended from time to time.
GE shall mean General Electric Company, a New York corporation.
--
GE Equipment shall mean the gas and steam turbine generation equipment
------------
and associated electrical and control systems components, now existing or
hereafter installed or located at the Facility, and which were supplied by GE
prior to or during the term of this Agreement, including, without limitation,
steam turbines; gas turbines (including components supplied in connection with
uprate packages); generators; load gears; speedtronic controls; steam turbine
controls; admission/extraction valves; stop valves; control consoles;
datatronics; accessory system compartment containing heavy duty, multi-shaft,
accessory gear, electric motor starting system, combined lube and hydraulic oil
system and all terminal boxes, conduit and wiring; generator auxiliary
compartment which contains all static excitation equipment, metering and
relaying current and potential transformers, lightning arrestors and generator
neutral grounding system; and any future improvements and/or enhancements to any
of the foregoing.
GE O&M Personnel shall mean all employees of Operator involved in the
----------------
performance of the Work, including, without limitation, all employees located at
the Regional Office, but expressly excluding the Operator Personnel.
-5-
<PAGE>
GE O&M Personnel Overhead shall have the meaning set forth in Section
-------------------------
5.2 hereof.
Ground Lease shall mean that certain Ground Lease dated August 1,
------------
1990; between Exxon, as "Lessor" therein, and Owner, as "Lessee" therein, as
amended from time to time.
Key Personnel shall mean the Key Regional Office Personnel, the
-------------
Facility Manager and all other personnel reporting directly to the Facility
Manager.
Key Regional Office Personnel shall mean the following personnel who
-----------------------------
will be located in the Regional Office: the general manager, the financial
analyst, the plant engineer, the environmental, health and safety engineer, the
sourcing specialist and such other personnel as Owner may designate.
kW shall mean kilowatt.
--
kWh shall mean kilowatt-hour.
---
Lender shall mean the entity or entities providing Owner with the
------
construction, term, permanent or other debt or equity financing for the Facility
and/or the operation thereof and/or any entity or entities providing a letter of
credit or other security in connection with the financing of the Facility and/or
the operation thereof.
Linden Approved Operating Budget shall mean an Approved Operating
--------------------------------
Budget for the Facility as set forth in Section 2.4 hereof
Major Overhauls shall have the meaning set forth in Section 2.1(2)
---------------
hereof.
Non-Defaulting Party shall have the meaning set forth in Section 9.2
--------------------
hereof.
North American shall have the meaning set forth in the preamble of
--------------
this Agreement.
O&M Fee shall have the meaning set forth in Section 5.1 hereof.
-------
O&M Plan shall have the meaning set forth in Section 2.4(a) hereof.
--------
Operating Budget shall have the meaning set forth in Section 2.4(a)
----------------
hereof.
Operating Procedures shall have the meaning set forth in Section
--------------------
2.8(a) hereof.
Operator shall have the meaning set forth in the preamble of this
--------
Agreement.
-6-
<PAGE>
Operator Confidential Information shall have the meaning set forth in
---------------------------------
Section 19.1 hereof.
Operator Indemnitees shall have the meaning set forth in Section 13.2
--------------------
hereof.
Operator Personnel shall mean all employees of POPI involved in the
------------------
performance of the Work or, in the event that during the term of this Agreement
POPI ceases to provide personnel for performance of the Work, then such
personnel who perform the functions that were previously performed by the
employees of POPI.
Operator Personnel Overhead shall have the meaning set forth in
---------------------------
Section 5.2 hereof.
OSHA shall mean the Occupational Safety and Health Administration.
----
Overhead Percentage Rate shall have the meaning set forth in Section
------------------------
5.2 hereof.
Owner shall have the meaning set forth in the preamble of this
-----
Agreement.
Owner Confidential Information shall have the meaning set forth in
------------------------------
Section 19.1 hereof.
Owner Indemnitees shall have the meaning set forth in Section 13.1
-----------------
hereof.
Parts shall mean replacement parts and/or assemblies (either in kind
-----
or improved). to replace existing parts and/or assemblies which are removed from
service, and any future improvements and/or enhancements to any such parts
and/or assemblies.
Parts Discount shall have the meaning set forth in Section 4.8 hereof.
--------------
Permitted Transferee shall mean (i) any Affiliate of Lender or (ii)
--------------------
any other person or entity who succeeds to the rights and interests of Lender
under any mortgage.
Plant Manager shall mean the person designated by Owner, pursuant to
-------------
Section 3.1(4) hereof, to serve as Owner's administrative representative at the
Site.
POPI shall mean Plant Operating Personnel, Inc., a Delaware
----
corporation.
Power Generation Factor shall have the meaning set forth in Section
-----------------------
6.1(a) hereof.
Power Purchase Agreement shall mean that certain Power Purchase
------------------------
Agreement dated April 14, 1989, executed by and between Cogen and Con Ed (which
Power Purchase Agreement has been assigned by Cogen to Owner), providing for the
sale by Owner to Con Ed
-7-
<PAGE>
of electric power generated by the Facility, as the same has heretofore been and
may hereafter be amended and supplemented from time to time.
Project Year shall mean any calendar year during the term of this
------------
Agreement, provided that the first Project Year shall be deemed to begin on the
Existing O&M Agreement Termination Date and extend through the next occurring
December 31.
Prudent Utility Practices shall mean those practices, methods, acts,
-------------------------
techniques, standards and equipment, as changed from time to time, that are then
generally accepted by the electric utility industry and commonly used in prudent
electric utility engineering and operations to operate and maintain equipment
lawfully, safely, dependably and economically, and as would have been (i)
expected to accomplish the desired result in a manner consistent with applicable
laws, applicable governmental permits, reliability, safety, environmental
protection, economy and expediency and (ii) implemented using that degree of
skill, diligence and foresight which would reasonably and ordinarily be expected
from a skilled and experienced operator complying with all applicable laws and
engaged in the same type of undertaking, including, without limitation, those
established by the North American Electric Reliability Council, as applicable to
units of the size and service of the Facility.
PSE&G shall mean Public Service Electric & Gas Company, a corporation
-----
organized under the laws of the State of New Jersey.
Published Price shall mean (i) with respect to Parts, the published
---------------
prices provided by Operator's or any of its Affiliates' parts centers and/or
available through Operator's or any of its Affiliates' computerized pricing
systems, or if at any time during the term of this Agreement Operator and its
Affiliates do not have such published prices for any Parts, then the normal and
customary charges that are paid by Operator's and its Affiliates' other
customers for such Parts in the United States and (ii) with respect to Services
and/or Repairs, the published prices or rates that Operator or any of its
Affiliates' charge for such Services and/or Repairs, or if at any time during
the term of this Agreement Operator and its Affiliates do not have published
prices or rates for any Services and/or Repairs, then the nonnal and customary
charges that are paid by Operator's and its Affiliates' other customers for such
Services and/or Repairs in the United States.
PURPA shall mean the Public Utility Regulatory Policies Act of 1978
-----
(U.S.C.A., Title 16, Section 824a-3, subsection (j))1 as amended, a law of the
United States of America.
Oualifying Cogeneration Facility shall have the meaning set forth in
--------------------------------
PURPA.
Regional Office shall mean the office established by Operator at a
---------------
location designated by Owner for the sole purpose (and no others) of
administering and performing its obligations under (i) this Agreement, (ii) the
Bayonne O&M Agreement and (iii) the Camden O&M Agreement.
-8-
<PAGE>
Reimbursable Costs shall have the meaning set forth in Section 5.2
------------------
hereof.
Related Agreements shall mean and include the Power Purchase
------------------
Agreement, the Ground Lease all easements used in connection with the Facility,
the Steam Purchase Contracts, the Backup Fuel Agreement, the Gas Service
Agreement, the Water Supply Agreement, the Security Deposit Agreement and the
order of FERC granting the Facility status as a Qualifying Cogeneration
Facility.
Repairs shall mean services for assembly, disassembly and/or repair
-------
provided by GE Apparatus Service Department, or if at any time during the term
of this Agreement GE Apparatus Service Department does not provide such
services, then such successor entity or other division of GE providing such
services.
Scheduled Outages shall mean a planned outage of the Facility or any
-----------------
portion thereof necessary for regular inspection and maintenance.
Security Deposit Agreement shall mean the Amended and Restated
--------------------------
Security Deposit Agreement and Escrow Agreement dated September 17, 1992, by and
among Owner, Cogen Technologies Linden, Ltd., General Electric Power Funding
Corporation, and Midlantic National Bank.
Services shall mean services for assembly, disassembly, diagnosis
--------
and/or repair provided by GE Power Generation Services, or if at any time during
the term of this Agreement GE Power Generation Services does not provide such
services, then such successor entity or other division of GE providing such
services.
Services Discount shall have the meaning set forth in Section 4.8
-----------------
hereof.
Seventh Year Termination Fee shall have the meaning set forth in
----------------------------
Article VIII hereof.
Site shall mean the certain tract of land located at Railroad and
----
Chemico Streets at Bayway's Bayway Facility in Linden, New Jersey, upon which
the Facility is constructed, such tract being more particularly described in the
Ground Lease, together with easements appurtenant thereto or used in connection
therewith.
Special Improvements shall have the meaning set forth in Section 4.4
--------------------
hereof.
Steam Purchase Contracts shall mean (i) that certain Agreement for the
------------------------
Sale of Steam dated August 1, 1990, executed by and between Owner and Exxon, and
(ii) any other agreements which Owner may execute in the future for the sale of
steam produced at the Facility, as each of such agreements may be amended from
time to time.
-9-
<PAGE>
Steam Purchasers shall mean Exxon, Bayway and any other future
----------------
purchasers of steam produced at the Facility.
Target DMNC shall have the meaning set forth in Section 6.1(b) hereof.
-----------
Termination Agreement shall have the meaning set forth in the preamble
---------------------
of this Agreement.
Test Plan shall have the meaning set forth in Section 6.1(b) hereof.
---------
Transition Stage shall have the meaning set forth in Section 2.9(a)
----------------
hereof.
Transition Stage Operating Budget shall have the meaning set forth in
---------------------------------
Section 2.9(d) hereof.
Transition Stage Operating Plan shall have the meaning set forth in
-------------------------------
Section 2.9(d) hereof.
Transition Stage Plan shall have the meaning set forth in Section
---------------------
2.9(d) hereof.
Unscheduled Maintenance shall mean all maintenance, repair and
-----------------------
replacement requirements of the Facility during each Project Year which are not
contemplated in the Approved Annual Operating Plan, or any approved revision
thereof, for each such Project Year.
W-2 Wages shall mean the amount listed in box 1 on Internal Revenue
---------
Service Form W-2, or if such form ceases to be used, then the sum of such
amounts as would have been included in the calculation of the number to be
inserted in such box 1 if such form were still in use.
Water Supply Agreement shall mean and refer to that certain letter
----------------------
dated February 19, 1990, from Elizabethtown Water Company to Owner, together
with the Tariff applicable thereto, and the Main Extension Agreement dated May
9,1991, between Elizabethtown Water Company and Owner.
Work shall mean all obligations, services, duties and responsibilities
----
assigned to or agreed to be undertaken by Operator and its subcontractors
pursuant to this Agreement.
II.
RESPONSIBILITIES OF OPERATOR
2.1 Services Generally. Operator hereby agrees to provide all
------------------
operations and maintenance services necessary or advisable in order to safely,
dependably and efficiently operate and maintain the Facility (as contemplated by
the Related Agreements). Without limiting the
-10-
<PAGE>
generality of the foregoing, Operator shall perform the following services on
behalf of Owner in connection with the operation and maintenance of the
Facility:
(1) Provide all services necessary or advisable to use, operate and
maintain the Facility's five (5) gas turbine units and associated waste heat
steam generators arranged in combined cycle with three (3) steam turbines in
good operating condition with the objective of maximizing output of steam
and electricity while minimizing Fuel consumption consistent with (i)
Prudent Utility Practices, (ii) the thermal and mechanical limits and other
requirements specified in the nameplates thereon or in vendor and
manufacturer warranty requirements or recommendations relating thereto so as
to maximize the residual value of the Facility, (iii) the applicable terms
of the Related Agreements and all easements related to the operation of the
Facility and the sale of steam and Electricity, (iv) all applicable federal,
state and local laws, regulations, orders, licenses, approvals, certificates
and permits, including all Qualifying Cogeneration Facility requirements,
(v) procedures established pursuant to the Facility Data and the Operating
Procedures as revised from time to time, (vi) the requirements of insurance
policies required hereunder and Owner's insurance carrier so as to maintain
insurance coverage in full force and effect with respect to the Facility or
any part thereof, (vil) the applicable Annual Operating Plan, and (viii) the
reasonable instructions of Owner;
(2) Maintain the Facility, including, without limitation, its
associated facilities, structures, buildings and offices, all
interconnections with Steam Purchasers' facilities, all interconnections
with Con Ed, all mechanical and electrical systems and controls, drainage
systems, air pollution control and water treatment facilities, access
roads, security fencing and all other Equipment, and (i) develop, implement
and maintain a maintenance management program which (a) meets all
applicable vendor and manufacturer warranty and preventive and predictive
maintenance requirements and specifications, (b) meets Prudent Utility
Practices, and (c) includes provisions for continuously improving such
program, (ii) develop, implement and maintain emergency preparedness
procedures that allow an immediate and appropriate response to events such
as fires, explosions, bomb threats, release of toxic chemicals, employee
illnesses and other accidents, (iii) perform or cause to be performed
routine and scheduled inspections and monitoring of the Facility and daily
maintenance work (such as cleaning the Equipment and maintaining levels of
liquids), (iv) perform or cause to be performed all necessary Unscheduled
Maintenance, subject to Owner's approval when required pursuant to Section
4.5 hereof, and (v) perform or cause to be performed such overhaul or
repair of major components of the Equipment (the "Major Overhauls") and
perform such replacement of major components of the Equipment (the "Capital
Improvements") as may be recommended or required by the manufacturer of any
such Equipment or requested by Owner or as may become, in Operator's
reasonable discretion, upon consultation with and approval from Owner,
otherwise necessary or appropriate;
(3) Establish and maintain an effective work force required for the
operation and maintenance of the Facility in accordance with the terms of
this Agreement and the
-11-
<PAGE>
Related Agreements through proper hiring, training, supervising and
qualifying procedures, and administer all matters pertaining to labor
relations, salaries, wages, working conditions, hours of work, termination
of employment, employee benefits, safety and all related matters in
connection with these duties in accordance with applicable laws;
(4) Maintain or cause to be available a sufficient number of personnel
adequately trained in effective operation and maintenance such that the
Facility can be operated in accordance with the terms of this Agreement and
the Related Agreements in the event of a strike by or other labor problem
with Operator's normal work force;
(5) Maintain an inventory of spare parts, Consumables and items of
equipment as Owner requires or, subject to Owner's prior approval, as
Operator determines are necessary or advisable to perform the operation and
maintenance services required hereunder, provided that (i) Operator shall
surrender such inventory to Owner upon termination of this Agreement and
(ii) the cost of maintaining such inventory shall be a Reimbursable Cost to
Operator;
(6) Coordinate with Owner all deliveries and services under and
monitor the contracts with respect to Consumables, water, and Fuel; review
performance under such contracts and determine compliance therewith; and to
the extent not hereinafter undertaken by Owner, perform Owner's obligations
under such contracts;
(7) Maintain a spare parts and tools inventory control and reporting
system, which system shall include, without limitation, procedures for
receiving, storing, trending the history of and cataloging spare parts and
tools, (ii) the ability to access the inventory of spare parts and tools for
the Bayonne Facility and (iii) the ability to access the inventory of spare
parts and tools for the Camden Facility; and store spare parts and tools on
the Site and at a central location in conjunction with the storage of spare
parts and tools for the Bayonne Facility and the Camden Facility in a manner
reasonably calculated to assure their continued good condition, including
storage in accordance with vendors' and manufacturers' warranty requirements
and recommendations in order to insure them against risks reasonably
expected to occur during periods of such storage. The decision as to which
spare parts will be stored on Site and which spare parts will be stored at a
central location shall be mutually agreed upon by Owner and Operator;
(8) Schedule, hire, and supervise subcontractors and vendors as may be
necessary for the performance of the services required hereunder and
regularly provide Owner with an updated list of all such subcontractors and
vendors; provided that (i) Operator shall obtain Owner's prior written
approval of any subcontractor or vendor intended to be used for Major
Overhauls, Capital Improvements or operation of the Facility, (ii) Operator
shall remain fully liable for the management and satisfactory performance
of its subcontractors and vendors, (iii) Operator shall use reasonable
efforts to ensure that all contracts and sub-contracts can be freely
assigned to Owner or a successor operator on termination of this Agreement,
and (iv) Owner may, upon delivery
-12-
<PAGE>
of written notice to Operator, require that a subcontractor or vendor be
replaced in the event that Owner considers that such subcontractor's or
vendor's performance has been unsatisfactory;
(9) Assist Owner in maintaining good community relations;
(10) Maintain good labor relations and, to the extent the work force
at the Facility is or becomes affiliated with labor unions, use best efforts
to obtain a no strike clause in any collective bargaining agreement and
consult with and obtain approval from Owner before taking any action
inconsistent with any such collective bargaining agreement;
(11) On behalf of Owner, generate, maintain and store all operating
and maintenance logs (which shall include an up-to-date record of (i) real
and reactive power production for each clock hour, (ii) Fuel consumption,
(iii) steam output, (iv) emission outputs, (v) water consumption, (vi)
changes in operating status, Scheduled Outages and Forced Outages, (vii) all
OSHA reportable and lost time accidents, and (viii) any unusual conditions
found during inspections) relating to the use, operation and maintenance of
the Facility. All such information shall be considered proprietary and
confidential information and shall not be disclosed to any third party for
any reason without the prior written consent of Owner;
(12) Maintain current revisions of all Facility drawings and
specifications, technical documents, instruction books, equipment diagrams
and other information illustrating a material, product or system relating to
the Facility;
(13) Keep accurate cost ledgers regarding the Work pursuant to the
terms of Section 15.1 hereof and in accordance with generally accepted
accounting principles, consistently applied, in such forms as shall be
reasonably required by Owner;
(14) Maintain records and provide to Owner all data and/or reports
required of Owner and/or Operator to federal, state and local agencies
(excluding any reports to be filed for federal, state and local income tax
purposes);
(15) Assist Owner in the renewal and maintenance of all licenses,
approvals and permits required in connection with the operation and
maintenance of the Facility, as modified from time to time;
(16) Collect, handle, transport and dispose of all waste and refuse
from the Site in accordance with all applicable laws, provided that Owner
signs all manifests prior to waste leaving the Site;
-13-
<PAGE>
(17) Provide reasonable access to the Facility and all records relating
to the operation and maintenance of the Facility to all agents,
representatives and inspectors of Owner, Lender and governmental
authorities;
(18) Monitor the sufficiency of the Fuel, water and backup electrical
power supplied to the Facility in terms of quality and quantity and advise
Owner of any deficiency thereof and any noncompliance of Fuel with the
appropriate specifications; work directly with suppliers of the Fuel, water
and backup electrical power to ensure adequate deliveries and likely future
requirements for the Facility; and verify invoices with respect thereto for
payment by Owner;
(19) Supply all tools, materials and services necessary or advisable
for the operation and maintenance of the Facility, including, but not
limited to, (i) all such materials, tools, equipment and services required
for the day to day operation and maintenance of the Facility and (ii) all
Consumables, including, without limitation, lubricating oils, chemicals,
filters and greases recommended by equipment manufacturers and suppliers or
as required to operate, maintain and protect the Facility;
(20) Take reasonable precautions for the safety of personnel performing
operations and maintenance services and comply with (i) all safety rules and
guidelines outlined in the Facility Data, (ii) all requirements under the
Ground Lease, including, without limitation, Bayway safety and security
regulations applicable to the Facility and (iii) all applicable federal,
state and local safety laws, regulations, orders, licenses, approvals,
certificates, permits, and other safety requirements (including, without
limitation, applicable requirements under OSHA) necessary or advisable to
prevent accidents or injury to persons or damage to property on, about or
adjacent to the Site, including erecting and properly maintaining guards and
barriers as needed for the protection of workers and the public and posting
danger signs warning against any hazards on the Site; and strive to
eliminate or abate safety hazards created by or otherwise resulting from the
performance of its operations and maintenance services hereunder;
(21) Conduct; and allow Owner to participate in, the process of
interviewing, selecting and hiring individuals to fill the Key Personnel
positions and complete such process no later than the Existing O&M Agreement
Termination Date, all such individuals being subject to Owner's approval,
and in the event any such Key Personnel positions become vacated during the
term of this Agreement, Operator shall conduct, and allow Owner to
participate in, the process of interviewing, selecting and hiring
replacements to fill such vacancies, all such replacements being subject to
Owner's approval. Without the prior written approval of Owner, Operator
shall not remove any individual from a Key Personnel position prior to such
individual being in such position for a minimum of two (2) years; provided,
however, if Owner notifies Operator that the performance of an individual is
unsatisfactory, then Operator shall promptly replace such individual in
accordance with the terms hereof;
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(22) Participate in and provide services during the Transition Stage,
as set forth in Section 2.9 hereof;
(23) Exercise Owner's rights under subcontractor and vendor warranties,
monitor and report to Owner concerning the remaining terms of all warranties
and, prior to the expiration of any such warranty, perform such inspections
as are reasonable to ensure that any final warranty work is not required;
provided, however, Operator shall not file suit to enforce any such warranty
without the prior written consent of Owner;
(24) Keep and maintain the Facility free and clear of all liens and
encumbrances resulting from performance of the Work by Operator or its
subcontractors;
(25) Keep Owner informed of the operating status of the Facility
through daily, weekly and monthly reports, as may be agreed on from time to
time, and through ongoing written and verbal communication;
(26) Determine and recommend to Owner for approval any necessary or
advisable Capital Improvements, modifications or alterations to the
Facility;
(27) Determine the need for any change, deletion or addition to the
obligations, services or duties performed by Operator pursuant to this
Section 2.1 and the change in cost attributable thereto, if any, where such
change, deletion or addition is caused by a reason outside of the control of
Operator, including, without limitation, a Capital Improvement or change in
Operating Procedures. Except as provided in Section 2.6 hereof, any change,
deletion or addition to the obligations, services or duties specifically
enumerated in this Section 2.1 shall be submitted to Owner for approval,
prior to implementation, as a modification to the Approved Annual Operating
Plan for the given Project Year;
(28) Work diligently to operate and maintain the Facility in a first-
class manner and provide all other work as is reasonably necessary or
advisable to perform Operator's operations and maintenance services pursuant
to this Agreement;
(29) Maintain all insurance coverage as required to be provided by
Operator under Article X hereof;
(30) Comply with the terms and conditions of each Approved Annual
Operating Plan, this Agreement and the related Agreements;
(31) Maintain a document control system for documents critical to
Facility operation and maintenance;
(32) Without any duty of inquiry, notify Owner if Operator becomes
aware of (i) a default by any of the parties to the Related Agreements, (ii)
any breach of any
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consents, licenses or permits which are required in connection with
operation of the Facility, (iii) any occurrence which constitutes a
violation of law or (iv) the occurrence of any event of force majeure under
the Related Agreements;
(33) Be responsible for payment in respect of fines and penalties
imposed on it or on Owner for breaches of applicable laws, permits or
licenses where such fines or penalties result from a failure by Operator to
comply with Prudent Utility Practices;
(34) Assist and cooperate with Owner in obtaining Owner status as a
"qualified business" under and complying with the New Jersey Urban
Enterprise Zones Act;
(35) As soon as reasonably practicable notify Owner and Con Ed of any
outage, whether or not such outage is scheduled; and
(36) Setup, staff, operate and maintain the Regional Office.
2.2 Compliance with Related Agreements. Operator (i) has reviewed the
----------------------------------
Related Agreements, (ii) shall abide by all of the terms thereof applicable to
the operation and maintenance of the Facility pursuant to the terms of this
Agreement and (iii) shall not operate and maintain the Facility in a manner
which would cause Owner to be in breach of any of the terms of the Related
Agreements. Owner shall provide Operator with written notice of any changes to
such terms that may affect Operator's provision of operation and maintenance
services hereunder, and such notice, unless otherwise agreed in writing by the
parties, shall modify Operator's obligation hereunder. This Section 2.2 shall
not be deemed to make Operator a party to any or all of the Related Agreements.
2.3 QF Status. Operator shall operate and maintain the Facility so as
---------
to maintain its status as a Qualifying Cogeneration Facility.
2.4 Annual Operating Plan. (a) Subject to the terms of the next
---------------------
succeeding sentence hereof, not later than one hundred twenty (120) days prior
to the first day of each Project Year, Operator shall prepare and submit to
Owner for approval a proposed operating and maintenance plan providing
information for each month during the upcoming Project Year (the "O&M Plan").
The O&M Plan for the first Project Year shall be submitted to Owner for approval
on the date on which this Agreement is executed unless previously submitted. The
O&M Plan shall describe, in detail acceptable to Owner and on a monthly basis;
anticipated maintenance and overhaul schedules, staffing plans, equipment
acquisitions and spare parts and Consumables inventories (including a breakdown
of capital items and expense items), schedules of subcontract services, plant
performance data regarding required environmental performance, projected Fuel
usage and such other matters as Owner may reasonably require. Any actions
proposed under the O&M Plan shall be consistent with the Facility Data, the
Operating Procedures, Prudent Utility Practices, the Related Agreements and this
Agreement. Contemporaneously with the delivery of the O&M Plan, Operator shall
submit to Owner a proposed budget for operating and maintaining the Facility
during the upcoming Project Year (the "Operating Budget"), which shall include
the
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estimated cost, based on time and materials and all fees contemplated in this
Agreement, for all anticipated operating and maintenance services to be provided
by Operator during each month of the upcoming Project Year in the account
structure and format provided by Owner (the Q&CM Plan and the Operating Budget
are hereinafter sometimes together called the "Annual Operating Plan"). When
approved pursuant to subparagraph (b) below, the Annual Operating Plan shall be
an "Approved Annual Operating Plan" and shall consist of an "Approved O&M Plan"
and an "Approved Operating Budget".
(b) Owner shall give its approval or disapproval of the Annual
Operating Plan no later than thirty (30) days after receipt thereof from
Operator. If Owner objects to all or any portion of the proposed Annual
Operating Plan, Owner shall furnish its objections in writing to Operator, and
Owner and Operator shall amend such Annual Operating Plan in order to
accommodate to Owner's satisfaction those items to which Owner objects.
(c) An Approved Annual Operating Plan shall constitute authorization
for Operator to operate and maintain the Facility in accordance with such
Approved Annual Operating Plan and the terms of this Agreement, it being
recognized and agreed that Operator shall operate and maintain the Facility in a
prudent and efficient manner so as to maximize both the current performance and
the residual value of the Facility and shall endeavor to ensure that the actual
costs of operating and maintaining the Facility are as low as reasonably
practicable and in any event do not exceed the Approved Operating Budget either
in total or, to the extent reasonably practicable, in any one budgetary
category. Operator shall notify Owner as soon as reasonably possible of any
significant deviations or discrepancies between the costs and expenses actually
incurred by Operator during each Project Year and the costs and expenses
projected to be incurred by Operator as set forth in the Approved Operating
Budget for each such Project Year.
(d) In the event Operator desires to request an adjustment to an
Approved Annual Operating Plan at any time during the Project Year, Operator
shall submit a proposed revised Annual Operating Plan for Owner's consideration,
which Owner shall approve or disapprove within fifteen (15) days after
submission thereof. If the proposed revised Annual Operating Plan is disapproved
by Owner within such fifteen (15) day period, Owner shall furnish Operator with
the reasons for such disapproval and shall immediately begin discussions with
Operator in an effort to reach a mutually agreeable revised Annual Operating
Plan. Upon such agreement, Operator shall revise the Annual Operating Plan with
respect thereto. Until the revised Annual Operating Plan is approved in writing
by Owner, Operator shall not, except in an emergency as described in Section 2.6
hereof, act outside of the Approved Annual Operating Plan for such Project Year
without the prior written consent of Owner. Once approved, Operator's authority
as to the revised, or any additionally revised, Annual Operating Plan shall be
the same as that authorized for the original Approved Annual Operating Plan.
2.5 Monthly Summary. Within two (2) business days after the end of
---------------
each calendar month of each Project Year, Operator shall submit to Owner, in a
form reasonably acceptable to Owner, a preliminary report containing operating
data, meter readings, and other billing documentation for such month sufficient
to generate monthly invoices for the sale of
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Electricity and steam produced at the Facility. In addition, within ten (10)
days after the end 07. each month of each Project Year, Operator shall submit
to Owner, in a form similar to Exhibit A attached hereto and made a part hereof
for all purposes and otherwise acceptable to Owner, a monthly operating report
summarizing in reasonable detail all areas of operation and maintenance and all
activities performed by Operator during such month. Operator shall submit the
proposed forms of such reports to Owner for approval on or before thirty (30)
days after the date on which this Agreement is executed.
2.6 Emergencies. Immediately upon the occurrence or imminent
-----------
likelihood of an accident or emergency involving the Facility or adjoining
property and endangering the safety of any person or property, or materially
adversely affecting the performance of the Facility or the Facility's compliance
with applicable law, Operator shall, after consultation with the Plant Manager
if the circumstances allow, and without the necessity of obtaining any other
approvals which might otherwise be required hereunder and exercising reasonable
care without special instruction or authorization from Owner, take any
reasonable and necessary or advisable action deemed by Operator to be reasonably
necessary or advisable under the circumstances to prevent, avoid or mitigate
injury, damage or loss to persons or property or to avoid penalties, fines or
damages under applicable law. Operator shall not Owner thereof as soon as
practicable.
2.7 Inspections.
-----------
(a) In addition to its daily activities associated with the operation
and maintenance of the Facility, Operator shall conduct inspections of the
Facility at regular intervals, as required by vendors' or manufacturers'
recommendations and Prudent Utility Practices. Within ten (10) days after the
Execution Date for the first (1st) Project Year and no later than one hundred
twenty (120) days prior to each Project Year thereafter, Operator shall submit
to Owner for approval Operator's proposed inspection schedule (which inspection
schedule shall be included as part of each O&M Plan to be submitted to Owner)
and shall incorporate into the proposed inspection schedule any reasonable
amendments proposed by Owner. Any inspection conducted pursuant to this Section
2.7 shall be conducted in such a manner so as to minimize the impact on the
production of electricity and steam from the Facility.
(b) During such inspections, Operator shall make any necessary
decisions and promptly perform all Work as may be necessary to effect (after
Owner's approval, if necessary) the maintenance, repair or replacement of any
part of the Facility the necessity of which becomes apparent during such
inspection.
(c) Within twenty (20) business days after (i) each inspection and
(ii) the completion of any maintenance or repair work performed after such an
inspection, Operator shall prepare and deliver to Owner a report of the results
of such inspection or any Work completed after such inspection, as the case may
be, containing a summary of Operator's observations and recommendations relating
thereto. Operator shall arrange for its personnel to attend any meetings or
conferences with Owner's personnel as Owner may from time to time request to
review the results of Operator's inspections and maintenance work.
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<PAGE>
(d) Operator shall cooperate in connection with inspections of
the Facility by Owner, the Plant Manager, Lender and any other designees of
Owner. Such inspections may occur at any time, provided that they do not
unreasonably interfere with the performance of Operator's obligations hereunder,
and further provided that if Owner or Owner's designated representive desires
to conduct any such inspection after normal business hours, Owner shall give
Operator reasonable notice thereof. Operator agrees to correct, in accordance
with the terms of Section 7.2 hereof, any failure to comply with the obligations
and standards set forth in this Agreement for the operation and maintenance of
the Facility that is identified by Lender.
2.8 Operating Procedures and Training.
---------------------------------
(a) Owner and Operator shall use due diligence to obtain from any
Equipment vendor or manufacturer all instruction manuals and spare parts lists
not timely submitted by such Equipment vendor or manufacturer, it being
understood that Owner shall coordinate this effort with Operator's assistance
and Owner may pursue all appropriate rights and remedies available to Owner
under any equipment supply agreements. To the extent any supplementary materials
are required for Operator training that are not provided by Equipment vendors or
manufacturers, Operator shall provide such materials, at Operator's sole cost
and expense, except where such supplementary materials are required in
connection with a Reimbursable Cost. Operator shall review the operating
procedures in effect at the Facility as of the Execution Date (the "Operating
Procedures") and shall prepare and submit to Owner a complete set of revisions
to the Operating Procedures sufficient to ensure the continued safe and
efficient operation and maintenance of the Facility in accordance with vendors'
and manufacturers' warranty requirements and recommendations, Prudent Utility
Practices, the Related Agreements and this Agreement. The Operating Procedures
shall, among other things, include Facility specific preventive and predictive
maintenance procedures integrating (i) vendor and manufacturer recommendations
and warranty requirements, (ii) requirements of the Related Agreements, (iii)
Operator's experience, (iv) adequate safety and fire prevention, response and
reporting measures and procedures, (v) adequate security measures and
procedures, and (vi) the monitoring of the performance of the Facility. In
addition, the Operating Procedures shall include, without limitation, (i)
employee manuals outlining proper employee conduct and general expectations,
rules and procedures, (ii) safety manuals, (iii) emergency preparedness and
response manuals, and (iv) environmental compliance manuals. Within twenty (20)
days of Owner's receipt thereof, Owner shall review revisions to the Operating
Procedures, provide reasonable written comments and suggestions, and Operator
shall duly consider such comments and suggestions in revising the Operating
Procedures. Owner's review and approval of the Operating Procedures shall not
telieve Operator of its obligation to operate and maintain the Facility in
accordance with this Agreement. Operator shall, as often as necessary but not
less often than annually, review and, if necessary, revise and update the
Operating Procedures, but shall not implement any amendments thereto without
Owner's prior written consent.
(b) Operator shall provide training materials, instructional personnel
and management oversight as necessary to develop and implement a comprehensive
training program for operation of the Facility (including the auxiliary boiler
located in Camden Paperboard's plant).
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<PAGE>
Operator shall ensure that its personnel are fully trained and qualified to
operate and maintain the Facility in accordance with vendors' and manufacturers'
warranty requirements and recommendations, Prudent Utility Practices, the
Related Agreements and this Agreement.
2.9 Transition Stage.
-----------------
(a) As the Existing O&M Agreement Termination Date approaches, an
orderly transition from North American to Operator must occur. Operator shall
participate in an orderly process of transition from the operation and
maintenance of the Facility by North American to the operation and maintenance
of the Facility by Operator (the "Transition Stage"). For purposes of this
Agreement, the Transition Stage shall have commenced as of the Execution Date.
During the Transition Stage, Operator shall cooperate and coordinate with North
American and shall report to and be subject to the authority of Owner.
(b) During the Transition Stage, Operator shall (i) plan and prepare
for hiring of the personnel necessary for the operation and maintenance of the
Facility, (ii) establish the Annual Operating Plan for use during the first
(1st) Project Year and obtain approval of Owner thereon (iii) establish the
inspection schedule for the Facility (which inspection schedule shall be
included as part of the first (1st) Annual Operating Plan and shall be the same
for the first Project Year as the inspection schedule established for such
period of time pursuant to the terms of the Existing O&M Agreement unless Owner
or Operator recommends a change to such inspection schedule) and obtain approval
of Owner thereon, (iv) prepare a detailed monthly report format as described in
Section 2.5 hereof and obtain approval of Owner thereon, and (v) set up and
staff the Regional Office.
(c) At such time as Owner has given written notice to Operator to
commence Transition Stage operations, Operator shall make available, on a phase-
in basis, sufficient personnel experienced in the operation and maintenance of
cogeneration facilities such as the Facility. In addition, Operator shall
perform all such duties and obligations otherwise set forth in this Agreement to
the extent that such duties and obligations are not inconsistent with its
transition role.
(d) Using a format similar to that described in Section 2.4 hereof
for the development of the Annual Operating Plan, Operator shall prepare and
submit to Owner a "Transition Stage Operating Plan," comprised of the
"Transition Stage Plan" and the "Transition Stage Operating Budget." The
Transition Stage Operating Plan shall include expenditures and activities to
occur during the Transition Stage as described in this Section 2.9, and shall be
submitted to Owner for its review and comment on the Execution Date. If Owner
objects to all or any portion of the proposed Transition Stage Operating Plan,
Owner shall promptly furnish its objections to Operator, and Owner and Operator
shall work diligently to resolve such objections.
(e) During the Transition Stage, Operator shall review and report to
the Owner on the status of, and where appropriate, make written recommendations
to Owner with respect to (i) operation and maintenance facilities, tools,
equipment, supplies and spare parts inventories,
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(ii) reporting, accounting, maintenance management and communication systems
necessary for Operator to operate and maintain the Facility in accordance with
the terms of this Agreement, (iii) security and safety systems and plans,
including any necessary or desirable special clothing or safety gear for
operations and maintenance personnel, and (iv) such other facilities and systems
as shall be necessary or desirable to operate and maintain the Facility and to
fulfill Operator's ongoing responsibilities under this Agreement.
(f) Upon the Existing O&M Agreement Termination Date, care, custody
and control of the Facility will pass from North American to Owner under the
terms of the Existing O&M Agreement and from Owner to Operator under the terms
of this Agreement and the Transition Stage shall end. Operator shall thereafter
operate and maintain the Facility in accordance with this Agreement and provide
any and all technical and engineering support required for the safe and
efficient operation and maintenance of the Facility.
(g) During the Transition Stage, Operator or its authorized
representative shall, if reasonably requested by Owner, attend any and all
review meetings between North American and Owner. Operator shall, if reasonably
requested by Owner, review and comment upon plans, specifications, documents, or
other data generated by North American.
2.10 Limited Authority. Operator shall not have any authority to (i)
-----------------
negotiate any change to the tariff under the Power Purchase Agreement, (ii)
settle or compromise claims on behalf of Owner under any Related Agreement,
(iii) agree to any amendments to, or waivers, consents or approvals in
connection with, any Related Agreement, (iv) serve any notice of a breach under
any of the Related Agreements, or (v) transfer, dispose of, lease or create any
encumbrance on any assets of Owner.
III.
RESPONSIBILITIES OF OWNER
3.1 Services, Operation, Obligations. Except as otherwise provided
--------------------------------
in Section 3.1(3) hereof, Operator shall have no obligation to provide any of
the following services or perform any of the following work, which services and
work shall be provided and performed by Owner:
(1) Arrange for a supply of Fuel and water, at no cost to Operator,
in such quantities as are necessary for the performance by Operator of the
Work;
(2) Provide for the sale of steam and electricity generated by the
Facility and for the billing and collection of revenues therefrom;
(3) Obtain or cause to be obtained all governmental licenses,
permits and approvals necessary to operate the Facility, including
environmental licenses, permits and approvals; provided, however, that
Operator shall (i) provide to Owner such technical information and other
assistance as is required from time to time to obtain licenses, permits
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or approvals or renewals or extensions thereof and (ii) keep such records
and provide such reports to appropriate governmental agencies as may be
required of Owner or Operator by any such licenses, permits and approvals;
(4) Designate and advise Operator of the Plant Manager (who shall act
and be designated as Owner's authorized representative);
(5) Provide and grant to Operator full access to the Facility and
such portions of the Site as are necessary to allow Operator to perform the
Work;
(6) Arrange for start-up power and back-up power in such quantities
as is necessary for the performance by Operator of the Work;
(7) Pay all applicable federal, state and local taxes (except for
sales taxes which are the responsibility of Operator) attributable to the
Facility and the sale of steam and electricity therefrom, including the
preparation of all tax returns and reports to be filed for federal, state
and local income tax purposes; and
(8) Maintain all insurance coverage as required to be provided by
Owner under Article X hereof.
3.2 Payments. Owner shall compensate Operator for the Work performed
--------
hereunder pursuant to the terms of Articles IV, V and VI hereof
3.3 Right to Perform Upon Operator's Default. If at any time Operator
----------------------------------------
fails to perform any obligation hereunder and such failure is likely to cause
injury to any person or damage to the Facility, to exceed or breach the terms or
conditions of any permit or easement, or to breach the terms of any Related
Agreement Owner, in addition to all other rights and remedies it has under this
Agreement, may, but shall have no duty to, perform or have performed by a third
party any such obligation not performed by Operator. Such performance by Owner
shall reduce any compensation payable to Operator hereunder during the
Transition Stage or in any Project Year by an amount equal to the cost to Owner
of effecting such performance.
IV.
OPERATING COSTS AND EXPENSES
----------------------------
4.1 Procedure for Incurring Costs. Owner, and not Operator, shall be
----------------------------
ultimately liable for all Reimbursable Costs and Direct Costs expended hereunder
in connection with the Facility and Operator shall receive payment for
Reimbursable Costs in accordance with the terms of Sections 5.2 and 5.4 hereof.
Operator shall submit a written requisition to Owner for any single item
requiring an expenditure in excess of Five Thousand and 00/100 Dollars
($5,000.00) or as otherwise may be required by Owner, and after receipt of
written approval from Owner, but not before, Operator shall be authorized to
prepare Operator's purchase order for such item. Operator shall (i) verify the
receipt at the Site of all materials and services to be delivered
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to the Facility covered by Owner's and Operator's purchase orders, (ii) verify
the accuracy vendors' invoices in connection therewith, and (iii) forward
invoices for Direct Costs to Owner for approval, processing, and payment by
Owner in accordance with the terms of Section 4.2
hereof.
4.2 Procedure for Payment of Direct Costs. Operator shall
-------------------------------------
periodically, but not more often than once a week, deliver to Owner invoices
received by Operator from third parties for all Direct Costs, accompanied by a
summary of all such invoices which itemizes all such invoices by operating cost
account number. Such invoices shall also be accompanied by a statement from
Operator confirming that all such invoices are accurate, due and payable,
together with all relevant documentation reasonably necessary for Owner to
verify the accuracy thereof. Each invoice submitted to Owner shall be paid by
Owner directly to the payee of such invoice on or before the date such invoice
is due, provided that if Owner disputes any amount set forth in any such
invoice, Owner shall pay the undisputed portion on or before such due date, and
Owner, Operator and such payee shall attempt in good faith to resolve all
disputed items as soon as reasonably practicable.
4.3 Limitation on Ability to Incur Direct Costs. Operator shall
-------------------------------------------
prepare Operator's purchase order for costs and expenses incurred in connection
with the operation and maintenance of the Facility during each month of a
Project Year pursuant to the terms hereof, to the extent and only to the extent
such costs and expenses:
(i) are included within the Approved Operating Budget, and any
approved revision thereof, for the applicable Project Year;
(ii) are incurred in connection with the performance of any
Unscheduled Maintenance, Special Improvements or Capital
Improvements as approved in writing by Owner;
(iii) are incurred in connection with an emergency under Section 2.6
hereof; or
(iv) are otherwise approved by Owner in writing.
4.4 Payment for Special Improvements. The actual cost of any
--------------------------------
alterations, modifications, improvements or additions to the Facility which are
required by any governmental or regulatory agency or are otherwise required to
comply with applicable laws, regulations or requirements ("Special
Improvements") shall be the sole responsibility of Owner. If any such costs are
necessary or advisable and become known to Operator, Operator shall promptly so
inform Owner who shall promptly determine the most feasible manner in which to
pay for such costs. Operator shall not be authorized to incur any expenditure
in relation to any Special Improvements without the prior written consent of
Owner.
4.5 Payment for Unscheduled Maintenance. The actual cost of
-------------------------------------
Unscheduled Maintenance shall be the sole responsibility of Owner. Operator
shall not incur any expenditure
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in relation to any Unscheduled Maintenance without the prior written consent of
Owner, except in the event of an emergency as described in Section 2.6 hereof.
4.6 Payment for Major Overhauls. The actual cost of Major Overhauls
---------------------------
shall be the sole responsibility of Owner. Operator shall not incur any
expenditure in relation to any Major Overhauls without the prior written consent
of Owner.
4.7 Payment for Capital Improvements. The actual cost of Capital
--------------------------------
Improvements shall be the sole responsibility of Owner. Operator shall not incur
any expenditure in relation to any Capital Improvements without the prior
written consent of Owner.
4.8 GE Equipment. Owner agrees to purchase from Operator, and
------------
Operator agrees to sell to Owner, (i) all Parts that Owner desires to purchase
during the term of this Agreement for GE Equipment, at a discount of thirty-five
percent (35%) less than the Published Price for such Parts (the "Parts
Discount"), (ii) all Services that Owner desires to purchase during the term of
this Agreement for (GE Equipment, at a discount of fifteen percent (15%) less
than the Published Price for such Services (the "Services Discount") and (iii)
all Repairs that Owner desires to purchase during the term of this Agreement for
GE Equipment, at a discount of fifteen percent (15%) less than the Published
Price for such Repairs. The parties anticipate that, over the term of this
Agreement, Operator will sell to Owner, and Owner will purchase from Operator,
Parts and Services for GE Equipment based on the schedule set forth on Exhibit E
attached hereto and made a part hereof for all purposes, which Parts and
Services have an estimated value of approximately Sixty Million and 00/100
Dollars ($60,000,000.00) based on current prices and including the Parts
Discount and Services Discount. The foregoing provisions of this Section 4.8 are
expressly made subject to the following:
(a) the foregoing shall not be construed as an obligation by Owner to
purchase from Operator any Parts, Services and/or Repairs for GE
Equipment during the term of this Agreement, but is only an
obligation by Owner that if Owner does in fact purchase any
Parts, Services and/or Repairs for GE Equipment during the term
of this Agreement, then Owner shall purchase such Parts, Services
and/or Repairs for GE Equipment from Operator;
(b) the decision whether to purchase Parts, Services and/or Repairs
for GE Equipment and the timing of any such purchases shall be
made by Owner in Owner's sole and absolute discretion;
(c) if at any time Operator is unable to provide Parts, Services
and/or Repairs for GE Equipment in a timely or cost effective
manner, then Owner shall have the right to obtain such Parts,
Services and/or Repairs that Operator is unable to provide in a
timely or cost effective manner from alternate sources;
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(d) Owner shall evaluate Operator on its performance in managing
each Forced Outage and Scheduled Outage in a cost effective and
time efficient manner, and, subject to Owner's sole and complete
discretion, refund to Operator up to fifty percent (50%) of the
Services Discount attributable to the Services performed during
such outage; and
(e) upon the expiration or other termination of this Agreement, Owner
shall have no further obligation to purchase from Operator, and
Operator shall have no further obligation to sell to Owner,
Parts, Services and/or Repairs for GE Equipment.
Owner shall have the right to have a financial audit of Operator's books,
accounts and records conducted by a third party selected by Owner which is
reasonably acceptable to Operator for the sole purpose of verifying the accuracy
of the Published Prices, including, without limitation, the right to audit such
books, accounts and records to determine the prices and rates for Parts,
Services and/or Repairs for GE Equipment paid by Operator's and its Affiliates'
other customers; provided, however, the results of such audit and the books,
accounts and records reviewed in connection therewith shall be deemed to be
Operator Confidential Information. If such audit reveals errors in the
calculation of any amounts paid by Owner, Operator shall promptly reimburse
Owner for any amounts improperly paid by Owner. Furthermore, if such audit
reveals errors of more than two percent (2%) in the calculation of the Published
Prices, then Operator shall pay to Owner the cost of the audit.
4.9 Wage Increases in Excess of CPI. In the event that Operator finds
-------------------------------
it necessary to increase salaries and/or wages, then, without the prior written
consent of Owner, Operator shall not increase the Effective Hourly Rate from one
Project Year to the next Project Year by an amount which exceeds the percentage
increase in the Base Index from the beginning of such Project Year to the
beginning of such next Project Year; provided, however, there shall be no
obligation on behalf of Owner to approve any such increase in salaries and/or
wages.
V.
PAYMENTS TO OPERATOR
5.1 O&M Fee. As compensation for the performance of the Work by
-------
Operator, Owner shall pay to Operator an operations and maintenance fee in the
amount of Thirty-One Thousand Two Hundred Fifty and 00/100 Dollars ($31,250.00)
per month (the "O&M Fee"), beginning with the thirteenth (13th) full calendar
month after the month in which the Existing O&M Agreement Termination Date
occurs and continuing for each month thereafter throughout the term of this
Agreement. The O&M Fee shall be payable monthly, in arrears, with the first such
payment being due and payable on the last business day of the thirteenth (13th)
full calendar month after the month in which the Existing O&M Agreement
Termination Date occurs, and with a like payment on the last business day of
each month thereafter throughout the term of this Agreement. If the last day of
the term of this Agreement does not fall on the last day of a month, the O&M Fee
for such partial month shall be prorated. If during the term of this Agreement
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conditions or circumstances change from those in effect on the Existing O&M
Agreement Termination Date such that there is either a material increase or
decrease in the responsibilities and obligations of Operator hereunder from
those responsibilities and obligations of Operator as of the. Existing O&M
Agreement Termination Date, then Owner and Operator shall meet and negotiate an
equitable adjustment to the O&M Fee.
5.2 Reimbursable Costs. To the extent not paid by Owner as Direct
------------------
Costs pursuant to Article IV hereof, Owner shall reimburse Operator for those
costs and expenses actually incurred by Operator in connection with the
operation and maintenance of the Facility during each month of a Project Year or
during the Transition Stage pursuant to the terms hereof, to the extent and only
to the extent such costs and expenses (collectively, the "Reimbursable Costs")
are:
(i) included within the approved Transition Operating Budget and any
approved revision thereof;
(ii) included within the Approved Operating Budget, and any approved
revision thereof, for the applicable Project Year;
(iii) incurred in connection with the performance of any Unscheduled
Maintenance as approved in writing by Owner;
(iv) incurred in connection with an emergency under Section 2.6
hereof;
(v) subject to the limitations set forth in Section 4.9 hereof, the
actual salaries, straight time hourly wages and overtime hourly
wages (including vacation and holiday pay for hourly personnel)
for all Operator Personnel (whether employed directly by
Operator or through a contractor) to the extent pertaining to
the Work, plus (a) the actual cost of associated payroll taxes,
unemployment and disability insurance, worker's compensation,
fringe benefits and other statutory compensation for all such
Operator Personnel to the extent pertaining to the Work and (b)
five percent (5%) of the W-2 Wages for all such Operator
Personnel to the extent pertaining to the Work ((a) and (b)
above collectively referred to herein as "Operator Personnel
Overhead"); provided, however, the amount of Operator Personnel
Overhead, other than such Overheaded that is required by law,
that is allowed to be included in Reimbursable Costs shall be
limited to (x) twenty-three and 05/100 percent (23.05%) of the
W-2 Wages for all such Operator Personnel per Project Year
during each of the first (1st) through fifth (5th) Project Years
and (y) twenty-four and 05/100 percent (24.05%) of the W-2 Wages
for all such Operator Personnel per Project Year during each of
the sixth (6th) through twelfth (12th) Project Years;
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(vi) (a) subject to the limitations set forth in Section 4.9 hereof,
the actual salaries for all GE O&M Personnel to the extent
pertaining to the Work, plus (b) thirty-six percent (36%) of
the W-2 Wages for all such GE O&M Personnel to the extent
pertaining to the Work (the "Overhead Percentage Rate") to
offset Operator's actual cost of associated payroll taxes,
unemployment and disability insurance, Worker's compensation,
fringe benefits and other statutory compensation for all such
GE O&M Personnel to the extent pertaining to the Work (such
actual cost collectively referred to herein as "GE O&M
Personnel Overhead"), whether such actual costs are more or
less than such percentage; provided, however, if the amount of
GE O&M Personnel Overhead that is required by law increases or
decreases over that in effect as of the Existing O&M Agreement
Termination Date, then the Overhead Percentage Rate shall be
increased or decreased, as the case may be, to the extent of
any such increase or decrease in GE O&M Personnel Overhead that
is required by law; or
(vii) otherwise approved by Owner in writing.
Subject to the limitations imposed in the immediately preceding paragraph,
the term Reimbursable Costs shall include, but not be limited to, the following
costs incurred by Operator in its performance of the Work:
(viii) the actual delivered cost of supplies, Consumables, spare
parts and/or replacement components and all other items
Operator is required to provide and does provide for the
Facility under this Agreement;
(ix) special training costs conducted off-site or by non-Operator
personnel, as approved in advance and in writing by Owner;
(x) community and labor relations costs provided by non-Operator
personnel, as approved in advance and in writing by Owner;
(xi) relocation and recruitment costs of salaried employees and
recruitment costs (but not relocation costs) of non-salaried
employees;
(xii) the actual costs of suppliers, subcontractors, attorneys,
certified accountants and other third party advisors, as
approved in advance and in writing by Owner;
(xiii) upon Owner's request and subject to Owner's prior written
approval, the cost of services (other than the Work) at
mutually agreed upon prices, terms and conditions;
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(xiv) the actual delivered cost for the purchase of certain
materials such as tools office equipment and office
supplies; and
(xv) a fraction of the actual costs incurred by Operator to staff,
operate and maintain the Regional Office, the numerator of
which fraction is the total of all costs and expenses set
forth in the Linden Approved Operating Budget for the Project
Year in question and the denominator of which fraction is the
total of all costs and expenses set forth in the Camden
Approved Operating Budget, the Bayonne Approved Operating
Budget and the Linden Approved Operating Budget for such
Project Year.
Unless Owner shall otherwise agree in writing, or unless otherwise included
in the approved Transition Stage Operating Budget or an Approved Operating
Budget, the term Reimbursable Costs shall not include and Operator shall not be
entitled to reimbursement for:
(xvi) salaries or other compensation of Operator's officers,
executives, general managers, estimators, auditors,
attorneys, labor consultants, risk managers, accountants,
purchasing and contracting agents and other employees at
Operator's principal office and branch offices, except
employees of Operator at the Facility and the Regional
Office;
(xvii) expenses of Operator's principal and branch offices other
than the field office at the Facility and the Regional
Office;
(xviii) any of Operator's general and administrative expenses of any
kind;
(xix) all costs of insurance paid by Operator and payments for
deductibles or self-insured retentions associated with such
insurance;
(xx) all costs and expenses incurred in connection with any
engineering services provided by Operator in connection with
the performance of the Work (e.g., maintaining Facility
drawings, specifications and technical documents up-to-date)
to the extent performed by Operator's employees other than
the Operator Personnel or the GE O&M Personnel;
(xxi) all costs and expenses incurred in connection with the
preparation of all reports required to be made by Operator
pursuant to the terms of this Agreement to the extent
performed by Operator's employees other than the Operator
Personnel or the GE O&M Personnel; and
(xxii) all employee bonuses paid by Operator to the Operator
Personnel and the GE O&M Personnel pursuant to Section 6.8
hereof
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5.3 CPI Adjustment. The O&M Fee and the Annual Fee Adjustment
--------------
Amount (together, the "CPI Adjusted Payments") shall be adjusted on the first
day of each Project Year (except the first Project Year) throughout the term of
this Agreement and any extensions hereof. On each such date each of the CPI
Adjusted Payments shall be adjusted to a new CPI Adjusted Payment calculated in
accordance with the following equation:
New CPI Adjusted Payment = (Applicable Adjustment Amount)
multiplied by (A/B)
"Applicable Adjustment Amount" equals the original dollar amount set
forth in this Agreement for a given CPI Adjusted Payment.
"A" equals the average of the Consumer Price Index for all urban
consumers for the New York/New Jersey area (1982-84 = 100), published by
the Bureau of Labor Statistics, United States Department of labor (the
"Base Index") for the last three full calendar months prior to the
commencement of the Project Year for which the new CPI Adjusted Payments
are to be computed.
"B" equals the Base Index for the last calendar month prior to the
month in which the Existing O&M Agreement Termination Date occurs.
5.4 Procedure for Payment of Reimbursable Costs. On or before the
-------------------------------------------
tenth (10th) day of each month commencing after the Existing O&M Agreement
Termination Date, Operator shall tender an invoice to Owner for all Reimbursable
Costs, if any, paid by Operator during the preceding month. Such invoices shall
be accompanied by a certificate from Operator confirming that all such
Reimbursable Costs have been paid, together with all relevant documentation
necessary for Owner to verify the accuracy thereof, including all relevant
invoices for Consumables, spare parts and replacement components and labor costs
and benefits computations incurred by Operator for the relevant staff and
specialists. Each invoice submitted to Owner shall be paid by Owner by wire
transfer not later than the tenth (10th) day of the next calendar month after
the month in which such invoice was received, but in no event shall Owner be
required to pay an invoice earlier than thirty (30) days after receipt of such
invoice provided that if Owner disputes any amount set forth in any such
invoice, (i) Owner shall promptly notify Operator of such dispute, (ii) Owner
shall pay the undisputed portion to Operator within said period and (iii) Owner
and Operator shall attempt in good faith to resolve all disputed items as soon
as reasonably practicable.
5.5 Late Payments. All payments that are past due and are not
-------------
disputed, or disputed and subsequently demonstrated to be payable to Operator,
shall accrue interest from the date such payments are due until such payments
are made at a per annum rate equal to the Default Rate.
VI.
FACILITY PERFORMANCE, LIQUIDATED DAMAGES AND BONUS
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6.1 Annual Fee Adjustment Amount. To provide incentive for Operator
----------------------------
to operate and maintain the Facility in such a way so as to maximize
profitability and efficiency of operation, achieve target operating levels of
performance, and protect the overall life and viability of the Facility, the O&M
Fee earned by Operator shall be subject to an annual adjustment. The amount of
such adjustment (the "Annual Fee Adjustment Amount" or "AFAA") shall be the sum
of bonuses earned by and/or liquidated damages assessed against Operator in each
of six (6) separate categories of evaluation. The six (6) categories of
evaluation are:
(1) Power Generation,
(ii) Change in DMNC,
(iii) Steam Delivery,
(iv) Net Plant Heat Rate,
(v) O&M Costs, and
(vi) Subjective Factors.
In each category the maximum bonus or liquidated damage will be limited to
a specific dollar amount. The AFAA shall be the sum of the bonuses earned and
liquidated damages assessed in each individual category and in any Project Year
shall never exceed Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00),
plus or minus, as the case may be.
(a) Power Generation. The maximum bonus or liquidated damages
----------------
capable of being earned by or assessed against Operator in the Power Generation
category of the AFAA in any Project Year shall be Fifty Thousand and 00/100
Dollars ($50,000.00). To determine the amount of bonus or liquidated damages
attributable to such category, a calculation will be made to determine the Power
Generation Factor (as defined hereinbelow) for a Project Year. Subject to the
Fifty Thousand and 00/100 Dollars ($50,000.00) limitation, if the Power
Generation Factor is greater than or equal to ninety-five percent (95%),
Operator shall be entitled to a bonus under the Power Generation category of the
AFAA calculated in accordance with the following formula:
Bonus = $25,000 + [(PGF - .95) x $833,333]
For a given Project Year, if the Power Generation Factor is less than
ninety-five percent (95%), but not less than ninety-two and one-half percent
(92.50%), the AFAA for the Power Generation category for such Project Year shall
be zero. Subject to the Fifty Thousand and 00/100 Dollars ($50,000.00)
limitation, if the Power Generation Factor is less than ninety-two and one-half
percent (92.50%), Operator shall be assessed liquidated damages under the Power
Generation category of the AFAA calculated in accordance with the following
formula:
Liquidated Damages = $25,000 + [(.925 - PGF) X $833,333)]
For purposes of the foregoing calculations, the following definitions shall
apply:
"Actual kWh' shall be equal to the amount of kWh actually generated
by the Facility in a Project Year, plus the amount of kWh actually
dispatched by Owner and/or
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ConEd in such Project Year. The dispatched kWh shall be determined by
multiplying the number of hours of dispatch by the amount of kW capacity
actually dispatched, provided such dispatch capacity is immediately
available for full and continuous delivery.
"FM kWh" shall be equal to the applicable DMNC (as determined by the
most recent ConEd test) for that portion of the Facility that, as a result
of Force Majeure, either is unable to generate electricity or generates
electricity at a reduced capacity multiplied by the number of hours in the
Project Year that the Facility was affected by such event of Force Majeure.
Notwithstanding anything stated herein to the contrary, for purposes of
determining bonus, the FM kWh shall be expressly limited to that portion of
the FM kWh for which Owner actually received payment from ConEd pursuant to
Section 4.5 of the Power Purchase Agreement.
"Power Generation Factor ('PGF')" shall be equal to the sum of the
Actual kWh and the FM kWh divided by the product of the applicable DMNC (as
determined by the most recent ConEd test) and the total number of hours in
the Project Year. The Power Generation Factor shall be expressed as a
decimal, rounded to the nearest one-thousandth.
(b) Change in DMNC. The maximum bonus or liquidated damages
--------------
capable of being earned by or assessed against Operator in the Change in DMNC
category of the AFAA in any Project Year shall be Twenty-Five Thousand and
00/100 Dollars ($25,000.00). As incentive to attain the level of DMNC required
by Owner, Operator shall be entitled to receive a bonus or, alternatively, be
assessed liquidated damages in the Change in DMNC category of the AFAA based on
the results of the semi-annual DMNC Test compared with the results of the semi-
annual DMNC Test conducted during the corresponding period in the immediately
preceding Project Year (the "Target DMNC"); provided, however, if either Owner
or Operator desires not to use the results of the semi-annual DMNC Test
conducted during the corresponding period in the immediately preceding Project
Year as the Target DMNC, then the Target DMNC shall be mutually agreed to by
Owner and Operator, but if Owner and Operator can not agree prior to the running
of such test, then the Target DMNC for such test shall be the DMNC as
demonstrated by the semi-annual DMNC Test conducted during the corresponding
period in the immediately preceding Project Year. By no later than forty-five
(45) days prior to each semi-annual DMNC Test, Operator shall prepare and submit
for Owner's approval a plan for such DMNC Test (the "Test Plan") which shall
clearly identify the measures to be taken by Operator to meet the Target DMNC.
The Test Plan shall be subject to Owner approval, provided, however, in the
event that Owner objects to all or any portion of the Test Plan, Owner shall
notify Operator in writing and Owner and Operator shall promptly meet to resolve
any differences in order to establish an approved Test Plan by no later than
twenty (20) days prior to the semi-annual DMNC Test.
For each DMNC Test conducted during a Project Year, Owner shall evaluate
Operator on its ability to achieve the Target DMNC, and, subject to Owner's
sole and complete discretion, award Operator a bonus of up to Twelve Thousand
Five Hundred and 00/100 Dollars ($12,500.00) or assess Operator with liquidated
damages of up to Twelve Thousand Five Hundred and 00/100 Dollars ($12,500.00) in
the Change in DMNC category of the AFAA.
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If an event of Force Majeure prevents or disrupts the running of a scheduled
DMNC Test, Operator shall neither be assessed liquidated damages nor receive a
bonus under such test. The sole effect of Force Majeure under this Section
6.1(b) shall be to cause a rescheduling of such DMNC Test. After conducting four
(4) DMNC Tests, and paying bonuses and/or liquidated damages in accordance with
this Section 6.1(b), in the first two (2) Project Years, Owner and Operator
shall meet and, in consideration of actual Facility operation, actual DMNC Test
results and the amounts of bonuses paid and/or liquidated damages assessed,
reevaluate the method used in determining the Change in DMNC category of the
AFAA.
For purposes of this Section 6.1(b), "DMNC Test" shall mean a semi-annual
test conducted, in accordance with the Test Plan, to determine the DMNC of the
Facility. Each DMNC Test shall be conducted on the date determined by Owner, but
no later than June 30th for the first such test during a Project Year and no
later than December 31st for the second such test during a Project Year.
(c) Steam Delivery. The maximum bonus or liquidated damages
--------------
capable of being earned by or assessed against Operator in the Steam Delivery
category of the AFAA in any Project Year shall be Twenty-Five Thousand and
00/100 Dollars ($25,000.00). If, over the course of a Project Year, fewer than
two (2) interruptions occur in the delivery of steam to Steam Purchasers, then
Operator shall receive a bonus in the amount of Twenty-Five Thousand and 00/100
Dollars ($25,000.00) under the Steam Delivery category of the AFAA for such
Project Year. If two (2) or three (3) interruptions occur in the delivery of
steam to Steam Purchasers during a Project Year, then the AFAA for the Steam
Delivery category of the AFAA for such Project Year shall be zero. If more than
three (3) interruptions occur in the delivery of steam to Steam Purchasers
during a Project Year, Operator shall be assessed liquidated damages in the
amount of Twenty-Five Thousand and 00/100 Dollars ($25,000.00) under the Steam
Delivery category of the AFAA for such Project Year. In no event shall the
amount of bonus earned or liquidated damages assessed in the Steam Delivery
category of the AFAA exceed Twenty-Five Thousand and 00/100 Dollars ($25,000.00)
in any Project Year.
(d) Net Plant Heat Rate. The maximum bonus or liquidated damages
-------------------
capable of being earned by or assessed against Operator in the Net Plant Heat
Rate category of the AFAA in any Project Year shall be Thirty-Seven Thousand
Five Hundred and 00/100 Dollars ($37,500.00). Over the course of a Project Year,
operation of the Facility at the optimum net plant heat rate increases
profitability. Owner shall evaluate Operator on its ability to achieve the
optimum net plant heat rate, and, subject to Owner's sole and complete
discretion, award Operator a bonus of up to Thirty-Seven Thousand Five Hundred
and 00/100 Dollars ($37,500.00) or assess Operator with liquidated damages of
up to Thirty-Seven Thousand Five Hundred and 00/100 Dollars ($37,500.00) in the
Net Plant Heat Rate category of the AFAA. The initial net plant heat rate shall
be determined pursuant to a performance test conducted within sixty (60) days
after the Existing O&M Agreement Termination Date.
(e) O&M Costs. The maximum bonus or liquidated damages capable of
---------
being earned by or assessed against Operator in the O&M Costs category of the
AFAA shall be Fifty
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Thousand and 00/100 Dollars ($50,000.00). During each Project Year, this
Agreement contemplates the existence of an Approved Operating Budget. Developing
reliable budgets based on obtainable forecasts and realistic expectations, and
receiving such budgets and any revisions thereof in a timely manner, are
essential elements of Owner's ability to monitor its investment in the
Facility. Owner shall evaluate and compare the Approved Operating Budget for a
given Project Year against the costs and expenses actually incurred and, subject
to Owner's sole and complete discretion, award Operator a bonus of up to Fifty
Thousand and 00/100 Dollars ($50,000.00) or assess Operator with liquidated
damages of up to Fifty Thousand and 00/100 Dollars ($50,000.00) in the O&M Costs
category of the AFAA.
(f) Subjective Factors. The maximum bonus or liquidated damages
------------------
capable of being earned by or assessed against Operator in the Subjective
Factors category of the AFAA in any Project Year shall be Sixty-Two Thousand
Five Hundred and 00/100 Dollars ($62,500.00). The Subjective Factors category of
the AFAA depends solely upon Owner's subjective evaluation of Operator's overall
performance of its obligations and services rendered hereunder. Subject to
Owner's sole and complete discretion, Owner shall evaluate Operator's
performance with respect to various qualitative factors, which, for illustrative
purposes only and not by way of limitation, may include: frequency of insurance
claims and increases in related insurance costs, community and public relations,
compliance with permits and easements, safety and environmental records, turn-
over of personnel, development of apprentice programs, personnel management
relevant to Urban Enterprise Zone criteria, timeliness of response to and
handling of events of Force Majeure, working relationship with Owner and
Lender, professionalism, profitability of the Facility and overall handling and
care of the Facility. Periodically but no more often than every three (3) months
during each Project Year, Owner shall deliver to Operator a list of the various
qualitative factors to be used by Owner in its subjective evaluation of
Operator's performance for the remainder of such Project Year. Based on Owner's
subjective evaluation of Operator's performance during a Project Year, Owner
shall, in Owner's sole and complete discretion, either award Operator a bonus of
up to Sixty-Two Thousand Five Hundred and 00/100 Dollars ($62,500.00) or assess
Operator liquidated damages of up to Sixty-Two Thousand Five Hundred and 00/100
Dollars ($62,500.00) under the Subjective Factors category of the AFAA for such.
Project Year.
6.2 Quarterly Meetings. Owner and Operator shall schedule and attend
------------------
regular quarterly meetings to discuss Operator's performance of the Work and
Owner's evaluation thereof and, when necessary, to review and revise the list of
qualitative factors described in Section 6.1(f) above.
6.3 Partial Project Year. In any partial Project Year, the amounts
--------------------
attributable to each category of the AFAA and the overall limitation placed on
the AFAA itself shall be prorated based on the number of calendar days in such
partial Project Year divided by 365 or 366, as the case may be.
6.4 Payment of Annual Fee Adjustment Amount. Not later than thirty
---------------------------------------
(30) days after the end of each Project Year, Owner shall render a statement to
Operator, with all necessary
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and appropriate supporting documentation, calculating the amount of bonus
payments due Operator and/or the amount of liquidated damages due to Owner
under each category of the AFAA. If the AFAA results in an amount payable by
Operator to Owner, such amount shall be set off against that portion of the O&M
Fee for such Project Year that has not yet been advanced to Operator, and the
balance, if any, shall be paid by Operator to Owner within thirty (30) days
after Owner delivers the statement therefor to Operator. If the AFAA results in
an amount payable by Owner to Operator, such amount shall be paid by Owner
within thirty (30) days after Owner delivers the statement therefor to Operator.
A party's obligation to pay the AFAA to the other party shall survive the
termination of this Agreement, even though such AFAA may not be capable of being
calculated until after the termination of this Agreement.
6.5 Application of CPI Adjustment. Each of the dollar amounts
-----------------------------
indicated in Section 6.1 above shall be adjusted in accordance with the
provisions of Section 5.3 hereof.
6.6 Change in Conditions or Circumstances. If during the term of this
-------------------------------------
Agreement conditions or circumstances change from those in effect on the
Existing O&M Agreement Termination Date such that there is either a material
increase or decrease in the responsibilities and obligations of Operator
hereunder from those responsibilities and obligations of Operator as of the
Existing O&M Agreement Termination Date, then Owner and Operator shall meet and
negotiate an equitable adjustment to the manner in which the AFAA is determined,
including, without limitation, revisions to the categories of evaluation used in
determining the AFAA, the relative weightings thereof and the overall limit on
the AFAA, if necessary.
6.7 Second Project Year. Notwithstanding anything to the contrary
-------------------
herein contained, for purposes of the calculation of the AFAA for the second
(2nd) Project Year, each of the dollar amounts indicated in Section 6.1 above
shall be reduced by fifty percent (50%), subject, however, to proration in
accordance with Section 6.3 hereof
6.8 Employee Bonuses. Beginning with the second (2nd) Project Year and
----------------
for each Project Year thereafter, Operator shall pay to the Operator Personnel
and the GE O&M Personnel as bonuses in the aggregate not less than twenty-five
percent (25%) of the AFAA for each such Project Year; provided, however, Owner
may pay, in Owner's sole discretion, additional bonuses to the Operator
Personnel and the GE O&M Personnel during any Project Year.
VII.
WARRANTY; CORRECTION OF DEFECTS
7.1 Warranty. Operator warrants that (i) the Work hereunder shall be
--------
performed in a first-class, competent, cost-conscious manner by appropriately
qualified personnel, (ii) the Work shall be performed in accordance with the
terms and conditions of this Agreement, including all standards set forth
herein, and (iii) all aspects of such Work shall be suitable for their required
purposes.
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7.2 Consequence of Breach. In the event Operator breaches any
---------------------
warranty described in Section 7.1 above, Operator shall re-perform any defective
service, replace any unfit or unqualified personnel and train new personnel, and
repair or replace any components of the Facility damaged as a consequence of
such breach. Any such re-performance, training, repair or replacement by
Operator pursuant to this Section 7.2 shall be at Operator's sole cost and
expense.
7.3 Vendor Warranties. Operator shall use its best efforts to
-----------------
obtain not less than one-year vendor warranties for all spare parts and
replacement parts, other than parts having a useful life of less than one year
and parts supplied by Owner pursuant to Article III. Any warranties obtained by
Operator from outside vendors or subcontractors shall be assignable and passed
through to Owner, but, during the term of this Agreement, Operator shall
maintain, administer and enforce such warranties for the benefit of Owner;
provided, however, Operator shall not file suit to enforce any such warranty
without the prior written consent of Owner.
VIII.
TERM
Unless sooner terminated as provided herein, the term of this
Agreement shall begin on the Execution Date and shall extend for an initial term
expiring at the end of the twelfth (12th) Project Year; provided, however, Owner
shall have the right, in Owner's sole discretion, to (i) terminate this
Agreement for convenience effective as of the end of the fourth (4th) Project
Year by delivering to Operator written notice of such termination on or before
one hundred eighty (180) days prior to the end of the fourth (4th) Project Year
and payment of the Fourth Year Termination Fee (as defined hereinbelow) in
accordance with the terms hereof, (ii) terminate this Agreement for convenience
effective as of the end of the seventh (7th) Project Year by delivering to
Operator written notice of such termination on or before one hundred eighty
(180) days prior to the end of the seventh (7th) Project Year and payment of the
Seventh Year Termination Fee (as defined hereinbelow) in accordance with the
terms hereof, and (iii) terminate this Agreement for convenience, at no cost to
Owner, effective as of the end of the tenth (10th) Project Year by delivering to
Operator written notice of such termination on or before one hundred eighty
(180) days prior to the end of the tenth (10th) Project Year.
The "Fourth Year Termination Fee" shall be due and payable as follows:
(i) Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00), which
shall be due and payable by Owner to Operator within thirty (30) days
after the termination of this Agreement, plus
(ii) the reasonable costs actually incurred by Operator in transferring,
relocating and/or terminating Operator's personnel at the Facility and
terminating subcontracts pertaining to the Facility up to a maximum of
One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00), which
shall be due and payable by Owner to Operator within thirty (30) days
after receipt by Owner from Operator of an
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invoice accompanied by all relevant documentation reasonably necessary
for Owner to verify the accuracy thereof, plus
(iii) an amount equal to ten percent (10%) of the Published Price (as
determined at the time of acquisition) of the Parts for GE Equipment
actually purchased by Owner from Operator during the term of this
Agreement, which amount shall be due and payable within thirty (30)
days after receipt by Owner from Operator of an invoice accompanied by
all relevant documentation reasonably necessary for Owner to verify
the accuracy thereof, but in no event earlier than thirty (30) days
after the termination of this Agreement.
The "Seventh Year Termination Fee" shall be due and payable as follows:
(i) Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00), which
shall be due and payable by Owner to Operator within thirty (30) days
after the termination of this Agreement, plus
(ii) the reasonable costs actually incurred by Operator in transferring,
relocating and/or terminating Operator's personnel at the Facility and
terminating subcontracts pertaining to the Facility up to a maximum of
One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00), which
shall be due and payable by Owner to Operator within thirty (30) days
after receipt by Owner from Operator of an invoice accompanied by all
relevant documentation reasonably necessary for Owner to verify the
accuracy thereof, plus
(iii) an amount equal to five percent (5%) of the Published Price (as
determined at the time of acquisition) of the Parts for GE Equipment
actually purchased by Owner from Operator during the term of this
Agreement, which amount shall be due and payable within thirty (30)
days after receipt by Owner from Operator of an invoice accompanied by
all relevant documentation reasonably necessary for Owner to verify
the accuracy thereof, but in no event earlier than thirty (30) days
after the termination of this Agreement.
IX.
TERMINATION
9.1. Event of Default. Should any of the following events or
----------------
conditions occur, the same shall constitute an event of default under this
Agreement (herein called an "Event of Default"):
(a) Operator breaches any of its material obligations under this
Agreement.
(b) Owner breaches any of its material obligations under this
Agreement.
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(c) If any representation or warranty of Operator or Owner under
Article XIV hereof shall prove untrue in any material respect.
(d) If, in any two (2) successive Project Years, Operator incurs the
maximum liquidated damages possible under Article VI hereof for each such
successive Project Year, then such occurrence shall be an Event of Default
by Operator.
(e) If Operator's aggregate limit of liability over the term of this
Agreement as set forth in Section 17.1 hereof is reached, then such
occurrence shall be an Event of Default by Operator.
9.2 Termination upon Breach. If either party commits an Event of
-----------------------
Default, the other party (hereinafter the "Non-Defaulting Party") may give such
party in default (the "Defaulting Party") a written notice describing such
default in reasonable detail and demanding that the Defaulting Party cure such
default; provided, however, Operator shall have no right to cure the Events of
Default set forth in Sections 9.1(d) and (e) above. If the Defaulting Party does
not cure its default within twenty (20) days after its receipt of such notice,
or if the default is such that it cannot be cured within such period of time and
the Defaulting Party does not promptly commence action within such twenty (20)
day period which is calculated to cure such default and thereafter diligently
pursue such action to completion, the Non-Defaulting Party shall have the right
to terminate this Agreement by written notice to the Defaulting Party, without
prejudice to any remedies at Law or in equity which are available to the Non-
Defaulting Party by reason of the Defaulting Party's default. Provided Operator
is performing all of its obligations under this Agreement in accordance with the
terms and conditions hereof, it shall not constitute an Event of Default if
Operator fails to earn a bonus for any Project Year, so long as Operator shall
pay Owner when due any associated liquidated damages required to be paid under
Article VI hereof and promptly makes all corrections to the Facility as may be
required hereunder. Notwithstanding anything stated herein, a good faith dispute
with respect to the payment of any amount claimed to be due hereunder, for so
long as such dispute remains unresolved and contested in good faith, shall not
be considered an Event of Default.
9.3 Termination for Insolvency. Subject to Article XII hereof, either
--------------------------
party may terminate this Agreement by written notice to the other party if the
other party (i) commences a proceeding under Federal or state bankruptcy,
insolvency or reorganization law, or (ii) has such a proceeding filed against it
and fails to have such proceeding stayed or vacated within sixty (60) days or
upon the end of any such stay, fails to have such involuntary prciceeding
vacated within sixty (60) days thereafter, or (iii) admits the material
allegations of any petition in bankruptcy filed against it, or (iv) is adjudged
bankrupt, or (v) makes a general assignment for the benefit of its creditors, or
(vi) has a receiver appointed for all or a substantial portion of such party's
assets which receiver is not discharged within sixty (60) days after his
appointment. Any termination of this Agreement pursuant to this Section 9.3
shall be considered to be by reason of anticipatory breach of contract, and such
termination shall be without prejudice to any rights the terminating party may
have by reason of such anticipatory breach.
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9.4 Owner's Additional Remedies. After termination of this Agreement
---------------------------
by Owner by written notice pursuant to Section 9.2 or 9.3 hereof, Owner may, in
addition to its other rights hereunder, take possession of and utilize any
materials, tools, equipment, manuals, records and other property of any kind
furnished by Operator, paid for by Owner, and necessary or intended to be used
to operate the Facility. Operator shall not be entitled to receive any further
payments under this Agreement except for payments for services provided prior to
termination of this Agreement. Operator and Owner shall continue to be bound by
such provisions of this Agreement that shall survive the termination hereof. In
addition, Operator shall remain liable for all liquidated damages hereunder
which have accrued but have not yet been paid at the time of such termination.
9.5 Transfer of Operations Upon Termination. Upon termination of this
---------------------------------------
Agreement for any reason, Operator shall fully cooperate with Owner in the
transfer of the performance of Operator's obligations hereunder to Owner or a
third party designated by Owner. Without limiting the foregoing, Operator shall
provide Owner and such third party with such information as may be reasonably
necessary for the safe and proper operation and maintenance of the Facility. The
parties acknowledge Owner's interest that the Facility be operated and
maintained during the final Project Year of this Agreement or portion thereof,
whether or not commensurate with the term hereof, to the same standards as it is
operated and maintained throughout the term of this Agreement and that personnel
of Owner have an opportunity to gain experience in the operation and maintenance
of the Facility during such final Project Year. Accordingly, Operator agrees
that Owner may send its personnel to the Facility during the final Project Year
for the purposes of monitoring Operator's performance under the terms of this
Agreement and gaining experience in operation and maintenance of the Facility,
without charge to Owner (except for the cost of Owner's personnel), provided
that Owner's personnel do not interfere with the continuing operation and
maintenance of the Facility by Operator pursuant to the terms hereof. Owner,
however, shall remain fully liable for the actions and inactions of its
employees during such time period. Upon termination of this Agreement, Operator,
to the extent permitted by law, shall assign to Owner any existing warranties
obtained by Operator on the Facility or any portion thereof and shall promptly
deliver to Owner all copies of the Facility Data, drawings, books and originals
or certified copies of all records relating to the operation and maintenance of
the Facility that are required to be maintained by Operator hereunder as of the
date of such termination.
9.6 Condition of Facility Upon Termination. Upon expiration or
--------------------------------------
termination of this Agreement, Operator shall leave the Facility in as good
condition as on the Existing O&M Agreement Termination Date, normal wear and
tear excepted, and with the equivalent supply of Consumables (other than spare
parts) and other operating items as were provided by Owner to Operator. All
special tools, improvements, inventory of supplies, spare parts, safety
equipment (as provided to or obtained by or provided by Operator during the term
of this Agreement) and any other items furnished by Operator hereunder will be
left at the Facility and will become or remain the property of Owner without
additional charge.
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9.7 Survival of Obligations. Termination of this Agreement for any
-----------------------
reason shall not relieve Owner or Operator of any obligation accrued or accruing
prior to such termination. Without limiting the generality of the foregoing,
Owner and Operator shall continue to be bound by Section 6.4, Article VII,
Sections 9.4, 9.5, 9.6 and 9.7, Article XIII, Article XVII, Article XVIII,
Article XIX, Article XX, and such provisions shall survive the termination of
this Agreement.
X.
INSURANCE
10.1 Operator Insurance Coverage. Operator shall secure and maintain
---------------------------
as a minimum during the term of this Agreement the following insurance:
(a) Worker's Compensation, subject to statutory limits.
(b) Employer's Liability, with limits as follows:
(i) Bodily Injury by Accident - $1,000,000 per accident;
(ii) Bodily Injury by Disease - $1,000,000 policy limit; and
(iii) Bodily Injury by Disease - $1,000,000 per each employee.
(c) Comprehensive (Business) Automobile Liability including
automobile contractual liability endorsement, in an amount equal to a
"combined single limit" coverage for bodily injury and property damage
limit of One Million and 00/100 Dollars ($1,000,000.00) per accident, in
comprehensive form and covering hired, owned and non-owned vehicles,
including, without limitation, vehicles leased by Operator from Owner. Such
insurance shall name Owner and Lender as Additional Insureds.
(d) Comprehensive (Commercial) General Liability Insurance in an
amount equal to at least One Million and 00/100 Dollars ($1,000,000.00) per
occurrence, "combined single limit" coverage. Such insurance shall contain
such coverages as Operator normally maintains for its own protection to
include Premises/Operations, Explosion, Collapse and Underground Hazards,
Broad Form Contractual, Independent Contractors, Products/Completed
Operations, Broad Form Property Damage (excluding care, custody and
control), Personal Injury, Cross Liability including a Broad Form
Contractual endorsement to meet the liability assumed in Section 13.1
hereof Such insurance shall twine Owner and Lender as Additional Insureds.
(e) Excess (or Umbrella) Liability insurance providing total or
excess limits for, and following the form of, the policies referred to in
Section 10.1 (b) (c) and (d) so as to bring the total of each up to Twenty-
Five Million and 00/100 Dollars ($25,000,000.00) per occurrence, and in the
annual aggregate where applicable. Such insurance Thall name Owner and
Lender as Additional Insureds.
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(f) Aircraft and Marine insurance should any aircraft or watercraft
be used in the Work. Such insurance shall be at limits at least equal to
those specified in Section 10.1(e) above. Such insurance shall name Owner
and Lender as Additional Insureds.
10.2 Owner Insurance Coverage. Owner shall secure and maintain during
------------------------
the term of this Agreement the following insurance:
(a) Worker's Compensation, subject to statutory limits.
(b) Employer's Liability, with limits as follows:
(i) Bodily Injury by Accident - $1,000,000 per accident;
(ii) Bodily Injury by Disease - $1,000,000 policy limit; and
(iii) Bodily Injury by Disease - $1,000,000 per each employee.
(c) Commercial General Liability Insurance covering legal liability
of the insured for damage to property of third parties or bodily injury to
third parties arising out of the ownership, operation and maintenance of
the Facility, in an amount equal to One Million and 00/100 Dollars
($1,000,000.00) per occurrence, "combined single limit" property
damage/bodily injury coverage. Such insurance policy shall be endorsed
naming Lender as an Additional Insured and Operator as an Additional
Insured in connection with claims arising out of or relating in any way to
Operator's presence on the Site or for the Work to be performed pursuant to
this Agreement only, and shall include Premises/Operations, Explosion,
Collapse and Underground Hazards, Broad Form Contractual, Independent
Contractors, Products/Completed Operations, Broad Form Property Damage,
Personal Injury, Cross Liability (Insured vs. Insured) and a Broad Form
Named Insured endorsement; provided, however, if a claim is made under such
insurance and the claim is not based upon the negligence or willful
misconduct of Operator, then Operator acknowledges it shall have no right
TO any recovery with respect to such claim and, in furtherance thereof,
Operator shall execute and deliver to Owner the appropriate waiver forms
necessary for a check to be issued by the insurer solely in the name of
Owner.
(d) Excess (or Umbrella) Liability insurance providing total or
excess limits for, and following the form of, the policies referred to in
Section 10.2 (b) and (e) so as to bring the total of each up to Twenty-Five
Million and 00/100 Dollars ($25,000,000.00) per occurrence, and in the
annual aggregate where applicable. Such insurance policy shall be endorsed
naming Lender as an Additional Insured and Operator as an Additional
Insured in connection with claims arising out of or relating in any way to
Operator's presence on the Site or for the Work to be performed pursuant to
this Agreement only; provided, however, if a claim is made under such
insurance and the claim is not based upon the negligence or willful
misconduct of Operator, then Operator acknowledges it shall have no right
to any recovery with respect to such claim and, in furtherance thereof,
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Operator shall execute and deliver to Owner the appropriate waiver forms
necessary for a check to be issued by the insurer solely in the name of
Owner.
(e) Property Insurance on an "All Risk" basis covering physical
damage or loss to all real and personal property of Owner located at the
Site and to off-premises electrical, gas, and steam transmission lines and
facilities, and other equipment for which Owner has an insurable interest
and in an amount not less than one hundred percent (100%) of the full
replacement value of such property. Such coverage shall meet all
requirements for property insurance set forth in the Related Agreements,
shall name Lender as an Additional Named Insured and shall name Operator as
an Additional Insured.
(f) Boiler and Machinery Insurance on the Facility for all insurable
objects, including but not limited to pressure vessels, turbines and
equipment, electrical generators, motors, air tanks, boilers, machinery,
pressure piping or similar apparatus, on a comprehensive form in an amount
not less than one hundred percent (100%) of the full replacement value of
such property. Such insurance policy shall cover objects at all locations
required to be insured under Section 10.2(e) above and shall name Lender
and Operator as Additional Insureds. Owner shall have the right at any
time, and from time to time, at Owner's sole option, to combine the
Property Insurance and the Boiler and Machinery Insurance into a single
policy. Owner shall be relieved of the obligation to renew the business
interruption coverage under said Property Insurance and Boiler and
Machinery Insurance in the event such business interruption coverage cannot
be purchased at commercially reasonable rates.
10.3 Form and Content of Insurance. All policies, and binders with
-----------------------------
respect to insurance provided pursuant to this Article X shall be as follows:
(a) Form of Policies. All insurance provided for hereunder shall be
----------------
placed on forms reasonably acceptable to Owner, Operator, and Lender.
(b) Insurance Companies. All insurance required hereunder shall be
-------------------
issued by and binding upon insurance companies reasonably acceptable to
Owner, Operator and Lender that are licensed or authorized to do business
in the State of New Jersey.
(c) Additional Insureds shall include the officers, directors and
-------------------
employees of each entity so named as its interests may appear.
(d) Severability. All liability insurance shall contain a
------------
severability of interest provision providing that, except with respect to
the total limits of liability, the insurance shall apply to each Insured or
Additional Insured in the same manner as if separate policies had been
issued to each.
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(e) Non-Recourse. All insurance shall provide that there will be no
------------
recourse against the Additional Insureds for the payment of premiums or
commissions or (if such policies provide for the payment thereof) additional
premiums or assessments.
(f) Waiver of Subrogation. All insurance maintained by Operator and
---------------------
Owner hereunder except for the insurance required pursuant to Section
10.1(b) and (c) and Section 10.2(b) hereof shall provide for the waiver of
any right of subrogation by the insurers thereunder against Owner, Operator
and Lender and the officers, directors and employees, agents and
representatives of each of them, and any right of the insurers to any setoff
or counterclaim or any other deduction, whether by attachment or otherwise,
in respect of any liability of any such person insured under such policy.
(g) Notice of Cancellation. All insurance shall provide that it may
----------------------
not be canceled or materially changed without giving Owner, Operator, and
Lender thirty (30) days prior written notification thereof, except in cases
of non-payment of premium for which ten (10) days prior written notice shall
be provided (unless a longer notice period for non-payment is agreed to by
the relevant insurer).
(h) Breach of Warranty. The interest of any Insured or Additional
------------------
Insured shall not be invalidated by any action or inaction of any of the
other parties so named.
10.4 Additional Requirements.
-----------------------
(a) Certificates; Proof of Loss. Prior to the performance of any Work
---------------------------
by Operator hereunder, each party shall furnish certificates of insurance to
the other party evidencing the insurance required of such party pursuant to
this Agreement. The party maintaining each policy hereunder shall make all
proofs of loss under each such policy, and shall take all other action
reasonably required to ensure collection from insurers for any loss under
any such policy, except that Owner may require Operator to provide such
proof of loss and take such other action on behalf of Owner in the case of
the insurance maintained by Owner pursuant to Section 10.2(c), (d), (e) and
(f). Operator shall provide Owner with copies of insurance policies obtained
by it promptly upon Owner's request.
(b) Insurance Report. Concurrently with the furnishing of the
----------------
certification referred to in Section 10.4(a), Operator shall furnish Owner
and Lender with an opinion of each insurance broker stating that all
premiums then due have been paid and that, in the opinion of such broker,
the insurance then carried and maintained with respect to the facility is in
accordance with the terms of this Article. Furthermore, Operator shall cause
each insurer or such broker to advise Owner and Lender in writing of any
default in the payment of any premiums or any other act or omission on the
part of Operator which might invalidate or render unenforceable, in whole or
in part, any insurance provided hereunder. Owner may at its sole option
obtain such insurance if not provided by Operator and, in such event,
Operator shall reimburse Owner upon demand for the cost thereof.
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(c) Payment of Deductibles and Self-Insured Retention Amounts. Owner
---------------------------------------------------------
shall be responsible for deductibles or self-insured retention under all of
the insurance policies required to be carried by Owner pursuant to Section
10.2 hereof, except in the event of loss or damage due to the negligence or
willful misconduct of Operator, in which case Operator shall be liable
proportionately to the extent of Operator's negligence or willful
misconduct, for the deductibles and/or self-insured retention applicable to
such insurance up to but not exceeding Two Hundred Fifty Thousand and 00/100
Dollars ($250,000.00) per occurrence. In addition, Operator shall be
responsible for all deductibles and self-insured retention under other
policies maintained by Operator. Owner may, in its sole discretion, change
the deductibles or self-insured retention under any of the insurance
policies that it is required to carry pursuant to Section 10.2 hereof and
shall promptly give Operator written notice of any such change; provided,
however, that Operator shall not be responsible for any deductibles or self-
insured retention in excess of Two Hundred Fifty Thousand and 00/100
Dollars ($250,000.00) per occurrence.
(d) Subcontractor Insurance. Operator shall require all subcontractors
-----------------------
and suppliers to obtain, maintain, and keep in force, prior to entry on the Site
and during the time in which they are engaged in performing services to be
furnished by Operator adequate coverage in accordance with Operator's normal
practice and shall provide Owner with current certificates of insurance
evidencing such coverage.
(e) Notification. Operator agrees to advise Owner as soon as
------------
practicable in writing of any notice of claim to which insurance pursuant to
this Article X applies.
(f) Owner's and Lender's Rights. Should Operator fail to provide or
---------------------------
maintain any of the insurance policies required of it, Owner and/or Lender
shall have the right to provide and/or maintain such coverage at Operator's
expense once Operator has had a reasonable time to cure.
(g) Capitalized Terms. Capitalized terms used in this Article X and
-----------------
not otherwise defined in this Agreement shall have the meanings generally
ascribed to them in the commercial insurance industry in the United States of
America.
(h) Disclosure. Operator agrees to make full disclosure to insurers of
----------
all material facts and circumstances as required by the terms of any insurance
policy under which Operator is named as an Additional Insured.
XI.
NOTIFICATIONS
Any notice to either party required or permitted hereunder shall be in
writing and shall be given by (i) personal delivery, (ii) commercial courier
(iii) registered or certified U.S. mail, return receipt requested, postage
Prepaid, or (iv) telecopy if also given by personal delivery,
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<PAGE>
commercial courier or registered or certified U.S. mail, return receipt
requested, postage prepaid within three (3) days after the telecopied
transmission, all such notices to be addressed as follows:
If to Owner:
Cogen Technologies Linden Venture, L.P.
c/o Cogen Technologies, Inc.
1600 Smith Street, Suite 4300
Houston, Texas 77002
Telecopier Number: (713) 951-7747
Attention: Vice President and Chief Financial Officer
Cogen Technologies Linden Venture, L.P.
c/o Cogen Technologies, Inc.
1600 Smith Street, Suite 4300
Houston, Texas 77002
Telecopier Number: (713) 951-7747
Attention: Senior Vice President and Chief Operating
Officer
with copy to:
Cogen Technologies Linden Venture, L.P.
Railroad & Chemico Streets
at Bayway's Bayway Facility
Linden, New Jersey 07036
Telecopier Number: (908) 474-0804
Attention: Plant Manager
If to Operator:
GE Global O&M Services
One River Road, Building 36-2E
Schenectady, New York 12345
Telecopier Number: (518) 385-2280
Attention: Manager of Global O&M Services
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If to Lender:
General Electric Power Funding Corporation
One River Road
Building 2, Room 741
Schenectady, New York 12301
Telecopier Number: (518) 385-3649
Attention: Vice President--Investments
with copy to:
General Electric Capital Corporation
1600 Summer Street, 6th Floor
Stamford, Connecticut 06927-1560
Telecopier Number: (203) 357-4329 or 6970
Attention: Vice President Energy Project Operations--
Transportation and Industrial
Financing Division
Notice by personal delivery shall be effective when made and notice by
commercial courier or by mail shall be deemed effective upon receipt. A copy of
each such notice shall, to the extent reasonably practicable, also be forwarded
by telecopier.
XII.
ASSIGNMENT; LENDER'S RIGHTS
12.1 Assignment. Neither Owner nor Operator may assign all or any
----------
part of their interests in this Agreement without the prior written consent of
the other, which consent shall not be unreasonably withheld, delayed or
conditioned; provided, however, Owner may assign its rights under this Agreement
as security for the payment of any indebtedness payable or to become payable to
Lender. In connection therewith, if requested by Lender, Operator will execute
an appropriate consent to any such assignment. Moreover, if requested by Lender,
Owner and Operator will execute the Recognition Agreement with Lender
substantially in the form shown in Exhibit D attached hereto and made a part
hereof for all purposes. This Agreement shall be binding on and shall inure to
the benefit of the parties and their respective successors and assigns to the
extent that assignment is permitted under this Agreement.
12.2 Lender's Rights. (a) Operator agrees that so long as any such
---------------
assignment to Lender or Recognition Agreement with Lender shall remain in effect
or until written notice of satisfaction is given to Operator by Lender, the
following provisions will apply:
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(1) except for the natural expiration of the term of this Agreement
(after giving effect to any renewal terms), there shall be no modification
of this Agreement without the prior written consent of Lender which consent
shall not be unreasonably withheld;
(2) Operator will not terminate, cancel or surrender this Agreement
by reason of Owner's default without giving Lender the same notice and
right to cure such default as Owner may have (plus an additional thirty
(30) days); provided, that if the default is a non-monetary default and (i)
is of such nature that it cannot be cured without first taking possession
of the Facility or (ii) is of such nature that it is not susceptible of
being cured by Lender, then Operator shall have no right to terminate this
Agreement by reason of such default if and so long as Lender shall proceed
diligently to attempt to obtain possession of the Facility or exercise its
remedies pursuant to the financing agreements including possession by a
receiver and upon obtaining such possession, Lender shall proceed
diligently to cure such default if such default is susceptible of being
cured by Lender;
(3) Operator will not terminate this Agreement by reason of Owner's
default under Section 9.3 if Lender has cured any monetary default and has
diligently commenced and is diligently continuing to exercise its remedies
under any of the financing agreements;
(4) Operator will deliver to Lender a copy of each notice of default
and notice of termination, extension or renewal at the same time that any
such notice is delivered to Owner;
(5) upon instructions from Lender, Operator will make any payments
due to Owner hereunder in accordance with such instructions;
(6) if Lender or a Permitted Transferee shall acquire title to or
possession of the Facility or shall appoint a new managing general partner
of Owner, then Operator shall accept performance from Lender or such
Permitted Transferee so long as Lender or such Permitted Transferee shall
have paid to Operator all costs and fees herein provided for, and then due
and payable, and shall comply or cause Owner to comply with the other
provisions of this Agreement. Upon acquiring title to or possession of the
Facility, Lender shall have the same rights as Owner with respect to the
availability and review of books and records of the Facility; and
(7) if Lender shall give notice to the Operator that a Special Event
under the Owner's Amended and Restated Agreement of Limited Partnership has
occurred and is continuing and Lender so elects, then all rights of the
Owner hereunder shall vest in Lender.
(b) Lender, as such, shall not be deemed to assume the performance of
any of the terms, covenants or conditions on the part of Owner to be performed
hereunder, but the purchaser, assignee or transferee of this Agreement under any
instrument of sale, assignment or
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<PAGE>
transfer pursuant to or in connection with any proceedings for the foreclosure
of any leasehold mortgage affecting the Facility shall be deemed to be an
assignee or transferee within the meaning of this Agreement, and shall be deemed
to have agreed to perform all of the terms, covenants and conditions on the part
of Owner to be performed hereunder from and after the date of such purchase and
assignment, but only for so long as such purchaser or assignee is the owner of
such leasehold estate.
(c) Notwithstanding any other provisions of this Agreement, any
sale, transfer, or assignment of this Agreement to Lender or a Permitted
Transferee pursuant to or in connection with (1) any proceedings for the
foreclosure of any leasehold mortgage affecting the Facility or (2) the exercise
by Lender of any other remedies under any of the financing agreements shall be
deemed to be a permitted sale, transfer or assignment of this Agreement.
(d) Any Lender or any Permitted Transferee may sell, assign or
transfer this Agreement to a Permitted Transferee; provided, however, that such
Lender or Permitted Transferee shall remain liable hereunder for the
obligations, if any, incurred by it prior to the sale, assignment or transfer.
12.3 Estoppel Certificates. Operator shall, without charge, at any
---------------------
time and from time to time hereafter, but not more frequently than twice in any
one-year period (or more frequently if such request is made in connection with
any sale or mortgaging of Owner's leasehold interest), within thirty (30) days
after written request of Owner, certify by written instrument duly executed and
acknowledged to any Lender or Permitted Transferee or any other person, firm or
corporation specified in such request: (a) as to whether this Agreement has been
supplemented or amended, and if so, the substance of such supplement or
amendment; (b) as to the validity and force and effect of this Agreement; (c) as
to the existence of any Event of Default hereunder; (d) as to the existence of
any offsets, counterclaims or defenses hereto on the part of Owner; and (e) as
to any other matters as may be reasonably so requested. Any such certificate may
be relied upon by Owner and any other person, firm or corporation to whom the
same may be exhibited or delivered, and the contents of such certificate shall
be binding on Operator.
12.4 Legal Opinion. Incident to the execution of this Agreement, if
--------------
requested by Owner, Operator shall furnish to Owner and any Lender or Permitted
Transferee an opinion of counsel to Operator with respect to the enforceability
of this Agreement against Operator and covering such other matters as may be
reasonably requested by Owner.
XIII.
INDEMNIFICATION
13.1 Operator Indemnity. Operator shall indemnify, defend and hold
------------------
harmless Owner, Lender, Exxon, Bayway and their respective Affiliates, and
partners, joint venturers, officers, agents, employees, successors and assigns
(collectively, the "Owner Indemnitees") from and against any and all suits,
actions, legal or administrative proceedings, claims, demands, penalties, costs
and expenses (including attorneys' fees, court costs and all costs or expenses
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related to environmental clean-up, containment, remediation or removal of
hazardous waste or pollution to property of third parties) of any nature for
personal injury or death or physical damage to property of any third party
(including employees of Operator and its subcontractors) arising out of or
resulting from the performance or non-performance of the Work or any other
activities on or about the Site or other locations where the Work is performed
to the extent that the same is caused by any negligent act or negligent omission
of, or willful misconduct or intentional act by, Operator or its subcontractors
or suppliers, or anyone employed by any of them or anyone for whose acts any of
them may be liable, unless solely caused by the negligence of any of the Owner
Indemnitees. In the event that such damage or injury is caused by the joint or
concurrent negligence of Owner, its employees, subcontractors (other than
subcontractors of Operator) or agents, the loss shall be borne by Operator and
Owner proportionately to their degree of fault. In the event Operator shall be
liable for any loss, costs and expenses pursuant to this Section 13.1, the
proceeds of the insurance policies referred to in Section 10.2(c) and (d) shall
first apply, other than as stipulated therein, to the loss, costs and expenses.
If such proceeds axe insufficient to cover all such loss, costs and expenses,
Operator shall be liable for and shall pay for all sums in excess of such
insurance proceeds; provided, however, in the event that such loss, costs and
expenses are caused by the joint or concurrent negligence of Owner, its
employees, subcontractors (other than subcontractors of Operator) or agents, the
loss, costs and expenses shall be borne by Operator and Owner proportionately to
their degree of fault. Notwithstanding anything herein to the contrary, in the
event of loss or damage due to the negligence or willful misconduct of Operator,
Operator shall be liable, proportionately to the extent of Operator's negligence
or willful misconduct, for the deductibles, self-insured retention and waiting
period deductibles applicable to the insurance policies required to be carried
by Owner pursuant to Section 10.2 hereof.
13.2 Owner Indemnity. Owner shall indemnify, defend and hold harmless
---------------
Operator and its Affiliates and partners, joint venturers, officers, agents,
employees, successors and assigns (collectively, the "Operator Indemnitees")
from and against any and all suits, actions, legal or administrative
proceedings, claims, demands, penalties, costs, and expenses (including
attorneys' fees, court costs and all costs or expenses related to environmental
clean-up, containment, remediation or removal of hazardous waste or pollution to
property of third parties) of any nature for personal injury or death or
physical damage to property of any third party (including employees of Owner and
its subcontractors) arising out of or resulting from the performance or non-
performance of Owner of its obligations hereunder or any of Owner's activities
on or about the Site or other location where Owner is to perform its obligations
hereunder to the extent that the same is caused by any negligent act or
negligent omission of, or willful misconduct or intentional act by, Owner, its
subcontractors (other than subcontractors of Operator) or suppliers (other than
suppliers of Operator), or anyone employed by any of them, or anyone for whose
acts any of them may be liable, unless solely caused by the negligence of any of
the Operator Indemnitees. In the event that such damage or injury is caused by
the joint or concurrent negligence of Operator or its employees, contractors,
subcontractors or agents, the loss shall be borne by Operator and Owner
proportionately to their degree of fault.
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13.3 No Limitation. In any and all claims against any of the Owner
-------------
Indemnitees by any employee of Operator, any of Operator's subcontractors or
suppliers, or anyone directly or indirectly employed by any of them or anyone
for whose acts any of them may be liable, the indemnification obligation under
Section 13.1 shall not be limited in any way by any limitation on the amount or
type of damages, compensation or benefits payable by or for Operator or any of
its subcontractors or suppliers under workers' or workmen's compensation acts,
disability benefit acts or other employee benefits acts, nor by the provision by
Operator of any insurance required to be provided under this Agreement.
XIV.
REPRESENTATIONS AND WARRANTIES
------------------------------
14.1 Representations and Warranties of Owner. Owner hereby represents
---------------------------------------
and warrants to Operator as follows:
(a) Owner is a limited partnership duly organized and existing in
good standing under the laws of the State of Delaware and is qualified to
do business in the State of New Jersey.
(b) Owner possesses all requisite power and authority to enter into
and perform this Agreement and to carry out the transactions contemplated
herein.
(c) Owner's execution, delivery, and performance of this Agreement
have been duly authorized, and this Agreement has been duly executed and
delivered and constitutes Owner's legal, valid, and binding obligation,
enforceable against Owner in accordance with its terms, except as may be
limited by bankruptcy, insolvency and other legal principles pertaining to
creditor's rights.
(d) No suit, action or arbitration, or legal, administrative or
other' proceeding is pending or, to Owner's knowledge, threatened against
Owner that would affect the validity or enforceability of this Agreement or
the ability of Owner to fulfill its obligations and commitments hereunder.
14.2 Representations and Warranties of Operator. Operator hereby
------------------------------------------
represents and warrants to Owner as follows:
(a) Operator is a corporation duly organized and existing in good
standing under the laws of the State of New York and is qualified to do
business in the State Of New Jersey.
(b) Operator possesses all requisite power and authority to enter
into and perform this Agreement and to carry out the transactions
contemplated herein.
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(c) Operator's execution, delivery, and performance of this
Agreement have been duly authorized, and this Agreement has been duly
executed and delivered and constitutes Operator's legal, valid, and binding
obligation, enforceable against Operator m accordance with its terms,
except as may be United by bankruptcy, insolvency and other legal
principles pertaining to creditors' rights.
(d) No suit, action or arbitration, or legal, administrative or
other proceeding is pending or, to Operator's knowledge, threatened against
Operator that would affect the validity or enforceability of this Agreement
or the ability of Operator to fulfill its obligations and commitments
hereunder.
(e) No material consents or approvals are required in connection
with the execution, delivery and performance by Operator of this Agreement,
(f) The execution, delivery and performance by Operator of this
Agreement will not (i) violate any law, rule or regulation applicable to
Operator, (ii) result in any breach of, or constitute any default under,
any contractual obligation of Operator, or (iii) result in, or require, the
creation or imposition of any lien or other encumbrance on any of the
properties or revenues of Owner.
XV.
HOOKS, RECORDS AND REPORTS
15.1 Books and Records. Operator shall maintain books and records at
-----------------
the Site reflecting solely transactions arising from the operation and
maintenance of the Facility pursuant to the terms of this Agreement, including,
without limitation, accounting, bookkeeping and administrative reports relating
to Facility performance data, the accrual and payment of items constituting
operating expenses and Reimbursable Costs, and the payment of all O&M Fees and
other moines to Operator. Such books and records shall (a) reflect only
transactions in connection with the Facility, (B) be kept physically apart from
any other books and records maintained by Operator for whatever purpose, and (c)
be available to Owner upon Owner's request for examination or copying during the
normal business hours of Operator. Operator shall cooperate with Owner's
accountant in the event Owner requests such accountant to conduct a financial
audit of the services provided by Operator hereunder, If such audit reveals
errors in the calculation of any amounts paid by. Owner, Operator shall promptly
reimburse Owner for any amounts improperly paid by Owner or Owner shall promptly
reimburse Operator for any amounts not paid by Owner, as the case may be.
Furthermore, if such audit reveals errors of more than two percent (2%) in the
calculation of Reimbursable Costs during any given month, then Operator shall
pay to Owner the cost of the audit. At the termination of this Agreement,
Operator shall furnish to Owner one copy of each report previously delivered to
Owner pursuant to Section 15.2 hereof, and one copy of such other books and
records which (i) relate to the Facility, and (ii) Operator maintains at the
time of such termination in the normal course of its record keeping under this
Article XV.
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15.2 Reports. In addition to any other report required to be made by
-------
Operator pursuant to the terms of this Agreement, Operator shall furnish to
Owner all such reports concerning the operation and maintenance of the Facility,
including any reports which may be required under the Related Agreements and as
may be required by the Lender. Operator shall provide such reports in the manner
and at the times as may be required under the Related Agreements or by the
Lender.
XVI.
FORCE MAJEURE
16.1 Force Majeure. Neither party shall be responsible or liable for
-------------
or deemed in breach hereof because of any delay in the performance of their
respective obligations hereunder due to circumstances beyond the reasonable
control of the party experiencing such delay, including but not limited to acts
of God; unusually severe weather conditions; strikes or other labor difficulties
(except that Operator's performance shall not be excused by strikes by persons
employed directly by Operator at the Site or by strikes limited to the Site);
war; riots; requirements, actions or failures to act on the part of governmental
authorities preventing performance; inability despite due diligence to obtain
required licenses, permits or governmental approvals; accidents; fire; damage to
or breakdown of necessary facilities; transportation delays or accidents;
failure or refusal of Con Ed to accept deliveries of Electricity under the Power
Purchase Agreement; failure or refusal of Exxon, Bayway or other Steam
Purchasers to accept deliveries of steam under the Steam Purchase Contracts; or
unavailability of Fuel (such causes hereinafter called "Force Majeure");
provided that the non-performing party is materially and adversely affected by
the event of Force Majeure and:
(a) The non-performing party gives the other party, as soon as
reasonably practicable tut in any event within forty-eight (48) hours of
such Force Majeure occurrence, written notice describing the particulars of
the occurrence;
(b) The suspension of performance is of no greater scope and of no
longer duration than is required by the Force Majeure;
(c) The non-performing party uses its best efforts to mitigate the
effects of the Force Majeure and remedy its inability to perform;
(d) When the non-performing party is able to resume performance of
its obligations under this Agreement, that party shall give the other party
written notice to that effect; and
(e) The Force Majeure was not caused by or connected with any
negligent or intentional acts, errors, or omissions, or failure by the non-
performing party to comply with any law, nile, regulation, order, or
ordinance or for any breach or default of this Agreement.
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The term Force Majeure does not include changes in market conditions or
governmental action that affect the cost of Owner's supply of Fuel or any
alternative supplies of Fuel or the demand for Owner's products.
16.2 Effect of Force Majeure. If after an event of Force Majeure that
-----------------------
has caused Operator to suspend or delay performance of the Work hereunder,
Operator has failed to take such action as Operator could lawfully and
reasonably initiate to remove or relieve either such event of Force Majeure or
its direct or indirect effects, Owner may, in its sole discretion, at Operator's
expense, initiate such reasonable measures as will be designed to remove or
relieve such event of Force Majeure or its direct or indirect effects and
thereafter require Operator to resume full or partial performance of the Work
hereunder.
16.3 Extended Force Majeure. In the event an event of Force Majeure
----------------------
hereunder or under any of the Related Agreements continues for thirty (30) days
or more, then Owner shall have the fight, upon delivery of thirty (30) days
advance written notice to Operator, to cause Operator to de-mobilized, and
effective thirty (30) days after Operator's receipt of such notice, Owner shall
be permanently relieved of the obligation to make payment of the O&M Fee to
Operator for those months during such extended event of Force Majeure that
Operator is de-mobilized. Owner shall pay all costs and expenses incurred in
connection with de-mobilization and re-mobilization to the extent such costs and
expenses are approved in writing by Owner. In addition, if such de-mobilization
continues for a period of one hundred eighty (180) or more consecutive days,
then Owner may terminate this Agreement by delivering written notice of
termination to Operator, such termination to be effective no earlier than thirty
(30) days after Operators receipt of such notice.
16.4 Payments to Operator During an Event of Force Majeure. During
-----------------------------------------------------
the continuance of an event of Force Majeure, Owner's obligation to make
payments to Operator for the O&M Fee and the AFAA shall be limited to the net
income (including insurance proceeds) derived from the Facility; provided,
however, (i) after the event of Force Majeure terminates, Owner shall bring
current the payment of all O&M Fees and AFAA (which are unpaid and accrued
during the event of Force Majeure) to Operator at such time as there is
sufficient net income from the Facility to make such payments and (ii) any such
delayed payments of the O&M Fee and the AFAA shall accrue interest at the rate
of interest announced by The Chase Manhattan Bank, N.A., from time to time, at
its principal office located at I Chase Manhattan Plaza, New York, New York
10081 (or any successor financial institution), as its prime commercial lending
rate; provided, however, Operator shall not be entitled to any O&M Fees for
those periods in which Operator was de-mobilized pursuant to Section 16.3
hereof. Owner's obligations under this Section 16.4 shall survive the
termination or expiration of this Agreement.
XVII.
LIMITATION OF LIABILITY
17.1 Operator. In no event, whether in tort, negligence, strict
--------
liability, breach of contract, warranty or otherwise, shall Operator's total
liability hereunder to Owner exceed (a)
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in any Project Year, Four Million and 00/100 Dollars ($4,000,000.00) and (b)
over the term of this Agreement, a total aggregate amount of Twelve Million
and 00/100 Dollars ($12,O00,000.00); provided, however, that the foregoing
limitation on liability shall not apply to any liability of Operator to Owner
(i) resulting from willful misconduct or intentional acts by Operator or (ii)
otherwise covered by the insurance policies required to be maintained by
Operator pursuant to Section 10.1 hereof up to the minimum amounts therein
stated, Notwithstanding anything contained herein to the contrary, in no event,
whether in tort, negligence, strict liability, breach of contract, warranty,
indemnity or otherwise, shall Operator be liable to Owner for special,
incidental, exemplary or consequential damages, including but not limited to,
loss of profits or revenues.
17.2 Owner. In no event, whether in tort, negligence, strict liability,
-----
breach of contract, warranty or otherwise, shall Owners total liability
hereunder to Operator exceed (a) in any Project Year, Four Million and 00/100
Dollars ($4,000,000.00) and (b) over the term of this Agreement, a total
aggregate amount of Twelve Million and 00/100 Dollars ($12,000,000.00);
provided, however, that the foregoing limitation on liability shall not apply to
any liability of Owner to Operator (i) resulting from willful misconduct or
intentional acts by Owner, or (ii) otherwise covered by the insurance policies
required to be maintained by Owner pursuant to Section 10.2 hereof up to the
minimum amounts therein stated. Notwithstanding anything contained herein to the
contrary, in no event, whether in tort, negligence, strict liability, breach of
contract, warranty, indemnity or otherwise, shall Owner be liable to Operator
for special, incidental, exemplary or consequential damages, including but not
limited to, loss of profits or revenues, except Owner shall indemnify Operator
against claims from Owner's customers for special, incidental, exemplary or
consequential damages up to, but not in excess of, a total aggregate amount of
Three Minion and 00(100 Dollars ($3,000,000.00) over the term of this Agreement.
XVIII.
RESOLUTION OF DISPUTES
18.1 Resolution by Parties.
---------------------
(a) In the event that a dispute rises hereunder between the patties,
the parties shall attempt in good faith to settle such dispute by mutual
discussions within thirty (30) days after the date that a party gives written
notice of the dispute to the other party; provided, however, that if the dispute
involves the amount of an invoice and after ten (10) days of mutual discussion
either party believes in good faith that further discussion will not resolve the
dispute TO its satisfaction, such party may immediately refer the matter to the
expert for consideration pursuant to Section 18.2 hereof.
(b) In the event that the dispute is not resolved in accordance with
Section 18.1(a) hereof, either party may refer the dispute to the chief
executive officers or chief operating officers of the respective parties for
further consideration. In the event that such individuals are
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unable to reach agreement within fifteen (15) days, or such longer period as
they may agree, then either party may refer the matter to an expert in
accordance with Section 18.2 hereof.
18.2 Mediation by Expert.
-------------------
(a) In the event that the parties are unable to resolve a dispute in
accordance with Section 18.1 hereof, then either party, in accordance with this
Section 18.2, may refer the dispute to an expert for consideration of the
dispute and to obtain a recommendation from the expert as to the resolution of
the dispute; provided, however, that with respect to disputes that involve the
-------- -------
amount of an invoice, either party may before any such dispute arises require
that an expert be appointed in accordance with the provisions of Section 18.2(b)
hereof and shall nominate a person it proposes to be the expert. Such an expert
shall have responsibility for considering all disputes that involve the amount
of invoices until replaced in accordance with the provisions of Section 18.2(b)
hereof
(b) The party initiating submission of the dispute to the expert
shall provide the other party with a notice stating that it is submitting the
dispute to an expert and nominating the person it proposes to be the expert. The
other party shall, within fifteen (15) days of receiving such notice, notify the
initiating party whether such person is acceptable. If the party receiving such
notice fails to respond or notifies the initiating party that the person is not
acceptable, the parties shall meet and discuss in good faith for a period of ten
(10) days to agree upon a person to be the expert. If the pates are unable to
agree, the responding party shall by the end of such ten (10) day period
nominate a person to be an expert, whereupon the two nominated experts shall
meet and agree upon a third person who shall be the expert. Should an expert
die, resign, refuse to act or become incapable of performing his or her
functions, the vacancy shall be filled by the method by which the expert was
originally appointed.
(c) (i) Consideration of the dispute by an expert shall be initiated
by the party who is seeking consideration of the dispute by the expert
submitting to both the expert and the other party written materials setting
forth:
(A) a description of the dispute;
(B) a statement of the party's position; and
(C) copies of records supporting the party's position.
(ii) Within ten (10) days of the date that a party has submitted
the materials described in Section 18.2(c)(i) hereof, the other party may submit
to the expert
(A) a description of the dispute;
(B) a statement of the party's position; and
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(C) copies of any records supporting the party's position.
The expert shall consider any such information submitted by the
responding party within the period provided in Section 18.2(c)(ii) hereof and,
in the expert's discretion, may consider any additional information submitted by
either party at a later date.
(d) The parties shall not be entitled to apply for discovery of
documents, but shall be entitled to have access to the other party's relevant
records and to receive copies of the records submitted by the other party.
(e) Each party shall designate one person knowledgeable about the
issues in dispute who shall be available to the expert to answer questions and
provide any additional information requested by the expert. Except for such
person, a party shall not be required to, but may, provide oral statements or
presentations to the expert or make any particular individuals available to the
expert.
(f) Except as provided in Section 18.2(h) hereof with respect to the
payment of costs, the proceedings shall be without prejudice to any party and
any evidence given or statements made in the course of this process may not be
used against a party in any other proceedings. The process shall not be regarded
as an arbitration and the laws relating to commercial arbitration shall not
apply. Unless the parties agree in writing signed by both parties at the time
the expert is selected that the decision of the expert will be binding, the
determination of the expert shall not be binding.
(g) When consideration of the dispute by an expert is initiated, the
expert shall be requested to provide a recommendation within fifteen (15) days
after the ten (10) day response period provided in Section 18.2(c)(ii) above has
run. If the expert's recommendation is given within such fifteen (15) day
period, or if the expert's recommendation is given at a later time and neither
party has at such time initiated any other proceeding concerning the dispute,
the parties shall review and discuss the recommendation with each other in good
faith for a period of ten (10) days following delivery of the recommendation
before proceeding with any other actions.
(h) If a party does not accept the recommendation of the expert with
respect to the dispute, it may initiate arbitration proceedings in accordance
with Section 18.3 hereof, provided, however, that prior to initiating the
-------- -------
arbitration proceedings it shall have paid all costs of the expert (including
the reimbursement of any costs paid to the expert by the other party) and all
out-of-pocket costs of the other party. Similarly if the expert has not
submitted its recommendation within the time period provided in Section 18.2(g)
hereof, a party may initiate arbitration proceedings in accordance with Section
18.3 hereof, provided that prior to initiating the arbitration proceedings it
--------
shall have paid all costs of the expert (including the reimbursement of any
costs paid to the expert by the other party).
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(i) Except as provided in Section 18.2(h) hereof, the costs of
engaging an expert shall be borne equally by the parties and each party shall
bear its own costs in preparing materials for, and making presentations to, the
expert.
(j) Without prejudice to the parties' rights to initiate arbitration
proceedings following the recommendation of the expert in accordance with
Section 18.2(h), the parties shall act in accordance with the recommendation of
the expert until resolution of the dispute by arbitration.
18.3 Arbitration. In the event a dispute arises between Owner and
-----------
Operator which is not resolved pursuant to Section 18.1 or 18.2 hereof, as
applicable, each party, as its sole remedy, other than mediation pursuant to the
terms of Section 18.2 hereof, for resolution of such dispute, shall have the
right to pursue arbitration pursuant to the terms hereof. All claims disputes,
and other matters in question arising out of or relating to this Agreement or
the breach thereof and which are resolved by arbitration shall be decided by
arbitrators selected as hereinafter provided and shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then obtaining, unless the parties mutually agree otherwise. The
resolution of such disputes shall not delay Operator's performance of its
undisputed obligations under the terms of this Agreement nor Owner's payment to
Operator for such Work. The arbitration shall be held in New York, New York, and
any arbitration demand must be filed with the American Arbitration Association
office located closest to New York, New York. If the claim or defense of either
party was without merit, the arbitrators may require that the party at fault pay
or reimburse the other party for (i) fees and expenses, including, attorneys and
expert fees and expenses, and (ii) reasonable out of pocket expenses incurred by
the other party in connection with the arbitration proceedings.
18.4 Selection of Arbitrators. Each dispute shall be submitted to
------------------------
three (3) arbitrators, one (1) arbitrator being selected by Owner, one (1)
arbitrator being selected by Operator, and the third arbitrator being selected
by the two (2) so selected. The party initiating the arbitration shall include
in its notification under Section 18.5 below the designation of its selected
arbitrator and the party receiving such notification shall designate its
arbitrator within fifteen (15) days thereafter and notify the initiating party
and its arbitrator of the selection. If the arbitrators selected by Owner and
Operator cannot agree on a third arbitrator within fifteen (15) days after the
second arbitrator is selected, the third arbitrator shall be selected by the
American Arbitration Association. In the event the party receiving notification
of a demand for arbitration shall not have selected its arbitrator and given
notice thereof to the other party and its arbitrator within fifteen (15) days
after receiving such notification, such arbitrator shall be selected by the
American Arbitration Association. Should a vacancy arise because any arbitrator
dies, resigns, refuses to act or in the opinion of his fellow arbitrators
becomes incapable of performing his or her functions, the vacancy shall be
filled by the method by which that arbitrator was originally appointed.
18.5 Notice. Notice of demand for arbitration shall be filed in
------
writing with the other party to this Agreement and with the American Arbitration
Association. The demand shall
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be made within a reasonable time after the claim, dispute or other matter in
question has arisen. In no event shall the demand for arbitration be made after
the date when the applicable statute of limitations world bar institution of a
legal or equitable proceeding based on such claim, dispute, or other matter in
question; provided, however, any claims asserted by Owner with respect to a
breach of the warranty set forth in Section 7.1 hereof shall be made within one
(1) year after the termination of this Agreement.
18.6 Award. This agreement to arbitrate shall be specifically
-----
enforceable under the prevailing arbitration law. The award rendered by the
arbitrators shall be final and judgment may be entered upon it in accordance
with applicable law in any court having jurisdiction thereof.
18.7 Survival. This Article XVIII shall survive termination of this
--------
Agreement.
XIX.
CONFIDENTIALITY AND INTELLECTUAL PROPERTY
19.1 Confidential Information. Operator agrees to keep confidential
------------------------
and not to disclose to any person for use for any purpose other than the
performance of the Work any written or other tangible information which is
marked or designated by Owner as confidential or proprietary (including
documents, computer records, specifications, formulae, evaluations, methods,
processes, technical descriptions, reports and other data, records and
information) provided to or created or acquired by Operator solely in the course
of the performance of the Work (collectively, "0wner Confidential Information").
Owner agrees to keep confidential and not to disclose to any person for use for
any purpose other than in connection with Owner's ownership of the Facility any
written or other tangible information which is marked or designated by Operator
as confidential or proprietary (including documents, computer records,
specifications, formulae, evaluations, methods, processes, technical
descriptions, reports and other data, records and information) provided to it by
Operator, but not provided to or created or acquired by Operator solely in the
course of the performance of the Work (collectively, "Operator Confidential
Information", and together with the Owner Confidential Information, the
"Confidential Information"). Notwithstanding the foregoing, Operator and Owner
shall be entitled to disclose Owner Confidential Information or Operator
Confidential Information, as the case may be:
(i) to its respective directors, officers, employees, subcontractors,
agents or professional advisors to the extent necessary for
performance of its obligations under this Agreement or to its auditors
for the purposes of any audit of its accounts, provided that it first
obtains from any such person or entity to whom the disclosure is to be
made an agreement of confidentiality in favor of the other party with
respect to the Confidential Information in question substantially on
the terms of this Article XIX; provided, however, in the case of
employees, the party desiring to disclose Confidential Information
need not obtain a confidentiality agreement from such employees, but
shall make such employees aware of, and require that such employees
comply with, the confidentiality obligations contained herein;
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(ii) when required to do so by law or by or pursuant to the rules of any
order having the force of law of any court, association or agency of
competent jurisdiction or any governmental, agency, provided that the
party seeking to disclose Confidential Information first informs the
other party of its intent to disclose such Confidential Information
so that such other party can seek a protective order or other
equitable relief to prevent disclosure of such Confidential
Information;
(iii) to the extent that the Confidential Information has, except as a
result of breach of confidentiality by a party, become publicly
available or generally known to the public at the time of such
disclosure;
(iv) to the extent that a party has acquired the Confidential Information
from a third party who is not in breach of any obligation as to
confidentiality;
(v) to the extent that the Confidential Information has been
independently developed by employees who have not had access to the
Confidential Information of the other party; or
(vi) to any person with the prior written consent of the other party.
19.2 Return of Confidential Information. Upon termination of this
----------------------------------
Agreement, Operator shall return to Owner the Owner Confidential Information
(including all, copies thereof) within its possession or control and Owner shall
return to Operator the Operator Confidential Information (including all copies
thereof) within its possession or control.
19.3 Continuation of Confidentiality Obligations. The obligations
-------------------------------------------
under this Article XIX shall continue for a period of three (3) years following
the termination of this Agreement.
19.4 Ownership of Confidentiality Information. All Owner
----------------------------------------
Confidential Information shall be and shall remain the property of Owner and all
Operator Confidential Information shall be and shall remain the property of
Operator.
19.5 Intellectual Property.
---------------------
(a) All of Owner's intellectual property rights shall remain the
property of Owner, but Owner hereby grants to Operator an irrevocable, non-
exclusive, royalty-free, non-transferable License to use such intellectual
property to the extent that Operator requires use of such intellectual property
in connection with the performance of the Work during the term of this
Agreement.
(b) Operator hereby grants to Owner an irrevocable, non-exclusive,
royalty-free license to use any intellectual property rights owned by Operator
and required in connection with
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the Facility. Such license shall be non-transferrable and limited for the use
and benefit of the Facility, except that Owner may assign the benefit of such
license to Lender.
(c) Before entering into an agreement with a third party relating to
the supply of materials specifically created by such third party for the
Facility, Operator shall request that such third party grant licenses to
Operator and Owner (with rights to Owner to assign or sub-license to any person
appointed operator of the Facility) to use all intellectual property rights
which arise in connection with such materials. In addition, Operator shall use
reasonable efforts to procure that intellectual property rights owned or
developed by third parties and used by Operator in connection with the Facility
be licensed either (i) to both Operator and Owner or (ii) to Operator solely,
but with rights to sub-license such intellectual property rights to Owner.
(d) Owner shall have the right either to (i) assign all sub-licenses
of intellectual property rights granted to it or (ii) grant sub-licenses to any
new operator of the Facility in respect of intellectual property in respect of
which a sub-license has been granted to Owner; provided, however, any such sub-
licenses shall limit the use of intellectual property for the benefit of the
Facility.
XX.
MISCELLANEOUS
20.1 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New Jersey, without giving effect to
the conflict of laws principles thereof.
20.2 Severability. Every provision of this Agreement is intended to
------------
be severable such that if any term or provision hereof is illegal or invalid for
any reason, such provision shall be severed from this Agreement and shall not
affect the validity of the reminder of this Agreement.
20.3 Entire Agreement. This Agreement constitutes the entire
----------------
agreement between Owner and Operator relating to the subject matter hereof and
supersedes and replaces all prior and contemporaneous agreements and
understandings not incorporated herein by reference thereto, whether written or
oral, and sets forth all the representations, covenants and warranties upon
which Owner and Operator rely in entering into this Agreement.
20.4 Amendments. No amendment or modification hereof shall be valid
----------
or binding upon the parties hereto unless evidenced in writing and signed by a
duly authorized representative of Owner and Operator and consented to by Lender.
20.5 Waiver. No failure by Owner to insist upon the strict
------
performance of any term, covenant or condition of this Agreement, or to exercise
any right or remedy upon breach of any provision, and no acceptance of payment
or performance during the continuation of any
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such breach, shall constitute a waiver of any term, covenant or condition herein
or a waiver of any subsequent breach or default in the performance of any term,
covenant or condition herein.
20.6 Original and Counterparts. This Agreement may be executed in
-------------------------
multiple counterparts, each of which shall be deemed an original for all
purposes, but all of which shall constitute one and the same instrument.
20.7 Independent Contractor. Operator shall perform its duties and
----------------------
obligations hereunder as an independent contractor, and nothing contained herein
shall be deemed to create a relationship of employer/employee, master/servant,
agency (except as otherwise expressly set forth herein), partnership or joint
venture.
20.2 Limited Recourse. Any claim against Owner that may arise under
----------------
this Agreement shall be made only against, and shall be limited to the assets
of, Owner, and no judgment, order or execution entered in any suit, action or
proceeding thereon shall be obtained or enforced against any partner or joint
venturer of Owner or the assets of such partner or joint venturer or any
incorporator, shareholder or other equity holder, employee, officer 'or director
thereof, whether acting individually or in a representative capacity hereunder
or in connection with the ownership, operation or maintenance of the Facility
(or, in the case of such partners or joint venturers that are partnerships, of
any partner thereof), or against any direct or indirect parent corporation or
affiliate or any incorporator, shareholder or other equity holdcr, employee,
officer or director of any thereof, whether acting individually or in a
representative capacity hereunder or in connection with the ownership, operation
or maintenance of the Facility, for the purpose of obtaining satisfaction of any
payment of any amount owing under this Agreement.
20.9 Captions. The captions contained in this Agreement are for
--------
convenience and reference only and in no way define, describe, extend or limit
the scope or intent of this Agreement or the intent of any provision contained
herein.
20.10 Exhibits. All Exhibits referenced in this Agreement shall be
--------
incorporated into this Agreement by such reference and shall be deemed to be an
integral part of this Agreement.
20.11 Effectiveness of Agreement. This Agreement shall only become
--------------------------
effective upon the termination of the Existing O&M Agreement by Owner pursuant
to the terms of the Termination Agreement. If Owner does not elect to terminate
the Existing O&M Agreement pursuant to the Termination Agreement, then this
Agreement shall be null and void and of no force or effect.
-60-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed as of the date and year first above written.
COGEN TECHNOLOGIES LINDEN VENTURE, L.P., d/b/a
Cogen Technologies Linden Venture, Limited
Partnership
By: Cogen Technologies Linden, Ltd.,
its Sole General Partner
By: Cogen Technologies, Inc., its Sole
General Partner
By: /s/ J.M. Bollinger
------------------------------
Name: J.M. BOLLINGER
-----------------------------
Title: SR. VP/COO
----------------------------
"OWNER"
GENERAL ELECTRIC COMPANY
By: /s/ A.C White
----------------------------------------
Name: A.C. WHITE
---------------------------------------
Title: GEN. MGR-GLOBAL O&M SERVICES
"OPERATOR"
-61-
<PAGE>
EXECUTION COPY
================================================================================
COGEN TECHNOLOGIES LINDEN, LTD.,
a Texas Limited Partnership
_____________________________________________
AMENDED AND RESTATED TERM LOAN AGREEMENT
Dated as of September 15, 1992
_____________________________________________
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION (not in its individual capacity but solely as
Owner Trustee), as Lender
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS............................................... 1
1.1 Certain Defined Terms....................................... 1
1.2 Other Definitional Provisions............................... 17
SECTION 2. AMOUNTS AND TERMS OF PRE-COMPLETION
AND POST-COMPLETION COMMITMENTS......................... 17
2.1 Pre-Completion Commitment................................... 17
2.2 Procedure for Borrowing with Respect to
Pre-Completion Loans...................................... 18
2.3 Disbursement of Pre-Completion Loans........................ 18
2.4 Post-Completion Commitment.................................. 19
2.5 Procedure for Borrowing with Respect to Post-
Completion Loans.......................................... 19
2.6 Disbursement of Post-Completion Loans....................... 19
2.7 Notes....................................................... 20
2.8 Use of Proceeds............................................. 22
SECTION 3. PROVISIONS RELATING TO ALL EXTENSIONS
OF CREDIT; FEES AND PAYMENTS............................ 22
3.1 Financing Fees; Origination Fee............................. 22
3.2 Commitment Reductions; Optional and Mandatory
Prepayments............................................... 22
3.3 Interest Rates and Payment Dates............................ 26
3.4 Making of Payments.......................................... 27
3.5 Computation of Interest and Fees............................ 27
3.6 Inability to Determine Eurodollar Rate...................... 28
3.7 Extension of Post-Completion Loan Period.................... 28
3.8 Increased Costs............................................. 29
3.9 Indemnity................................................... 31
3.10 Taxes....................................................... 31
3.11 Limitation of Liability..................................... 32
SECTION 4. REPRESENTATIONS AND WARRANTIES............................ 32
4.1 Financial Statements........................................ 32
4.2 Partnership Existence and Business; Partners................ 33
4.3 Compliance with Law......................................... 33
4.4 Power and Authorization; Enforceable
Obligations............................................... 33
4.5 No Legal Bar................................................ 35
4.6 No Proceeding or Litigation................................. 35
4.7 No Default or Event of Loss................................. 36
4.8 Ownership of Property; Liens................................ 36
4.9 Taxes....................................................... 36
4.10 Federal Regulations......................................... 37
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.11 ERISA........................................................ 37
4.12 Investment Company Act....................................... 38
4.13 Collateral Security Documents................................ 38
4.14 Full Disclosure.............................................. 38
4.15 Principal Place of Business, Etc............................. 39
4.16 Representations and Warranties............................... 39
4.17 Environmental Matters........................................ 39
SECTION 5. CONDITIONS PRECEDENT....................................... 40
5.1 Conditions to Closing Date................................... 40
5.2 Conditions to Pre-Completion Loans........................... 41
5.3 Conditions to Post-Completion Loans.......................... 42
5.4 Conditions to All Loans...................................... 43
SECTION 6. AFFIRMATIVE COVENANTS...................................... 44
6.1 Conduct of Business, Maintenance of
Existence, Etc............................................. 44
6.2 Payment of Obligations....................................... 45
6.3 Performance under Other Agreements........................... 45
6.4 Insurance Coverage........................................... 45
6.5 Inspection of Property; Books and Records.................... 45
6.6 Compliance with Laws......................................... 45
6.7 Financial Statements......................................... 46
6.8 Certificates; Other Information.............................. 47
6.9 Taxes and Claims............................................. 48
6.10 Mechanics' and Materialmen's Liens........................... 48
6.11 Maintenance of Property...................................... 49
6.12 Notices...................................................... 49
6.13 Maintenance of Liens of the Collateral
Security Documents......................................... 50
6.14 Agent for Service of Process................................. 50
6.15 Employee Plans............................................... 51
6.16 Fiscal Year.................................................. 51
6.17 Right of First Refusal; Further Security..................... 51
SECTION 7. NEGATIVE COVENANTS......................................... 51
7.1 Merger, Sale of Assets, Purchases, Etc....................... 51
7.2 Indebtedness; Guarantee Obligations.......................... 52
7.3 Distributions, Etc........................................... 52
7.4 Liens........................................................ 53
7.5 Nature of Business........................................... 53
7.6 Amendment of Contracts, Etc.................................. 53
7.7 Investments.................................................. 53
7.8 Leases....................................................... 54
7.9 Change of Office............................................. 54
7.10 Change of Name............................................... 54
7.11 Compliance with ERISA........................................ 54
7.12 Transactions with Affiliates and Others...................... 55
7.13 Capital Expenditures......................................... 55
7.14 Sale and Leaseback........................................... 55
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.15 Minimum Net Worth.............................................. 55
SECTION 8. EVENTS OF DEFAULT............................................. 55
SECTION 9. MISCELLANEOUS................................................. 62
9.1 Amendments and Waivers......................................... 62
9.2 Notices........................................................ 62
9.3 Release of Collateral.......................................... 63
9.4 No Waiver; Cumulative Remedies................................. 64
9.5 Survival....................................................... 64
9.6 Expenses....................................................... 64
9.7 Indemnification................................................ 64
9.8 Successors and Assigns; Transferees;
Transferred Interests........................................ 65
9.9 Severability................................................... 66
9.10 Headings....................................................... 66
9.11 Counterparts................................................... 67
9.12 The Lender Sole Beneficiary.................................... 67
9.13 GOVERNING LAW.................................................. 67
9.14 Submission to Jurisdiction; Waivers............................ 67
9.15 Usury Savings.................................................. 68
9.16 Limitations on Recourse........................................ 70
9.17 Effectiveness.................................................. 71
9.18 Prior Amendments............................................... 71
</TABLE>
-iii-
<PAGE>
SCHEDULES:
- ---------
Schedule 1 Intentionally Omitted
Schedule 2 Pro Forma Fixed Charge Coverage Calculation
Schedule 3 Calculation of Origination Fee
Schedule 4 Certain Provisions Regarding Termination Expense
(Benefit)
Schedule 5 Certain Provisions Regarding Events of Default
Schedule 6 Amortization Schedule
EXHIBITS:
- --------
Exhibit A-1 Intentionally Omitted
A-2 Form of Post-Completion Note
A-3 Form of Working Capital Note
B Form of Opinion of Counsel to the Borrower and the General Partner
C-l Intentionally Omitted
C-2 Form of Post-Completion Loan Borrowing Certificate
D Form of Notice of Borrowing
E Intentionally Omitted
F Intentionally Omitted
G Intentionally Omitted
H Form of Security Deposit Agreement
I Intentionally Omitted
J Intentionally Omitted
-iv-
<PAGE>
AMENDED AND RESTATED TERM LOAN AGREEMENT, dated as of September 15,
1992, between (i) Cogen Technologies Linden, Ltd., a Texas limited partnership
(the "Borrower"), of which Cogen Technologies, Inc., a Texas corporation, is the
--------
sole general partner (the "General Partner"), and (ii) State Street Bank and
---------------
Trust Company of Connecticut, National Association, not in its individual
capacity but as trustee (in such capacity, the "Lender" or the "Owner Trustee")
------ -------------
under a Trust Agreement, dated as of December 28, 1990 (as amended, supplemented
or other-wise modified from time to time, the "Trust Agreement"), between the
---------------
Owner Trustee and Linden Owner Partnership, a Delaware partnership ("Linden
------
Owner Partnership").
- -----------------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower and General Electric Power Funding Corporation,
a Delaware corporation ("GEPFC" or "Original Lender") are parties to the Term
---------------
Loan Agreement, dated as of February 15, 1990 (as amended prior to the date
hereof, the "Original Loan Agreement") and
-----------------------
WHEREAS, pursuant to an Agreement dated as of September 15, 1992,
among GEPFC, the Owner Trustee and the Borrower, GEPFC has assigned all of its
right, title and interest in the Original Loan Agreement to the Owner Trustee;
and
WHEREAS, the Borrower desires that the Lender provide term financing
for the purposes specified herein, and the Lender is willing to provide such
financing subject to and upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein the parties hereto hereby agree to amend and restate
the Original Loan Agreement as follows:
SECTION 1. DEFINITIONS
-----------
1.1 Certain Defined Terms. Unless otherwise defined herein, terms
---------------------
used but not defined herein shall have their respective meanings in the
Construction Loan Agreement (as hereinafter defined) (after giving effect to any
waiver or amendment thereof with the consent of the Lender and notwithstanding
the termination or expiration thereof) and the following terms shall have the
following meanings (such definitions to be equally applicable to both singular
and plural forms of the terms defined):
"Additional Debt": as defined in subsection 7.2(b).
---------------
"Additional Extension Date": as defined in subsection 3.7.
-------------------------
<PAGE>
2
"Additional Lender": any Person, other than the Lender, who extends
-----------------
credit to the Borrower after the Post-Completion Loan Period.
"Adverse Environmental Event": any event relating to any Relevant
---------------------------
Environmental Law the occurrence of which creates a material likelihood
that the ability of the Borrower to perform its obligations under the
Transaction Documents to which it is a party would be materially and
adversely affected.
"Affiliate Collateral Security Documents": as defined in the Original
---------------------------------------
Loan Agreement.
"Affiliate Note": as defined in the Original Loan Agreement
--------------
"Agreement": this Amended and Restated Term Loan Agreement, as further
---------
amended, supplemented or otherwise modified from time to time.
"Amended and Restated Partnership Agreement": the Amended and
------------------------------------------
Restated Partnership Agreement of the Limited Partnership dated as of
September 15, 1992 among the Borrower, the Owner Trustee and Robert C.
McNair, as the same may be further amended, supplemented or otherwise
modified from time to time.
"Applicable Eurocurrency Reserve Requirements": with respect to any
--------------------------------------------
Eurodollar Interest Period, the sum of (a) the product of (i) GEPFC's
Ratio and (ii) (1.00-Fixed Eurocurrency Reserve Requirements) and (b) the
product of (i) Assignees' Ratio and (ii) (1.00-Floating Eurocurrency
Reserve Requirements).
"Assignees' Ratio": with respect to each Eurodollar Interest Period,
----------------
the quotient of (i) the aggregate principal amount of all assignments of
the Original Lender's Commitments and all Participations granted by the
Original Lender, in each case, to any banks which, as of the first day of
such Eurodollar Interest Period, are members of the Federal Reserve System
and are required by any regulation of the Board of Governors of the Federal
Reserve System or any other Governmental Authority having jurisdiction to
maintain reserve requirements prescribed for eurocurrency funding, divided
by (ii) $250,000,000.
"Borrower Pledge Agreement": the Second Amended and Restated Pledge
-------------------------
Agreement, dated as of December 13, 1990, entered into by the Borrower in
favor of the Lender, as assignee of GEPFC, as collateral agent for the
Original Lender, the agent for the lenders under the Construction Loan
Agreement and GECC, as the same may be further amended, supplemented or
otherwise modified from time to time.
<PAGE>
3
"Borrowing Date": any Business Day or Working Day, as the case may be,
--------------
specified in a notice pursuant to subsection 2.2 or 2.5 as a date on which
the Borrower requests the Lender to make a Loan hereunder.
"Called Principal": with respect to the Post-Completion Note, the
----------------
principal of such Note that is to be prepaid pursuant to subsection 3.2(b).
"Certified Expenses": the following costs and expenses incurred by the
------------------
Borrower: (a) the aggregate amount of interest that has accrued on the
principal amount of the Pre-Completion Loans; (b) any Financing Fee; (c)
any Commitment Fee; (d) any fees and expenses set forth in subsection 9.6;
(e) a fee payable to the Borrower on the Construction Conversion Date for
the development and construction of the Project in an amount equal to the
excess of (1) $25,000,000 over (2) the Development and Construction Fee;
and (f) any other costs and expenses approved by the Lender.
"Closing Date": as defined in subsection 5.1.
------------
"Collateral": the collective reference to all real and personal
----------
property, tangible and intangible, and the proceeds thereof, subjected from
time to time to the Liens created by the Collateral Security Documents.
"Collateral Agency Agreement": the Collateral Agency Agreement, dated
---------------------------
as of February 15, 1990, entered into by the Borrower, the Original Lender,
GEPFC as agent under the Construction Loan Agreement and GEPFC as
collateral agent, substantially in the form of Exhibit J to the Original
Loan Agreement, as the same has been amended, supplemented or otherwise
modified, and being released as of the Second Capital Contribution Date
pursuant to subsection 9.3.
"Collateral Security Documents": the collective reference to the
-----------------------------
Borrower Pledge Agreement, the General Partner Pledge Agreement, the
Collateral Agency Agreement, and from and after the date of execution and
delivery thereof, the Note Pledge Agreement (together with all Pledge
Supplements thereto), the Security Deposit Agreement and any other
agreement or instrument hereafter specifically identified in writing by the
Borrower and the Lender to be a "Collateral Security Document"; provided,
--------
that upon termination of the Security Period and the release of Collateral
as set forth in subsection 9.3 hereof, the term "Collateral Security
Documents" shall not include the General Partner Pledge Agreement, the Note
Pledge Agreement (together with all Pledge Supplements thereto), the
Collateral Agency Agreement and any other agreement or instrument
specifically identified in writing by the Borrower and the Lender to be a
"Collateral Security Document" to the extent that any such agreement or
<PAGE>
4
instrument has been released by the Lender in accordance with the
provisions hereof.
"Commercial Pacer Rate": with respect to each calendar month, a rate
----------------------
of interest per annum equal to the sum of (a) the rate for commercial paper
with a 30 day maturity as reported in Federal Statistical Release
H.15 (519), or any successor publication of the Federal Reserve Board, on
the last Business Day of the preceding calendar month, plus (by .55%.
"Commitment Fee": as defined in subsection 3.7.
--------------
"Commitments": the collective reference to the Pre-Completion
-----------
Commitment and the Post-Completion Commitment.
"Commonly Controlled Entity": an entity, whether or not incorporated,
--------------------------
which is under common control with the Borrower within the meaning of
Section 4001 of ERISA or is part of a group which includes the Borrower and
which is treated as a single employer under Section 414 of the Code.
"Construction Loan Agreement": the Construction Loan Agreement, dated
---------------------------
as of February 15, 1990, by and between the Limited Partnership, the
lenders parties thereto and GEPEC, as agent for such lenders, as amended to
the date hereof.
"Debt Service Account": the Debt Service Account established pursuant
--------------------
to the Security Deposit Agreement.
"Default": any of the events specified in Section 8, whether or not
-------
any requirement for the giving of notice, the lapse of time, or both, or
for the happening of any other condition, has been satisfied.
"Development Agreement": the Development Agreement, dated as of
---------------------
February 15, 1990 between the Borrower and the Limited Partnership.
"Discounted Value": with respect to the Called Principal of the Post-
----------------
Completion Note, the amount calculated by discounting all remaining
scheduled payments with respect to such Called Principal from their
respective scheduled due dates to the Settlement Date with respect to such
Called Principal, in accordance with accepted financial practice and at a
discount factor (applied on a semiannual basis) equal to the Treasury Yield
with respect to such Called Principal.
"EBDIT": for any period, net income before deductions for depreciation
-----
expense, amortization expense, interest expense and income taxes.
"Environmental Notice": any written complaint, order, citation or
--------------------
other written communication from any
<PAGE>
5
Governmental Authority affecting or relating to (a) the Collateral or (b)
the Borrower or any activity or operations at any time conducted by the
Borrower, in either case, with regard to the occurrence, presence of,
exposure to or threatened occurrence, presence of or exposure to
Environmental Discharges, Hazardous Materials or any other environmental
matter, the circumstances of which might result in or constitute a
violation of any Relevant Environmental Law.
"Equity Letters of Credit": as defined in the Amended and Restated
------------------------
Partnership Agreement.
"Eurodollar Base Rate": LIBOR or LIBOR (Reference Banks), as
--------------------
applicable.
"Eurodollar Interest Period": with respect to each Floating Rate Loan:
--------------------------
(a) initially, the period from and including the Borrowing Date
with respect to such Floating Rate Loan to but excluding the
numerically corresponding day in the immediately succeeding month; and
(b) thereafter, each period from and including the day following
the last day of the next preceding Eurodollar Interest Period
applicable to such Floating Rate Loan to but excluding the numerically
corresponding day in the immediately succeeding month;
provided that the foregoing provisions are subject to the following:
--------
(A) if any Eurodollar Interest Period would otherwise end on a
day which is not a Working Day, such Eurodollar Interest Period shall
be extended to the next succeeding Working Day unless the result of
such extension would be to extend such Eurodollar Interest Period into
another calendar month, in which event such Eurodollar Interest Period
shall end on the immediately preceding Working Day;
(B) any Eurodollar Interest Period that commenced prior to the
Second Capital Contribution Date that would otherwise extend beyond
the Second Capital Contribution Date, shall end on the Second Capital
Contribution Date or, if such day shall not be a Working Day, on the
preceding Working Day; and
(C) any Eurodollar Interest Period that begins on the day
following the last Working Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month
at the end of such Eurodollar Interest Period) shall end on the last
Working Day of a calendar month.
<PAGE>
6
"Eurodollar Rate": with respect to each Floating Rate Loan for each
---------------
Eurodollar Interest Period applicable thereto, the rate per annum (rounded
upwards to the nearest whole multiple of 1/100th of one percent) equal to
the quotient of (a) the Eurodollar Base Rate, divided by (b) the Applicable
Eurocurrency Reserve Requirements.
"Event of Default": any of the events specified in Section 8; provided
---------------- --------
that any requirement for the giving of notice, the lapse of time, or both,
or for the happening of any other condition, has been satisfied.
"Event of Loss": (a) the actual or constructive total loss of the
-------------
Facility, excluding any loss which occurs prior to the delivery of the
principal components of the Facility to the Site, or the condemnation,
confiscation or seizure of, or requisition of title to all or substantially
all of the Project, or the requisition by any Governmental Authority for a
period exceeding six months of the use of all or substantially all of the
Project; (b) the loss, destruction or damage of, or condemnation,
confiscation or seizure of, or requisition of title to, or requisition by
any Governmental Authority of the use of, such portion of the Project as
shall render the Facility unable to operate at substantially its designed
level of output or as a Qualifying Facility, unless (in a situation in
which clauses (a) and (c) are not applicable) (i) no Event of Default shall
have occurred and be continuing at the time of occurrence of any of the
events specified above in this clause (b), (ii) in the reasonable opinion
of the Lender, it. is feasible to restore, rebuild or replace the affected
portion of the Project and (iii) in the reasonable opinion of the Lender,
sufficient funds are or will be available to the Borrower or the Limited
Partnership (1) to restore, rebuild or replace the affected portion of the
Project so that the Facility will be able to operate at substantially its
designed level of output and to operate as a Qualifying Facility within 18
months after the occurrence of such Event of Loss and (2) to pay all
principal of and interest on the then outstanding Notes until such
restoration, rebuilding or replacement is completed; (c) in the reasonable
opinion of the Lender, the Facility, the owner thereof or any of such
owner's Affiliates is subject to being deemed by any Governmental Authority
having jurisdiction to be, or is subject to regulation as, an "electric
utility", "electric corporation", "electrical company", "public utility" or
a "public utility holding company" under any law, rule or regulation of any
Governmental Authority, except where (i) the effect of such determination
would result only in the imposition of reporting or safety requirements
which, in the reasonable opinion of the Lender, are non-burdensome in
nature and (ii) in the event that steam from the Project is supplied,
directly or indirectly, to Persons other than Exxon under the Steam Supply
Agreement or otherwise, the Limited Partnership shall have obtained a
declaratory order
<PAGE>
7
or other official assurance, in form arid substance reasonably satisfactory
to the Lender, from the New Jersey Board of Regulatory Commissioners to the
effect that such sales will not result in the Facility, the owner thereof
or any of such owner's Affiliates being deemed to be, or subject to
regulation as, a "public utility" under any Applicable Law (other than
regulation of the nature described in clause (1) of this clause (c)); (d) a
change shall have occurred after the date hereof in any applicable law or
regulation or in the interpretation thereof by any Governmental Authority
charged with the administration or interpretation thereof which, in the
reasonable opinion of the Lender, would make any of the Project Documents
subject to cancellation, suspension or termination, which cancellation,
suspension or termination, in the reasonable opinion of the Lender, could
reasonably be expected to have a material adverse effect on the economic
viability of the Project; or (e) an event of force majeure or other event
----- -------
or condition shall exist which permits or requires any party to any of the
Project Documents to cancel, suspend or terminate its performance
thereunder in accordance with the terms thereof or which could excuse any
such party from liability for non-performance thereunder, unless (i) the
parties to such Project Documents shall have effectively waived the
condition giving rise to such right or requirement with respect to such
cancellation, suspension, termination or release from liability, or (ii) in
the reasonable opinion of the Lender, such cancellation, suspension,
termination or release from liability could not reasonably be expected to
have a material adverse effect on the economic viability of the Project.
"Extension Date": as defined in subsection 3.7.
--------------
"Extension Period": as defined in subsection 3.7.
----------------
"Financing Fees": as defined in subsection 3.1
--------------
"Fixed Charge Coverage Ratio": shall mean, for each year during the
---------------------------
Preferred Distribution Period, the ratio of:
(a) the pro forma EBDIT of the Limited Partnership for such year
to
--
(b) the sum of (i) the aggregate Preferred Cash Distributions
required to be made during such year, plus (ii) the aggregate amount
of interest payable on the Loans during such year plus (iii) the
aggregate amount of scheduled repayments to be made on the Post-
Completion Note during such year.
"Fixed Eurocurrency Reserves Requirements": with respect to any
----------------------------------------
Eurodollar Interest Period for any Floating Rate Loan, the aggregate of the
rates (expressed as a decimal) of reserve requirements current on the date
two
<PAGE>
8
Working Days prior to the initial Borrowing Date (including, without
limitation, basic, supplemental, marginal and emergency reserves under any
regulations of the Board of Governors of the Federal Reserve System or
other Governmental Authority having jurisdiction with respect thereto), as
in effect on the initial Borrowing Date, dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D of such Board) required to be maintained by a
member bank off such System.
"Fixed Interest Rate": (a) with respect to each Post-Completion Loan
-------------------
which is a Fixed Rate Loan, (i) if the Borrowing Date for such Loan is the
Second Capital Contribution Date, a rate of interest equal to the sun of
(x) the Treasury Yield as in effect on the second Business Day preceding
the Second Capital Contribution Date or such other date on or prior to the
Second Capital Contribution Date as the Lender and the Borrower may select,
plus (y) 245 basis points and (ii) otherwise, a rate of interest equal to
the sum of (x) the Treasury Yield as in effect on the Borrowing Date or the
conversion date with respect to such Loan, plus (y) 245 basis points or (b)
with respect to each Pre-Completion Loan which is a Fixed Rate Loan, a rate
of interest equal to the sum of (i) the Treasury Yield in effect on the
second Business Day preceding the Second Capital Contribution Date or such
other date on or prior to the Second Capital Contribution Date as the
Lender and the Borrower may select, plus (ii) 245 basis points.
"Fixed Principal": with respect to the Post-Completion Note, the
---------------
principal of such Note which is to be made as or converted to a Fixed Rate
Loan.
"Fixed Rate Loans": the Pre-Completion Loans or Post-Completion Loans
----------------
at such time as such Loans are made or maintained at the Fixed Interest
Rate.
"Flip Date": as defined in the Amended and Restated Partnership
---------
Agreement.
"Floating Eurocurrency Reserves Requirements": with respect to any
-------------------------------------------
Eurodollar Interest Period for any Floating Rate Loan, the aggregate of the
rates (expressed as a decimal) of reserve requirements current on the date
two Working Days prior to the beginning of such Eurodollar Interest Period
(including, without limitation, basic, supplemental, marginal and emergency
reserves under any regulations of the Board of Governors of the Federal
Reserve System or other Governmental Authority having jurisdiction with
respect thereto), as now and from time to time hereafter in effect,
dealing with reserve requirements prescribed for eurocurrency funding
(currently referred to as "Eurocurrency liabilities" in Regulation D of
such Board) required to be maintained by a member bank of such System.
<PAGE>
9
"Floating Rate": with respect to any Eurodollar Interest Period, a
-------------
rate of interest per annum equal to (i) the Eurodollar Rate for such
Eurodollar Interest Period, plus (ii) 165 basis points.
"Floating Rate Loans": the Pre-Completion Loans or Post-Completion
-------------------
Loans, at such time as Loans are made or maintained at the Floating Rate or
the Special Floating Rate.
"GECC": General Electric Capital Corporation, a New York corporation.
----
"General Partner Pledge Agreement": the Second Amended and Restated
---------------------------------
Pledge Agreement, dated as of December 13, 1990, entered into by the
General Partner in favor of GEPFC, as collateral agent for the Original
Lender and GECC, as the same has been amended, supplemented or otherwise
modified, and being released as of the Second Capital Contribution Date
pursuant to subsection 9.3.
"GEPFC's Ratio": with respect to each Eurodollar Interest Period, the
-------------
quotient of (i) a number equal to $250,000,000 minus the aggregate
principal amount of all assignments of the Original Lender's Commitments
and all Participations granted by the Original Lender, in each case, to any
banks which, as of the first day of such Eurodollar Interest Period, are
members of the Federal Reserve System and are required by any regulation of
the Board of Governors of the Federal Reserve System or any other
Government Authority having jurisdiction to maintain reserve requirements
prescribed for eurocurrency funding, divided by (ii) $250,000,000.
"Implicit Rate": as defined in the Amended and Restated Partnership
-------------
Agreement.
"Initial Working Capital Deposit Amount": $10,000,000.
--------------------------------------
"Insolvency": with respect to any Multiemployer Plan, the condition
----------
that such Plan is insolvent within the meaning of such term as used in
Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
---------
"Installment Payment Date": the date which is 27 months after the
------------------------
Second Capital Contribution Date and thereafter, the last day of each
March, June, September and December during each year prior to the date
which is 15 years after the Second Capital Contribution Date.
"Intercreditor Agreement": the Intercreditor Agreement to be executed
-----------------------
and delivered by each Additional Lender and the Lender, substantially in
the form of Exhibit E to the
<PAGE>
10
original Loan Agreement, as the same may be amended, supplemented or
otherwise modified from time to time.
"Interest Payment Date": (a) during the Pre-Completion Loan Period,
---------------------
the last day of each calendar month, commencing on the first such day to
occur after any Pre-Completion Loans are made, (b) during and after the
Post-Completion Loan Period, the last day of each March, June, September
and December, commencing with the first such day to occur after the Second
Capital Contribution Date and (c) each day of payment or prepayment of any
Loan.
"LIBOR": with respect to any Eurodollar Interest Period, the rate per
-----
annum determined on the basis of the offered rates for deposits in Dollars
for such Eurodollar Interest Period which appear on the Reuters Screen LIBO
Page as of 11:00 a.m., London time, on the day that is two Working Days
prior to the beginning of such Eurodollar Interest Period. If at least two
such offered rates appear on the Reuters Screen LIBO Page, the rate in
respect of such Eurodollar Interest Period will be the arithmetic mean of
such offered rates. If fewer than two offered rates appear, the rate in
respect of such Eurodollar Interest Period will be determined as it the
parties had specified "LIBOR (Reference Banks)" as the Eurodollar Base
Rate.
"LIBOR (Reference Banks)": with respect to any Eurodollar Interest
-----------------------
Period, a rate per annum equal to the arithmetic mean of the rates quoted
by Bankers Trust Company and Chemical Bank (or if either flankers Trust
Company or Chemical Bank shall cease to exist, Barclays Bank PLC shall be
substituted for the bank which ceased to exist, or if both Bankers Trust
Company and Chemical Bank shall cease to exist, Barclays Bank PLC and
National Westminster Bank PLC shall be substituted for such banks) in New
York City at approximately 11:00 a.m., New York City time, on the first day
of such Eurodollar Interest Period for loans in Dollars to prime banks in
the London interbank market for a period equal to the number of days in
such Eurodollar Interest Period and in an amount substantially equal to the
amount of the Floating Rate Loan to be outstanding during such Eurodollar
Interest Period.
"Limited Partner": Cogen Technologies Limited Partners Joint Venture,
---------------
a Texas general partnership.
"Limited Partnership": Cogen Technologies Linden Venture, L.P., a
-------------------
Delaware limited partnership, of which the Borrower is the sole general
partner.
"Loans": the collective reference to the Pre-Completion Loans and the
-----
Post-Completion Loans.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
------------------
in Section 4001(a) (3) of ERISA.
<PAGE>
11
"Note Pledge Agreement": the Note Pledge Agreement, dated as of March
----------------------
14, 1991, entered into by the Borrower in favor of the Original Lender, as
the same has been amended, supplemented or otherwise modified, and being
released as of the Second Capital Contribution Date pursuant to subsection
9.3.
"Notes": the collective reference to the Pre-Completion Note, the
-----
Post-Completion Note and the Working Capital Note.
"Notice of Borrowing": a notice in substantially the form of Exhibit
-------------------
D.
"Obligations": all the unpaid principal amount of, and interest on
-----------
(including, without limitation, interest accruing after the maturity of the
Loans and interest accruing after the filing of any petition in bankruptcy,
or the commencement of any insolvency, reorganization or like proceeding
relating to the Borrower, whether or not a claim for post-petition or post-
filing interest is allowed in such proceeding), the Notes and all other
obligations and liabilities of the Borrower to the Lender, whether direct
or indirect, absolute or contingent, due or to become due, or now existing
or hereafter incurred, which may arise under, out of, or in connection
with, this Agreement, the Notes, any other Transaction Document (other than
the Partnership Agreement and the Amended and Restated Partnership
Agreement) and any other document executed and delivered in connection
therewith or herewith, whether on account of principal, interest, fees,
indemnities, costs, expenses (including, without limitation, all fees and
disbursements of counsel to the Lender) or otherwise.
"Operative Documents": the collective reference to the Amended and
-------------------
Restated Partnership Agreement, the Capital Contribution Agreement, the
Security Deposit Agreement, the Equity Letters of Credit, the Reimbursement
Agreement, the Recognition Agreements and the Project Documents.
"Origination Fee": as defined in subsection 3.1(b).
---------------
"Participations": as defined in subsection 9.8(c).
--------------
"Partners": collectively, the General Partner and the Limited Partner.
--------
"Partnership Agreement": the agreement of limited partnership of the
---------------------
Borrower, dated as of June 28, 1989 (and the related certificate of limited
partnership of even date therewith), between the General Partner, as
general partner, and the Limited Partner, as limited partner, as amended,
supplemented or otherwise modified from time to time in accordance with the
provisions of subsection 7.6.
<PAGE>
12
"Permitted Assignee": as defined in subsection 9.8(b),
------------------
"Permitted Investments": (a) securities issued or directly and fully
---------------------
guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than six months from
the date of acquisition, (b) certificates of deposit and eurodollar time
deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case, with the Lender or with an~
domestic commercial bank of recognized stature having capital and surplus
in excess of $500,000,000, (c) repurchase obligations with a term of not
more than seven days for underlying Securities of the types described in
clauses (a) and (b) above entered into with any financial institution
meeting the qualifications specified in clause (b) above, and (d)
commercial paper issued by the Lender, the Original Lender or the parent
corporation of the Lender or the Original Lender, and commercial paper
rated at least A-2 or the equivalent thereof by Standard & Poor's
Corporation or at least P-2 or the equivalent thereof by Moody's Investors
Service, Inc. and in each case maturing within six months after the date of
acquisition.
"Permitted Liens": (i) Liens created by the Collateral Security
---------------
Documents; (ii) Liens in favor of the agent under the Construction Loan
Agreement created by the Collateral Security Documents (as defined in the
Construction Loan Agreement); (iii) Liens in favor of any Person (other
than the General Partner, the Limited Partner or any Affiliate of any such
Person) which arise in the ordinary course of business of the Borrower
(including, without limitation, materialmen's, mechanics', workers',
repairmen's and employees' Liens and similar Liens which arise in
connection with any tax, assessment, governmental charge or levy) but not
(unless otherwise permitted by this Agreement) in connection with any
Indebtedness or Guarantee Obligation and which do not in the aggregate
materially impair the use and value of the Borrower's property or assets in
the conduct of its business or impair the rights or interests of the Lender
with respect to the Collateral; provided that if any such Lien arose in
--------
connection with any tax, assessment, governmental charge or levy or any
claim referred to in subsection 6.9 or any charge or claim of a mechanic or
a materialman, the Borrower shall be diligently contesting the same in
accordance with, and subject to, the provisions of subsection 6.9 or 6.10,
as the case may be; (iv) Liens arising out of judgments or awards which are
bonded or with respect to which at the time an appeal or proceeding for
review is being prosecuted in good faith and for the payment of which
adequate reserves shall have been provided; (v) mineral rights, utility
easements, any other easements and any covenants running with the land
relating to any real property of the Borrower or any similar deed
restrictions
<PAGE>
13
the existence and use of any of which do not materially interfere with the
use and enjoyment of the Collateral; and (vi) Liens in favor of any
Additional Lender in accordance with subsection 7.2(b).
"Plan": at any particular time, any employee benefit plan which is
----
covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Pledge Agreement Supplement": as defined in the Note Pledge
---------------------------
Agreement.
"Pledged Note": as defined in the Note Pledge Agreement; collectively
------------
the "Pledged Notes".
-------------
"Post-Completion Borrowing Certificate": a certificate of the Borrower
-------------------------------------
substantially in the form of Exhibit C-2.
"Post-Completion Commitment": the Lender's obligation to make Post-
--------------------------
Completion Loans pursuant to subsection 2.4 in an aggregate amount not to
exceed the amount set forth therein, as such amount shall be reduced from
time to time pursuant to the provisions hereof.
"Post-Completion Loan Period": the period from and including the
---------------------------
Second Capital Contribution Date to but not including the date which is two
years after the Second Capital Contribution Date, or, if such date is
extended by the Borrower in accordance with subsection 3.7, the date which
is three years or four years, as the case may be, after the Second Capital
Contribution Date.
"Post-Completion Loans": the collective reference to Loans made
---------------------
pursuant to subsection 2.4.
"Post-Completion Note": as defined in subsection 2.7(c).
--------------------
"Pre-Completion Borrowing Certificate": a certificate of the Borrower
------------------------------------
substantially in the toxin of Exhibit C-1 to the Original Loan Agreement.
"Pre-Completion Commitment": the Lender's obligation to make Pre-
-------------------------
Completion Loans pursuant to subsection 2.1 in an aggregate amount not to
exceed the lesser of (a) the excess of (i) $666,000,000 over (ii) the sum
of (1) the aggregate outstanding principal amount of the Construction Loans
(as defined in the Construction Loan Agreement) and (2) the aggregate
amount available to be drawn under the Letters of Credit (as defined in the
Construction Loan Agreement) or (b) $150,000,000.
<PAGE>
14
"Pre-Completion Loan Period": the period from and including the
--------------------------
Construction Conversion Date to but not including the Second Capital
Contribution Date.
"Pre-Completion Loans": the Loans made pursuant to subsection 2.1.
--------------------
"Pre-Completion Note": as defined in subsection 2.7(a).
-------------------
"Preferred Cash Distributions": the distributions to the Limited
----------------------------
Partner (as defined in the Amended and Restated Partnership Agreement)
referred to in subsection 4.3(a) of the Amended and Restated Partnership
Agreement.
"Preferred Distribution Period": the period from and including the
-----------------------------
Second Capital Contribution Date to and including the Flip Date.
"Preferred Limited Partner": as defined in the Amended and Restated
-------------------------
Partnership Agreement.
"Project Documents": as defined in the Amended and Restated
-----------------
Partnership Agreement.
"Project Limited Partner": the Owner Trustee or any of its designees
-----------------------
or assignees that have been admitted to the Limited Partnership as a
limited partner of the Limited Partnership pursuant to subsection 10.1 of
the Amended and Restated Partnership Agreement, and any other Person
properly holding a limited partnership interest pursuant to the Amended and
Restated Partnership Agreement, and admitted to the Limited Partnership as
a limited partner of the Limited Partnership and shown as such on the books
and records of the Partnership, when acting in such capacity.
"Redetermined Origination Fee": as defined in subsection 3.1(b).
----------------------------
"Reimbursement Agreement": as defined in the Amended and Restated
-----------------------
Partnership Agreement.
"Reorganization": with respect to any Multiemployer Plan, the
--------------
condition that such Plan is in reorganization within the meaning of such
term as used in Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b) of
----------------
ERISA, other than those events as to which the thirty-day notice period is
waived under subsections .13, .14, .16, .18, .19, or .20 of PBGC Reg. 2615.
<PAGE>
15
"Required Payments Account": the Required Payments Account established
-------------------------
pursuant to the Security Deposit Agreement.
"Requirement of Law": as to any Person, (a) the Certificate of
------------------
Incorporation and By-Laws or partnership agreement or other organizational
or governing documents of such Person, (b) any law, treaty, rule or
regulation, or determination of an arbitrator or a court or other
Governmental Authority (other than any Relevant Environmental Law), in each
case applicable to or binding upon such Person or any of its properties or
to which such Person or any of its properties is subject and the violation
of which, or which determination, could reasonably be expected to (i) have
a material adverse effect on the business, operations, properties,
condition (financial or otherwise) or prospects of such Person or (ii)
materially adversely affect the ability of such Person to perform its
obligations under the Transaction Documents to which it is a party and (c)
any Relevant Environmental Law.
"Security Agent": Midlantic Bank or any bank acting as successor
--------------
security agent under the Security Deposit Agreement.
"Security Deposit Agreement": the Amended and Restated Security
--------------------------
Deposit Agreement and Escrow Agreement, to be entered into by the Limited
Partnership, the Borrower, GEPFC, the Lender and the Security Agent on the
Second Capital Contribution Date, substantially in the form of Exhibit H,
as amended, supplemented or otherwise modified from time to time.
"Security Period": the date from and including the Closing Date to but
---------------
not including the date of release of the Lender's and the Original Lender's
Liens on the Collateral to be released pursuant to subsection 9.3 on the
Second Capital Contribution Date.
"Settlement Date": with respect to the Called Principal of any the
---------------
Post-Completion Note, the date on which such Called Principal is to be
prepaid pursuant to subsection 3.2(b).
"Single Employer Plan": any Plan which is covered by Title IV of
--------------------
ERISA, but which is not a Multiemployer Plan.
"Special Event": as defined in the Amended and Restated Partnership
-------------
Agreement.
"Special Floating Rate": with respect to any Eurodollar Interest
---------------------
Period, a rate of interest per annum equal to (i) the Eurodollar Rate for
such Eurodollar Interest Period, plus (ii) 420 basis points.
<PAGE>
16
"Termination Expense (Benefit)": in connection with any prepayment of
-----------------------------
the Loans pursuant to subsection 3.2(c) or (d) or any acceleration of the
Loans pursuant to Section 8, any loss or expense (or income or gain)
resulting from the prepayment or termination of any fixed rate debt
(including funding of the equity investments of the partners of Linden
Owner Partnership) incurred to finance the Loans being prepaid or repaid
and any loss or expense (or income or gain) resulting from the cancellation
or termination of any interest rate hedging arrangement entered into for
the purpose of fixing or limiting the interest rate on any floating rate
debt (including funding of the equity investments of the partners of Linden
Owner Partnership) incurred to finance the Loans being prepaid or repaid.
Termination Expense (Benefit) shall be positive if it results in a loss or
expense and shall be negative if it results in income or gain. Termination
Expense (Benefit) shall be calculated in accordance with the provisions of
Schedule 4.
"Texas Eastern": the collective reference to Texas Eastern
-------------
Transmission Corporation, Houston Center Corporation and Texas Eastern
Cryogenics, Inc.
"Texas Eastern Letter Agreement": that certain letter dated June 18,
------------------------------
1991 from the General Partner to Texas Eastern regarding the possibility of
pursuing the feasibility of transmitting electrical power from Staten
Island, New York to Linden, New Jersey.
"Transaction Documents": the collective reference to this Agreement,
---------------------
the Notes, the Partnership Agreement, the Amended and Restated Partnership
Agreement and the Collateral Security Documents.
"Transferee": as defined in subsection 9.8(c).
----------
"Treasury Yield": with respect to the Called Principal or any Fixed
--------------
Principal, as the case may be, of the Post-Completion Note, the yield to
maturity implied by the Treasury Constant Maturity Series yields reported
(for the latest day for which such yields shall have been so reported as of
the Business Day next preceding the Settlement Date with respect to such
Called Principal or the Business Day on which the Fixed Interest Rate is to
be determined for such Fixed Principal, as the case may be) in Federal
Reserve Statistical Release 11.15 (519) (or any successor publication of
the Federal Reserve Board) for actively traded U.S. Treasury securities
having a constant maturity equal to the remaining weighted average life to
final maturity (calculated in accordance with accepted financial practice)
of such Called Principal as of such Settlement Date or Fixed Principal as
of such determination date, as the case may be. Such implied yield shall be
determined (a) by calculating the remaining weighted average life to final
maturity of
<PAGE>
17
such Called Principal or Fixed Principal, as the case may be, rounded to
the nearest quarter-year and (b) if necessary, by interpolating linearly
between Treasury Constant Maturity Series yields.
"Working Capital Fund": a fund maintained for working capital purposes
--------------------
in a separate bank account which shall contain the Initial Working Capital
Deposit Amount and thereafter, monies from time to time received from the
Limited Partnership for deposit therein, and shall not contain any other
monies of the Borrower.
"Working Capital Loan": the Post-Completion Loan made to the Borrower
--------------------
in respect of the Initial Working Capital Deposit Amount.
"Working Capital Note": as defined in subsection 2.7(d).
--------------------
"Yield-Maintenance Premium": with respect to the Post-Completion Note,
-------------------------
a premium equal to the excess, if any, of the Discounted Value of the
Called Principal of such Note over such Called Principal. The Yield-
Maintenance Premium shall in no event be less than zero.
1.2 Other Definitional Provisions. (a) All terms defined in this
-----------------------------
Agreement shall have the defined meanings when used in the Notes or in any
certificate or other document made or delivered pursuant hereto.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto, accounting terms not defined in subsection 1.1, and
accounting terms partly defined in subsection 1.1 to the extent not defined,
shall have the respective meanings given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section, schedule and
exhibit references are to this Agreement unless otherwise specified.
SECTION 2. AMOUNTS AND TERMS OF PRE-COMPLETION AND POST-COMPLETION
COMMITMENTS
-------------------------------------------------------
2.1 Pre-Completion Commitment. Subject to and upon the terms and
-------------------------
conditions set forth herein, the Lender agrees to make Pre-Completion Loans to
the Borrower during the Pre-Completion Loan Period on any Working Day which is
the last working Day of a calendar month in an aggregate principal amount not to
exceed the lesser of (a) the excess of (i) $666,000,000 over (ii) the sum of (1)
the aggregate outstanding principal amount of the Construction Loans (as defined
in the Construction Loan Agreement) and (2) the aggregate amount available to be
<PAGE>
18
drawn under the Letters of Credit (as defined in the Construction Loan
Agreement) or (b) $150,000,000.
2.2 Procedure for Borrowing with Respect to Pre-Completion Loans.
------------------------------------------------------------
Whenever the Borrower desires the Lender to make a Pre-Completion Loan pursuant
to subsection 2.1, the Borrower shall give the Lender an irrevocable Notice of
Borrowing to be received by the Lender prior to 12:00 Noon, New York City time,
at least two Working Days prior to the requested Borrowing Date, specifying (i)
the amount to be borrowed, (ii) the requested Borrowing Date and (iii) wire
transfer instructions for the disbursement of the proceeds of the Pre-Completion
Loan referred to in clause (b) of subsection 2.3. The Borrowing Date shall be a
Working Day.
2.3 Disbursement of Pre-Completion Loans. (a) Not later than 12:00
------------------------------------
Noon, New York City time, on the Borrowing Date specified in the Notice of
Borrowing, if the conditions precedent to the requested Pre-Completion Loan
listed in subsections 5.2 and 5.4 have been satisfied, the Lender will:
(i) with respect to the portion of each Pre-Completion Loan which
represents (1) the amount of the Financing Fee in respect of such Pre-
Completion Loan, (2) the aggregate amount of accrued but unpaid interest on
the Pre-Completion Loans and (3) the aggregate amount of any fees and
expenses referred to in subsection 9.6, transfer such amount to the Lender
in such manner as the Lender may deem advisable;
(ii) with respect to the portion of any Pre-Completion Loan which
represents Certified Expenses referred to in clause (e) of the definition
thereof, transfer such amount in accordance with the instructions set forth
in the Notice of Borrowing; and
(iii) with respect to the portion of each Pre-Completion Loan which
represents Certified Expenses referred to in clause (f) of the definition
thereof, transfer such amount to the Borrower by wire transfer in
accordance with the instructions set forth in the Notice of Borrowing or as
otherwise approved by the Lender.
(b) During the Pre-Completion Loan Period, if the conditions
precedent listed in subsection 5.2 and 5.4 have been satisfied, on each Interest
Payment Date, the Lender will automatically make a Pre-Completion Loan to the
Borrower in an amount equal to the aggregate amount of accrued but unpaid
interest on the outstanding Pre-Completion Loans if the Lender shall not have
received a Notice of Borrowing from the Borrower pursuant to subsection 2.2. The
Lender will transfer the amount of such Pre-Completion Loan to the Lender in
such manner as it may deem advisable.
<PAGE>
19
2.4 Post-Completion Commitment. (a) Subject to and upon the terms and
--------------------------
conditions set forth herein, the Lender agrees to make Post-Completion Loans to
the Borrower during the Post-Completion Loan Period in an aggregate amount not
to exceed the lesser of (a) the excess of (i) $750,000,000 or such lesser
commitment amount as may be determined pursuant to subsection 3.1(b) over (ii)
the sum of (1) the aggregate amount of the Owner Trustee's capital contributions
to the Limited Partnership pursuant to Section 2 of the Capital Contribution
Agreement and (2) the aggregate principal amount of all Pre-Completion Loans
made by the Lender pursuant to subsection 2.1 or (b) the excess of (i) the
amount which would cause the Fixed Charge Coverage Ratio as of the Second
Capital Contribution Date, as calculated (in accordance with Schedule 2) from
the pro forma financial statements of the Limited Partnership delivered to the
Lender pursuant to subsection 6.7(b), to be projected to be at least equal to
1.20 to 1.00 for each year during the Preferred Distribution Period over (ii)
the aggregate principal amount of all Pre-Completion Loans made by the Lender
pursuant to subsection 2.1; provided that so long as the aggregate amount of all
-------- ----
Loans exceeds the amount calculated pursuant to clause (b) above, the Lender
shall not be required to make any additional Post-Completion Loans.
2.5 Procedure for Borrowing with Respect to Post-Completion Loans.
-------------------------------------------------------------
Whenever the Borrower desires the Lender to make a Post-Completion Loan pursuant
to subsection 2.4, the Borrower shall give the Lender an irrevocable Notice of
Borrowing to be received by the Lender prior to 12:00 Noon, New York City time,
at least two Business Days (in the case of Fixed Rate Loans and Working Capital
Loans) and four Working Days in the case of Floating Rate Loans) prior to the
requested Borrowing Date, specifying (i) the amount to be borrowed, (ii) the
requested Borrowing Date, (iii) wire transfer instructions for the disbursement
of the proceeds of the Post-Completion Loan referred to in clause (c) of
subsection 2.6 and (iv) whether such Loan is to be a Floating Rate Loan, a Fixed
Rate Loan or the Working Capital Loan or a combination thereof and, if a
combination thereof, the amount allocable to each. The Borrowing Date shall be a
Working Day if the Post-Completion Loan is to be a Floating Rate Loan and a
Business Day if the Post-Completion Loan is to be a Fixed Rate Loan or the
Working Capital Loan. Each Post-Completion Loan shall be in a minimum amount of
$5,000,000. No more than one Post-Completion Loan shall be made in any month.
The Borrowing Date shall be a Business Day.
2.6 Disbursement of Post-Completion Loans. Not later than 12:00 Noon,
-------------------------------------
New York City time, on the Borrowing Date specified in the Notice of Borrowing,
if the conditions precedent to the requested Post-Completion Loan listed in
subsections 5.3 and 5.4 have been satisfied, the Lender will:
<PAGE>
20
(a) with respect to the portion of each Post-Completion Loan which
represents (1) the amount of the Financing Fee in respect of such Post-
Completion Loan, (2) a Commitment Fee and (3) the aggregate amount of any
fees and expenses referred to in subsection 9.6, transfer such amount to
the Lender in such manner as the Lender may deem advisable;
(b) on the first Borrowing Date during the Post-Completion Loan
Period, with respect to the Working Capital Loan, transfer such amount to
the bank maintaining the Working Capital Fund for deposit in the Working
Capital Fund; and
(c) with respect to the portion of each Post-Completion Loan which
does not represent Certified Expenses referred to in clause (a) above or
the Initial Working Capital Deposit Amount, transfer such amount to the
Borrower by wire transfer in accordance with the instructions set forth
in the Notice of Borrowing.
2.7 Notes. (a) During the Pre-Completion Loan Period, the Pre-
-----
Completion Loans made by the Lender pursuant to subsection 2.1 shall be
evidenced by a promissory note of the Borrower, substantially in the form of
Exhibit A-1 to the Original Loan Agreement with appropriate insertions (the
"PreCompletion Note"), payable to the order of GEPFC, as the Original Lender.
-------------------
The Pre-Completion Note shall (i) be dated the Closing Date, (ii) represent the
Borrower's obligation to pay the aggregate unpaid principal amount of all
outstanding Pre-Completion Loans made by the Lender, (iii) bear interest for the
period from the date thereof until paid in full on the unpaid principal amount
thereof from time to time outstanding at the applicable interest rate per annum
provided in, and payable as specified in, subsection 3.3, (iv) be entitled to
the benefits of this Agreement and the Collateral Security Documents and (v) be
stated to mature, with respect to each Loan, in equal consecutive quarterly
installments of principal and interest payable on each Installment Payment Date
occurring after the Borrowing Date with respect to such Loan.
(b) On the first day of the Post-Completion Loan Period, the Borrower
shall execute and deliver to the Lender a Post-Completion Note (as hereinafter
defined) in substitution for and replacement of (but not in payment of) the
Original Lender's Pre-Construction Note. As soon as practicable thereafter, the
Lender shall mark the Pre-Completion Note "cancelled by renewal" and return it
to the Borrower.
(c) During and after the Post-Completion Loan Period, the Pre-
Completion Loans and the Post-Completion Loans (other than the Working Capital
Loan) made by the Lender pursuant to subsection 2.1 or 2.4 shall be evidenced by
a promissory note of the Borrower, substantially in the form of Exhibit A-2 with
appropriate insertions (the "Post-Completion Note"), payable to
---------------------
<PAGE>
21
the order of the Lender. The Post-Completion Note shall (i) be dated the
Closing Date, (ii) represent the Borrower's obligation to pay the aggregate
unpaid principal amount of all outstanding Pre-Completion Loans and
Post-Completion Loans made by the Lender, (iii) bear interest for the date
thereof until paid in full on the unpaid principal amount thereof from time to
time outstanding at the applicable interest rate per annum provided in, and
payable as specified in, subsection 3.3, (iv) be entitled to the benefits of
this Agreement, the Security Deposit Agreement and the Borrower Pledge
Agreement, and if the Liens on the Collateral have not been released pursuant to
subsection 9.3, the other Collateral Security Documents and (v) be stated to
mature, with respect to each Loan, in consecutive quarterly installments of
principal payable as provided in Schedule 6 and subsection 3.2(a) on each
Installment Payment Date occurring after the Borrowing Date with respect to such
Loan. The amortization schedule will be calculated on or prior to the Second
Capital Contribution Date based on the assumptions that (i) the interest rate
for each Fixed Rate Loan is the Fixed Interest Rate as determined in accordance
with clause (b) of the definition thereof, (ii) the interest rate for each
Floating Rate Loan and each Floating Rate Loan which is converted to a Fixed
Rate Loan pursuant to the provisions hereof is 10.50% and (iii) the Loans
amortize in consecutive quarterly installments of principal and interest during
the maturity thereof.
(d) The Working Capital Loan made by the Lender pursuant to
subsection 2.4 shall be evidenced by a promissory note of the Borrower,
substantially in the form of Exhibit A-3 with appropriate insertions (the
"Working Capital Note"), payable to the order of the Lender. The Working
--------------------
Capital Note shall (i) be dated the Second Capital Contribution Date, (ii)
represent the Borrower's obligation to pay the unpaid principal amount of the
outstanding Working Capital Loan made by the Lender, (iii) bear interest for the
unpaid principal amount thereof from time to time outstanding at the applicable
interest rate per annum provided in, and payable as specified in, subsection
3.3, (iv) be entitled to the benefits of this Agreement, the Security Deposit
Agreement and the Borrower Pledge Agreement, and if the Liens on the Collateral
have not been released pursuant to subsection 9.3, the other Collateral Security
Documents and (v) be stated to mature on the date which is 15 years after the
Second Capital Contribution Date.
(e) The Lender is hereby authorized to record the date, type and
amount of each Pre-Completion Loan and Post-Completion Loan made by the Lender
and the date and amount of each payment or prepayment of principal of the Loans
made by the Borrower, the date of conversion of any Floating Rate Loan to a
Fixed Rate Loan, and in the case of Floating Rate Loans, the Eurodollar Interest
Period and interest rate with respect thereto, and in the case of Fixed Rate
Loans, the Fixed Interest Rate with respect thereto, on the schedules annexed to
and constituting a part of such Notes, and any such recordation shall constitute
prima facie evidence of the accuracy of the
<PAGE>
22
information so recorded; provided that the failure by the Lender to make any
--------
such endorsement shall not affect the obligations of the Borrower hereunder or
under such Notes in respect of the Pre-Completion Loans and Post-Completion
Loans made by the Lender hereunder.
2.8 Use of Proceeds. During the Pre-Completion Loan Period, the
---------------
proceeds of the Pre-Completion Loans shall be used by the Borrower for the
payment of Certified Expenses specified in clauses (a), (b), (d), (e) and (f) of
the definition thereof. During and after the Post-Completion Loan Period, the
proceeds of the Loans may be used by the Borrower (a) with respect to the
Initial Working Capital Deposit Amount, for the purposes specified in subsection
7.7(b), (b) for other purposes specified in subsections 7.3 and 7.7 and (c) for
the payment of Certified Expenses.
SECTION 3. PROVISIONS RELATING TO ALL EXTENSIONS OF CREDIT; FEES AND
PAYMENTS
---------------------------------------------------------
3.1 Financing Fees; Origination Fee. (a) The Borrower agrees to pay
-------------------------------
to the Lender a financing fee (a "Financing Fee") on each Loan, computed at the
-------------
rate of 1/2 of 1% on the principal amount of such Loan. Such Financing Fee shall
be paid with the proceeds of a Loan on the Borrowing Date for such Loan.
(b) On the Closing Date, the Borrower paid, to GEPFC, as the Original
Lender, a loan origination fee (the "Origination Fee") equal to $1,250,000. The
---------------
Borrower and the Lender hereby agree that on the Second Capital Contribution
Date, they shall recalculate the amount of the Origination Fee (the
"Redetermined Origination Fee") and the amount of the Post-Completion Commitment
----------------------------
based on the expected utilization of the Post-Completion Commitment. If the
amount of such Redetermined Origination Fee, together with the interest thereon
that would have accrued at the applicable interest rate set forth in subsection
4.4 of the Construction Loan Agreement for the period from and including the
Closing Date (as defined in the Construction Loan Agreement) to but excluding
the Second Capital Contribution Date, is less than the amount of the Origination
Fee, together with interest thereon which accrued at the applicable interest
rate set forth in subsection 4.4 of the Construction Loan Agreement for the
construction loan which financed the Origination Fee for such period, a
prepayment of the Loans shall be made pursuant to subsection 3.2(g).
3.2 Commitment Reductions; Optional and Mandatory Prepayments. (a)
---------------------------------------------------------
The Borrower shall pay each Loan (other than the Working Capital Loan) in
consecutive quarterly installments of principal on each Installment Payment Date
occurring after the Borrowing Date with respect to such Loan in the amount set
forth on Schedule 6. The Borrower shall pay the Working Capital Loan on the date
which is 15 years after the Second Capital
<PAGE>
23
Contribution Date. The amortization schedule will be calculated on or prior to
the Second Capital Contribution Date based on the assumptions that (i) the
interest rate for each Fixed Rate Loan is the Fixed Interest Rate as determined
in accordance with clause (b) of the definition thereof, (ii) the interest rate
for each Floating Rate Loan and for each Floating Rate Loan which is converted
to a Fixed Rate Loan pursuant to the provisions hereof is 10.50% and (iii) the
Loans amortize in consecutive quarterly installments of principal and interest
during the maturity thereof. On each Installment Payment Date, the Commitments
shall automatically be reduced by the aggregate principal amount of payments
made in respect of the Loans on such Installment Payment Date.
(b) (i) During (A) the Pre-Completion Loan Period and (B) if any
Loans (other than the Working Capital Loan) are bearing interest at a Floating
Rate, during the post-Completion Loan Period, the Borrower may from time to time
prepay such Loans then outstanding, in whole or in part, without premium or
penalty. During the Post-Completion Loan Period, if any Loans (other than the
Working Capital Loan) are bearing interest at a Fixed Interest Rate, the
Borrower may from time to time prepay (x) such Fixed Rate Loans (other than the
Working Capital Loan) then outstanding, in whole or in part, at 100% of the
principal amount so prepaid plus the Yield-Maintenance Premium and (y) the
Working Capital Loan, in whole or in part, without premium or penalty. Optional
prepayments pursuant to this subsection 3.2(b) shall be made upon at least two
Working Days' prior written irrevocable notice to the Lender, specifying the
date and amount of such prepayment. If any such notice is given, the Borrower
will make the prepayment specified therein and such prepayment shall be due and
payable on the date specified therein, together with interest accrued thereon to
the date of prepayment. Optional prepayments shall be applied to the
installments of principal of the Loans (other than the Working Capital Loan) in
the inverse order of maturity.
(ii) The Borrower may request the Security Agent to transfer to the
Lender the cash available in the Required Payments Account to be applied towards
any prepayment of the Loans specified in paragraph (i) above, provided, that any
--------
such prepayment (A) may be made without premium or penalty (except for any
Yield-Maintenance Premium payable pursuant to paragraph (i) above) and (B) shall
be applied pro rata to the remaining scheduled repayments to be made on the
--- ----
Post-Completion Note.
(c) If the Lender has delivered a notice in writing to the Borrower
declaring that a Declared Event of Loss has occurred, (i) the Commitments shall
terminate forthwith and (ii) the Borrower shall prepay in full, together with
any Termination Expense (Benefit) (except in the case of a Declared Event of
Loss described in clause (c) of the definition of "Event of Loss" which results
solely from any activity of the Limited Partner or any of its Affiliates other
than the Limited Partner's interest in the Limited Partnership or any action
taken by the Limited
<PAGE>
24
Partner or any of its Affiliates, in which case the related Termination Expense
(Benefit), if any, shall not be payable), the unpaid principal amount of the
then outstanding Pre-Completion Note, Working Capital Note and Post-Completion
Note, as the case may be, together with accrued interest thereon to the date of
prepayment and shall pay any unpaid Financing Fee, Commitment Fee, if any, and
other fees accrued hereunder to the date of prepayment, on the earlier of (x)
the date occurring 90 days after the date of receipt of such notice from the
Lender and (y) the date on which insurance proceeds are received by the Borrower
or the Limited Partnership with respect to such Event of Loss; provided, that
--------
with respect to any such Event of Loss that arises out of the loss, destruction
or damage of the Facility, the date specified in clause (x) above shall be
extended for an additional period (not to exceed 90 days) if, in the reasonable
opinion of the Lender, insurance proceeds sufficient to cover the amounts
specified in clause (ii) above will be received within such additional period.
(d) If a Special Event occurs and is continuing and the Borrower
exercises its option pursuant to subsection 14.2 of the Amended and Restated
Partnership Agreement to purchase the Preferred Limited Partnership Interest (as
defined in the Amended and Restated Partnership Agreement) within the time
period specified therein, on the date on which the Borrower exercises such
option, it shall prepay in full, without premium or penalty (other than any
Termination Expense), the unpaid principal amount of the then outstanding Pre-
Completion Note, Working Capital Note and Post-Completion Note, as the case may
be, together with accrued interest thereon to the date of prepayment and any
Termination Expense (Benefit).
(e) If the Borrower shall have given the Preferred Limited Partner
(as defined in the Amended and Restated Partnership Agreement) irrevocable
written notice pursuant to subsection 11.1(a) (ii) of the Amended and Restated
Partnership Agreement of the Borrower's intent to exercise its option pursuant
to subsection 11.1(a) thereof to purchase such Limited Partner's Limited
Partnership Interest (as defined in the Amended and Restated Partnership
Agreement), on the proposed purchase date for such Limited Partnership Interest,
(i) the Commitments shall terminate and (ii) the Borrower shall prepay in full
100% of the unpaid principal amount of the Post-Completion Note and the Working
Capital Note, together with accrued interest thereon to the date of prepayment
and shall pay any unpaid Financing Fee, Commitment Fee, if any, and other fees
accrued hereunder to the date of prepayment. Such prepayment may be made with
the proceeds of a loan to the Limited Partnership (which will be permitted to
distribute such proceeds to the Borrower for purposes of making such prepayment)
on terms which are substantially similar to the terms (including, without
limitation, interest rate and maturity) applicable to the Post Completion Loans.
Such loan shall be secured by a pledge of the interests of the Borrower in the
Limited Partnership pursuant to a pledge agreement in form and substance
satisfactory to the
<PAGE>
25
Lender and by a first priority lien on the assets of the Limited Partnership
(including, without limitation, the Project) pursuant to a security agreement
and a mortgage, each in form and substance satisfactory to the Lender.
(f) If the amount of the Origination Fee, together with the interest
which accrued thereon at the applicable interest rate set forth in subsection
4.4 of the Construction Loan Agreement for the period specified in subsection
3.1(b), is greater than the Redetermined Origination Fee, together with the
interest that would have accrued thereon at the applicable interest rate set
forth in subsection 4.4 of the Construction Loan Agreement for the construction
loan which financed the Origination Fee for the period specified in subsection
3.1(b), on the Second Capital Contribution Date, the Borrower shall be deemed to
have prepaid the Loans (other than the Working Capital Loan) in an amount equal
to the amount of such excess. Any such prepayment shall be applied to the
installments of principal of the Loans (other than the Working Capital Loan) in
the inverse order of maturity.
(g) On each Interest Payment Date during and after the Post-
Completion Loan Period and on each Installment Payment Date, the cash available
in the Debt Service Account shall be transferred to the Lender to pay the
amounts due and owing on such dates in accordance with the Security Deposit
Agreement.
(h) (i) If the Quarterly Required Payments Ratio (as defined in the
Security Deposit Agreement) for any two consecutive calendar quarters is less
than (x) 1.1 to 1.0 during the period from and including the Second Capital
Contribution Date to but excluding the date which is six years after the Second
Capital Contribution Date or (y) 1.2 to 1.0 during the period from and including
the date which is six years after the Second Capital Contribution Date to but
excluding the date which is fifteen years after the Second Capital Contribution
Date, (ii) if (x) the First Year Required Payments Ratio (as defined in the
Security Deposit Agreement) is less than 1.1 to 1.0 and the Quarterly Required
Payments Ratio for any two consecutive quarters during the annual period from
and including the date which is two years after the Second Capital Contribution
Date to but excluding the date which is three years after the Second Capital
Contribution Date is less than 1.1 to 1.0 or (y) the Eighth Year Required
Payments Ratio (as defined in the Security Deposit Agreement) is less than 1.2
to 1.0 and the Quarterly Required Payments Ratio for any two consecutive
quarters during the annual period from and including the date which is nine
years after the Second Capital Contribution Date to but excluding the date which
is ten years after the Second Capital Contribution Date is less than 1.2 to 1.0
or (iii) if an Event of Default has occurred and is continuing, any amount in
the Required Payments Account shall be applied to prepay the Loans then
outstanding pro rata with respect to the remaining scheduled repayments to be
made on the Post-Completion Note.
<PAGE>
26
(i) Payments and prepayments made pursuant to paragraphs (a), (b),
(c), (d), (e), (g) and (h) of this subsection 3.2 may not be reborrowed.
3.3 Interest Rates and Payment Dates. (a) (i) During the Pre-
--------------------------------
Completion Loan Period, (x) the unpaid principal amount of the Pre-Completion
Loans (other than the Designated Pre-Completion Loan (as defined in the Original
Loan Agreement)) shall bear interest for each Eurodollar Interest Period at the
Floating Rate (as defined in the Original Loan Agreement) and (y) the unpaid
principal amount of the Designated Pre-Completion Loan shall bear interest for
each Eurodollar Interest Period at the Special Floating Rate.
(ii) On the Second Capital Contribution Date Pre-Completion Loans in
the aggregate principal amount of $115,000,000 shall be converted to Fixed Rate
Loans bearing interest at the Fixed Interest Rate and the balance of the Pre-
Completion Loans shall continue to bear interest at the Floating Rate.
(iii) The unpaid principal amount of Post-Completion Loans (other than
the Working Capital Loan) borrowed on or after the Second Capital Contribution
Date may, at the option of the Borrower, bear interest for each Eurodollar
Interest Period at the Floating Rate or bear interest at the Fixed Interest
Rate.
(iv) The Borrower shall have the option at any time prior to the
eighth anniversary of the Second Capital Contribution Date to convert the
Floating Rate Loans to Fixed Rate Loans bearing interest at the Fixed Interest
Rate on the date of conversion, in whole or in part (provided integral multiples
of $5,000,000 are so converted) by giving the Lender seven Business Days
irrevocable prior written notice of its election to convert specifying the
amount to be converted and the requested conversion date. Fixed Rate Loans may
not be converted to Floating Rate Loans.
(v) The unpaid principal amount of the Working Capital Loan shall
bear interest at the Commercial Paper Rate for the period from and including the
date thereof until payment in full thereof.
(b) If all or a portion of the principal amount of any Loan made
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), any such overdue principal amount shall bear
interest at a rate per annum which is 2% above the rate which would otherwise be
applicable pursuant to subsection 3.3(a) (i), (ii), (iii), (iv) or (v) from the
date of such non-payment until paid in full (as well after as before judgment).
(c) Interest on the aggregate unpaid principal amount of the Loans
shall be payable in arrears on each Interest Payment Date. Subject to the
satisfaction of the conditions precedent
<PAGE>
27
set forth in subsections 5.2 and 5.4, any interest on Pre-Completion Loans may
be paid from the proceeds of a Pre-Completion Loan. Each payment of interest
shall be deemed to be a separate Pre-Completion Loan pursuant to subsection 2.1;
provided, that, after giving effect to any such payment of interest, the
- -------- ----
aggregate outstanding principal amount of all Pre-Completion Loans shall not
exceed the Pre-Completion Commitment. Any such payment of interest shall be
evidenced by the Pre-Completion Note and shall be credited against the amount of
interest accrued but unpaid on such Pre-Completion Note and such accrued but
unpaid interest shall thereupon be deemed paid in the amount of such interest
payment.
3.4 Making of Payments. All payments due hereunder or under the Notes
------------------
on account of principal, interest, fees, and any other obligation incurred
hereunder shall be paid to the Lender, by wire or electronic transfer for
deposit at United States Trust Company of New York to the credit of Union Bank
of Switzerland, as Collateral Agent, account no. 014813, ABA Number: 021-001-
318, reference: for deposit on behalf of State Street Bank and Trust Company of
Connecticut, National Association, not in its individual capacity but as Owner
Trustee or such other account as the Lender may from time to time specify to the
Borrower, in freely transferable Dollars and in immediately available funds
without set-off or counterclaim. All payments hereunder shall be made without
any presentment of the Notes to the Borrower, but upon payment in full of the
Notes, the holder thereof shall cancel them and return them to the Borrower. If
any payment hereunder (other than payments on Floating Rate Loans) becomes due
and payable on a day other than a Business Day, such payment shall be extended
to the next succeeding Business Day and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension. If any payment on Floating Rate Loans becomes due and payable on a
day other than a Working Day, the maturity thereof shall be extended to the next
succeeding Working Day unless the result of such extension would be to extend
such payment into another calendar month, in which event such payment shall be
made on the immediately preceding Working Day.
3.5 Computation of Interest and Fees. (a) Interest in respect of
--------------------------------
Floating Rate Loans and all fees hereunder shall be calculated on the basis of a
360-day year for the actual days elapsed. Interest in respect of Fixed Rate
Loans and the Working Capital Loan shall be calculated on the basis of a 365/
366-day year for the actual days elapsed.
(b) The Lender shall as soon as practicable notify the Borrower of
each determination of a Floating Rate, Fixed Interest Rate and Commercial Paper
Rate. The determination of any of such rates by the Lender pursuant to any
provision of this Agreement shall be conclusive and binding on the Borrower in
the absence of manifest error.
<PAGE>
28
3.6 Inability to Determine Eurodollar Rate. In the event that the
--------------------------------------
Lender shall have determined (which determination shall be conclusive and
binding upon the Borrower) that by reason of circumstances affecting the
interbank eurodollar market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate applicable for any Eurodollar Interest Period
with respect to (a) proposed Floating Rate Loans or (b) the continuation of
Floating Rate Loans beyond the expiration of the then current Eurodollar
Interest Period therefor, the Lender shall give notice of such event to the
Borrower. Within 30 days following the date of such notice by the Lender, the
Lender and the Borrower shall enter into negotiations in good faith with a view
to agreeing to an alternative basis acceptable to the Borrower and the Lender
for determining the interest rate (the "Substitute Eurodollar Rate") which shall
---------------------------
be applicable during such Eurodollar Interest Period for the Floating Rate Loans
to which such Eurodollar Interest Period applies and which shall reflect the
cost to the Lender of funding such Floating Rate Loans for such Eurodollar
Interest Period from alternate sources plus 165 basis points. At the expiration
of 30 days from the giving of such notice by the Lender, the Substitute
Eurodollar Rate agreed to by the Lender and the Borrower shall take effect with
respect to such Eurodollar Interest Period from the beginning of such Eurodollar
Interest Period.
3.7 Extension of Post-Completion Loan Period. (a) The Borrower shall
----------------------------------------
have the option on the date (the "Extension Date") which is two years after the
---------------
Second Capital Contribution Date to extend the Post-Completion Loan Period for
an additional year to the date which is three years after the Second Capital
Contribution Date (the "Extension Period"), upon delivery of a written notice to
------------------
the Lender to such effect within 30 days prior to the Extension Date and the
payment of a commitment fee (the "Commitment Fee") computed at the rate of 1/4
---------------
of 1% on the unused portion of the Post-Completion Commitment (or such lesser
amount as may be determined in accordance with paragraph (b) below) on such
Extension Date. If the Borrower shall have extended the Post-Completion Loan
Period in accordance with the preceding sentence, on the date (the "Additional
----------
Extension Date") which is three years after the Second Capital Contribution
- ---------------
Date, the Borrower shall have the option to extend the Post-Completion Loan
Period for an additional year to the date which is four years after the Second
Capital Contribution Date, upon delivery of a written notice to the Lender to
such effect within 30 days prior to the Additional Extension Date and the
payment of an additional Commitment Fee on the Additional Extension Date.
Subject to the satisfaction of the conditions precedent set forth in subsections
5.3 and 5.4, any Commitment Fee may be paid from the proceeds of a Post-
Completion Loan. Each payment of a Commitment Fee shall be deemed to be a
separate Post-Completion Loan pursuant to subsection 2.4; provided, that, after
--------
giving effect to any such payment of a Commitment Fee, the principal amount of
the Loans shall not exceed the Post-Completion Commitment. Any such payment of a
Commitment Fee shall be evidenced by the Post-Completion Note.
<PAGE>
29
(b) If the Borrower shall exercise either or both of its options set
forth in paragraph (a) above, the Borrower shall specify, in the written notice
delivered to the Lender pursuant to such paragraph, the amount of the Post-
Completion Commitment to be in effect during the Extended Period and the
Additional Extended Period, if any; provided, that in no event shall such Post-
--------
Completion Commitment exceed the sum of (i) the principal amount of the Loans on
the Extension Date or the Additional Extension Date, as the case may be, and
(ii) the unused portion of the Post-Completion Commitment on the day immediately
preceding the Extension Date or the Additional Extension Date, as the case may
be.
3.8 Increased Costs. (a) Notwithstanding any other provisions of this
---------------
Agreement, if any Applicable Law or any change therein or in the interpretation
or the application thereof by any Governmental Authority charged with
interpretation or administration thereof shall make it unlawful for the Lender
to make or maintain Floating Rate Loans as contemplated by this Agreement, the
Lender shall give written notice thereof to the Borrower and the obligation of
the Lender hereunder to make Floating Rate Loans shall forthwith be suspended so
long as such Applicable Law, interpretation or application shall continue, and
Loans then outstanding as Floating Rate Loans, if any, shall be converted
automatically to Loans bearing interest at the Substitute Eurodollar Rate (as
determined in accordance with subsection 3.6) on the next succeeding Interest
Payment Date or within such earlier period as may be required by law. If any
such conversion of Floating Rate Loans is made on a day which is not the last
day of a Eurodollar Interest Period, the Borrower shall pay to the Lender upon
the Lender's request, such amount or amounts as may be necessary to compensate
the Lender for any loss or expense sustained or incurred by the Lender in
respect of the Floating Rate Loans as a result of such conversion, including but
not limited to any interest or fees payable by the Lender to lenders of funds
obtained by it in order to make or maintain the Floating Rate Loans hereunder,
and shall pay to the Lender the Eurodollar Rate on such Floating Rate Loans to
the date of such automatic conversion. A certificate as to any additional
amounts payable pursuant to the foregoing sentence submitted by the Lender to
the Borrower shall be conclusive absent manifest error.
(b) In the event that any Applicable Law or any change therein or in
the interpretation or application thereof by any Governmental Authority charged
with the administration or interpretation thereof, or compliance by the Lender
with any request or directive (whether or not having the force of law) received
from any central bank or monetary authority or other Governmental Authority:
(i) does or shall subject the Lender to any tax of any kind
whatsoever or change therein with respect to this Agreement, the Notes or
any Floating Rate Loan hereunder, or the performance by the Lender of its
obligations hereunder, or change the basis of taxation of payments to the
Lender of
<PAGE>
30
principal, commitment fees, interest, or any other amount payable hereunder
(except for changes in the rate of tax on the overall net income of the
Lender); or
(ii) does or shall impose, modify or hold applicable or change any
reserve (including, without limitation, basic, supplemental, marginal and
emergency reserves), special deposit, compulsory loan or similar
requirement against assets held by, deposits or other liabilities in or for
the account of, advances or loans by, or other credit extended by, or any
other acquisition of funds by (including, without limitation, all
Eurocurrency funding by and all Eurocurrency liabilities), any office of
the Lender which are not otherwise included in the determination of the
Eurodollar Rate; or
(iii) does or shall impose on the Lender any other condition, or change
therein;
and the result of any of the foregoing is to increase the cost to the Lender of
making, committing to make, renewing or maintaining Floating Rate Loans or to
reduce any amount receivable thereunder, then, in any such case, the Borrower
shall promptly pay to the Lender, upon its demand, such additional amount which
will compensate the Lender for such additional cost or reduced amount receivable
which the Lender deems to be material as determined by the Lender with respect
to this Agreement, the Notes or the Floating Rate Loans hereunder.
(c) In the event that the adoption of any Applicable Law, rule,
regulation or guideline regarding capital adequacy, or any change therein or in
the interpretation or application thereof by any Governmental Authority charged
with the administration or interpretation thereof or compliance by the Lender
with any request or directive regarding capital adequacy (whether or not having
the force of law) from any central bank or Governmental Authority including,
without limitation, the issuance of any final rule, regulation or guideline,
does or shall have the effect of reducing the rate of return on the Lender's
capital as a consequence of its obligations hereunder to a level below that
which the Lender could have achieved but for such adoption, change or compliance
(taking into consideration the Lender's policies with respect to capital
adequacy) by any material amount, then from time to time, within 15 days after
demand by the Lender, the Borrower shall pay to the Lender such additional
amount or amounts as will compensate the Lender for such reduction.
(d) If the Lender becomes entitled to claim any additional amounts
pursuant to this subsection 3.8, it shall promptly notify the Borrower thereof.
A certificate as to any additional amounts payable pursuant to this subsection
3.8 submitted by the Lender to the Borrower shall be conclusive absent manifest
error. The covenants contained in this
<PAGE>
31
subsection 3.8 shall survive the termination of this Agreement and payment of
the Notes.
(e) In the event that the Borrower shall receive a certificate with
respect to additional amounts payable pursuant to subsection 3.8(a) or (b) in
respect of Floating Rate Loans, the Borrower shall have the option during the
Pre-Completion Loan Period, exercisable by notice to the Lender at least three
Working Days prior to the next succeeding Interest Payment Date, to convert all
then outstanding Floating Rate Loans to loans bearing interest at the Substitute
Eurodollar Rate (as determined in accordance with subsection 3.6) on such next
succeeding Interest Payment Date. Should such option be exercised, the Lender
agrees that in the event that such additional amounts pursuant to this
subsection 3.8 would at any time during the PreCompletion Loan Period no longer
be payable with respect to Floating Rate Loans, the Lender shall promptly notify
the Borrower thereof and as soon as practicable thereafter, the outstanding
loans bearing interest at the Substitute Eurodollar Rate shall be converted to
Floating Rate Loans.
3.9 Indemnity. The Borrower agrees to indemnify the Lender and to
---------
hold the Lender harmless from any loss or expense which the Lender may sustain
or incur as a consequence of (a) default by the Borrower in payment when due of
the principal amount of or interest on the Floating Rate Loans, (b) default by
the Borrower in making a borrowing after the Borrower has given a notice in
accordance with subsection 2.2 or 2.5 or (c) default by the Borrower in making
any prepayment after the Borrower has given a notice in accordance with
subsection 3.2 or (d) a prepayment by the Borrower of Floating Rate Loans on a
day which is not the last day of a Eurodollar Interest Period, including, but
not limited to, any lost yield on such Loans at the applicable interest rates
provided for herein, but excluding any lost opportunity costs. This covenant
shall survive termination of this Agreement and payment of the outstanding
Notes.
3.10 Taxes. All payments made by the Borrower under this Agreement
-----
and the Notes shall be made free and clear of, and without reduction for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority excluding
net income taxes and franchise taxes based upon net income of the United States
of America or any political subdivision or taxing authority thereof or therein
(including Puerto Rico) and net income taxes and franchise taxes based upon net
income of the country in which the Lender is organized or in which its
Eurodollar lending office is located or any political subdivision or taxing
authority thereof or therein (such nonexcluded taxes being called "Indemnified
-----------
Taxes"). If any Indemnified Taxes are required to be withheld from any amounts
- -----
payable to the Lender hereunder or under the Notes, the amounts so payable to
the Lender shall be increased to the extent necessary to yield to the Lender
(after payment of all
<PAGE>
32
Indemnified Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Agreement and the Notes. Whenever any
Indemnified Tax is paid by the Borrower, as promptly as possible thereafter, the
Borrower shall send to the Lender, a certified copy of an original official
receipt showing payment thereof. If the Borrower fails to pay any Indemnified
Taxes when due to the appropriate taxing authority or fails to remit to the
Lender the required receipts or other required documentary evidence, the
Borrower shall indemnify the Lender for any incremental taxes, interest or
penalties that may become payable by the Lender as a result of any such failure.
3.11 Limitation of Liability. The Lender agrees that the liability of
-----------------------
the Borrower under this Agreement, the Notes and the other Obligations shall be
limited to the Collateral and the rights and remedies of the Lender against the
Collateral pursuant to the Collateral Security Documents; provided, however,
--------
that the Lender shall have full recourse to the Borrower and all of its assets
in an amount equal to 10% of the then outstanding Obligations less the amount of
cash or cash equivalents in the Working Capital Fund. Except to the extent set
forth in the immediately preceding sentence, in no event shall the Borrower or
any Partner or any officer, director, partner or Affiliate thereof be personally
liable or obligated for the Obligations. Nothing herein shall limit the full
recourse of the Lender to the Collateral pursuant to the Collateral Security
Documents or be deemed to constitute a waiver of liability, if any, of any
Person for damages for fraud or for any knowing misrepresentation made by such
Person herein or in any other Transaction Document or in any certificate or
other document delivered pursuant hereto or thereto.
SECTION 4. REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Lender to enter into this Agreement and to make
the Loans, the Borrower represents and warrants to the Lender that as of the
date hereof and as of each Borrowing Date:
4.1 Financial Statements. (a) The unaudited balance sheet of the
--------------------
Borrower as of June 30, 1992 and the related unaudited statements of income and
partners' capital and changes in partners' capital and cash flow for the period
then ended, heretofore furnished to the Lender and certified by a Responsible
Officer of the General Partner, are complete and correct in all material
respects and fairly present the financial condition of the Borrower on such date
and the results of its changes in partners' capital and cash flow for the period
then ended, in conformity with GAAP applied on a consistent basis. All
liabilities, direct and contingent, of the Borrower on such date required to be
disclosed pursuant to GAAP are disclosed in such balance sheet.
<PAGE>
33
(b) Since December 31, 1989, no material adverse change has occurred
in (i) the properties, business, operations, condition (financial or otherwise)
or prospects of the Borrower or (ii) the Borrower's ability to perform its
obligations under this Agreement, the Notes and the other Transaction Documents
to which it is a party, and, except as contemplated by this Agreement, the
Construction Loan Agreement and the Amended and Restated Partnership Agreement,
no additional Indebtedness has been incurred by the Borrower.
4.2 Partnership Existence and Business: Partners. (a) The Borrower is
--------------------------------------------
a limited partnership duly organized and validly existing under the laws of the
State of Texas, and is duly qualified to do business in the States of New York
and New Jersey, the only jurisdictions in which the conduct of its business or
the ownership or lease of its assets requires such qualification. The
Certificate of Limited Partnership of the Borrower has been duly filed in the
office of the Secretary of State of Texas and no other filing, recording,
publishing or other act is necessary or appropriate in connection with the
existence or the business of the Borrower except those which have been duly made
or performed. The Borrower is the sole general partner of the Limited
Partnership, and is engaged solely in: (i) the business of being the general
partner of the Limited Partnership, (ii) activities permitted pursuant to this
Agreement, (iii) the performance of the Limited Partnership's obligations
pursuant to the Basic Documents and the Operative Documents and (iv) to the
extent permitted by subsection 8.20 of the Construction Loan Agreement and
subsection 7.3(a) (i) of the Amended and Restated Partnership Agreement, the
performance of the Limited Partnership's obligations pursuant to any agreements
relating to the Exxon System.
(b) The General Partner is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and is duly
qualified to do business in the States of New York and New Jersey, the only
jurisdictions in which the conduct of its business or the ownership or lease of
its assets requires such qualification. The General Partner is the sole general
partner of the Borrower.
(c) The only partners of the Borrower on the date of execution and
delivery of this Agreement are the General Partner, as the sole general partner,
and the Limited Partner, as the sole limited partner.
(d) The Borrower has one Subsidiary, which Subsidiary is the Limited
Partnership. The General Partner has only one Subsidiary, which is the Borrower.
4.3 Compliance with Law. Each of the Borrower and the General Partner
-------------------
is in compliance with all Requirements of Law.
4.4 Power and Authorization: Enforceable Obligations. (a) The
------------------------------------------------
Borrower has full power and authority and the legal
<PAGE>
34
right to own its properties and to conduct its business as now conducted and
proposed to be conducted by it, to execute, deliver and perform this Agreement,
the Notes and the other Transaction Documents to which it is or is to become a
party, to take all action as may be necessary to complete the transactions
contemplated thereunder, and to act as the managing general partner of the
Limited Partnership. The Borrower has taken all necessary partnership and legal
action to authorize the borrowings hereunder on the terms and conditions of this
Agreement, the Notes and the other Transaction Documents to which it is a party,
to grant the liens and security interests provided for in the Collateral
Security Documents to which it is a party and to authorize the execution,
delivery and performance of this Agreement, the Notes and the other Transaction
Documents to which it is a party and to grant the Liens provided for therein. No
consent or authorization of, filing with, or other act by or in respect of any
other Person (including the General Partner) is required in connection with the
borrowings hereunder or with the execution, delivery or performance by the
Borrower or the validity or enforceability as to the Borrower of this Agreement,
the Notes and the other Transaction Documents except the filings and recordings
necessary to perfect the Liens created by the Collateral Security Documents and
except for the Governmental Approvals and other consents and approvals set forth
on Schedule 3 and 7 to the Construction Loan Agreement. Each of this Agreement,
the Pre-Completion Note and the other Transaction Documents to which the
Borrower is a party has been duly executed and delivered by the Borrower and
constitutes a legal, valid and binding obligation of the Borrower enforceable
against the Borrower in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally and by general
principles of equity. Except as otherwise disclosed in writing to the Lender,
neither the Partnership Agreement, the Amended and Restated Partnership
Agreement, once executed and delivered by the parties thereto, or any of the
Collateral Documents to which the Borrower is a party has been amended or
modified except in accordance with subsection 7.6, and all such documents are,
or upon execution and delivery thereof, will be in full force and effect.
(b) The General Partner has full power and authority and the legal
right to own its properties and to conduct its business as now conducted and
proposed to be conducted by it, to execute, deliver and perform the Collateral
Security Documents to which it is or is to become a party, to take all action as
may be necessary to complete the transactions contemplated thereunder, and to
act as the managing general partner of the Borrower. The General Partner has
taken all necessary corporate and legal action to authorize the execution,
delivery and performance of the Collateral Security Documents to which it is or
is to become a party and to grant the Liens provided for therein. No consent or
authorization of, filing with, or other act by or in respect of any other Person
(including, without limitation, any stockholder of the General Partner) is
required in connection
<PAGE>
35
with the execution, delivery or performance by the General Partner or the
validity or enforceability as to the General Partner of the Collateral Security
Documents to which it is a party. Each of the Partnership Agreement and the
other Collateral Security Documents to which the General Partner is a party has
been duly executed and delivered by the General Partner and constitutes, and
each of the other Collateral Security Documents to which the General Partner is
to become a party will upon execution and delivery thereof by the General
Partner and the other parties thereto (if any) constitute, a legal, valid and
binding obligation of the General Partner enforceable against the General
Partner in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and by general principles of equity.
(c) The Partnership Agreement has been duly authorized, executed and
delivered by each of the Partners and constitutes a valid and legally binding
obligation of each of the Partners enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity.
4.5 No Legal Bar. The execution, delivery and performance of this
------------
Agreement, the Notes and the other Transaction Documents, the creation of the
Liens provided for in the Collateral Security Documents, the borrowings by the
Borrower hereunder, and the use of the proceeds thereof, (a) will not violate
any Requirement of Law applicable to the Borrower or the General Partner, (b)
will not violate or result in any breach of, or constitute any default under,
any Contractual Obligation of the Borrower or the General Partner, except to the
extent that the failure to comply therewith could not reasonably be expected to
(i) have a material adverse effect on the business, operations, property,
condition (financial or otherwise) or prospects of the Borrower or the General
Partner, as the case may be, or (ii) materially adversely affect the ability of
the Borrower or the General Partner to perform its obligations under the
Transaction Documents to which it is a party, and (c) will not result in, or
require, the creation or imposition of any Lien on any of the properties or
revenues of the Borrower or the General Partner pursuant to any Requirement of
Law or Contractual Obligation, except for Permitted Liens. No approvals or
consents of any trustee or any holder of any indebtedness, obligations or
securities of the Borrower or the General Partner are required in connection
with the execution, delivery and performance by the Borrower or the General
Partner of any Transaction Document to which it is or is to become a party,
except such as have been duly obtained and are in full force and effect.
4.6 No Proceeding or Litigation. Except as disclosed by the Borrower
---------------------------
to the Lender in writing on or prior to the
<PAGE>
36
Closing Date, no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the best knowledge of the
Borrower, threatened against the Borrower or the General Partner, or against any
of their respective properties, rights, revenues or assets (a) which could
reasonably be expected to have a material adverse effect on the properties,
business, operations, condition (financial or otherwise) or prospects of the
Borrower or the General Partner, (b) which could reasonably be expected to
impair the value of the security granted to the Lender pursuant to the
Collateral Security Documents or (c) which could reasonably be expected to have
a material adverse effect on the ability of the Borrower or the General Partner
to perform its obligation under any Transaction Document to which it is a
party.
4.7 No Default or Event of Loss. Neither the Borrower nor the General
---------------------------
Partner is in default under or with respect to any Contractual Obligation in any
respect which could reasonably be expected to (i) have a material adverse
effect on the business, operations, property, condition (financial or otherwise)
or prospects of the Borrower or the General Partner or (ii) materially adversely
affect the ability of the Borrower or the General Partner to perform its
obligations under the Transaction Documents to which it is a party. No Default
or Event of Default has occurred and is continuing. No Event of Loss has
occurred which has not been notified in writing to the Lender pursuant to
subsection 6.12.
4.8 Ownership of Property; Liens. The Borrower has good title in fee
----------------------------
simple to, or a valid leasehold interest in, all its real property, and good
title to all its other property, free and clear of all liens other than
Permitted Liens. No mortgage or financing statement or other instrument or
recordation covering all or any part of such property which has been executed
by, or with the permission of, the Borrower or the General Partner is on file in
any recording office, except such as has been filed in favor of the Lender or as
evidences Permitted Liens.
4.9 Taxes. (a) The General Partner has filed or caused to be filed
-----
all tax returns which are required to be filed by it or by the Borrower, and has
paid or caused to be paid all taxes shown to be due and payable on such returns
or on any assessments made against it or the Borrower or any of its or the
Borrower's property and all other taxes, fees or other charges imposed on it or
the Borrower or any of its or the Borrower's property by any Governmental
Authority, except taxes, fees and other charges not yet due and payable or which
are being contested in accordance with the provisions of subsection 6.9.
(b) Except for (i) transfer taxes and registration, recordation and
other miscellaneous fees payable in connection with the recordation of any
Collateral Security Document and the filing of financing statements required to
perfect the Lender's rights under the Collateral Security Documents, if any,
which
<PAGE>
37
shall have been paid in full by the Borrower on or before each Borrowing Date to
the extent required hereunder, and (ii) other taxes or fees, if any, which are
indemnified against by the Borrower pursuant to subsection 3.10 and which shall
have been paid in full by the Borrower on or before each Borrowing Date
hereunder to the extent then required and (iii) taxes imposed with respect to
the Lender by the jurisdiction in which the Lender is organized, doing business
or in which an office of the Lender is located or any political subdivision or
taxing authority thereof or therein, to the best knowledge of the Borrower,
neither the execution and delivery of this Agreement, the Notes or any other
Transaction Document, nor the consummation of any of the transactions
contemplated hereby or thereby, will result in any tax, levy, impost, duty,
charge or withholding imposed by the United States or any agency or taxing
authority thereof, or by the State of New York or the State of New Jersey or any
political subdivision or taxing authority thereof or therein, on or with respect
to such execution, delivery or consummation, or upon or with respect to the
Lender.
4.10 Federal Regulations. Neither the Borrower nor the General
-------------------
Partner is engaged or will engage in the business of extending credit for the
purpose of "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulations G, U and X of the Board
of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. No part of the proceeds of the Loans will be used for
"purchasing" or "carrying" any "margin stock" as so defined or for any purpose
which violates, or which would be inconsistent with, the provisions of the
Regulations of such Board of Governors.
4.11 ERISA. No Reportable Event has occurred during the immediately
-----
preceding six-year period with respect to any Plan, and each Plan has complied
and has been administered in all material respects with applicable provisions of
ERISA and the Code. The present value of all benefits under each Single Employer
Plan maintained by the Borrower or any Commonly Controlled Entity (based on
those assumptions used to fund such Plan) did not, as of the last annual
valuation date applicable thereto, exceed the value of the assets of such Plan
allocable to such benefits. Neither the Borrower nor any Commonly Controlled
Entity has during the immediately preceding six-year period had a complete or
partial withdrawal from any Multiemployer Plan, and neither the Borrower nor any
Commonly Controlled Entity would become subject to liability under ERISA if the
Borrower or any Commonly Controlled Entity were to withdraw completely from all
Multiemployer Plans as of the most recent valuation date applicable thereto.
Neither the Borrower nor any Commonly Controlled Entity has received notice that
any Multiemployer Plan is in Reorganization or Insolvency nor, to the best
knowledge of the Borrower, is any such Reorganization or Insolvency reasonably
likely to occur. The present value (determined using actuarial and other
assumptions which are reasonable in respect of the benefits provided and the
employees participating) of the
<PAGE>
38
liability of the Borrower and each Commonly Controlled Entity for post
retirement benefits to be provided to their current and former employees under
Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA) does
not, in the aggregate, exceed the assets under all such Plans allocable to such
benefits.
4.12 Investment Company Act. Neither the Borrower nor the General
----------------------
Partner is an "investment company" or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
4.13 Collateral Security Documents. (a) The Collateral Security
-----------------------------
Documents are effective to create, in favor of the Lender, legal, valid and
enforceable liens on and security interests in all right, title, estate and
interest of the Borrower in and to all items of Collateral (other than those
items of Collateral which, individually or in the aggregate, are not material)
and (i) all necessary and appropriate recordings and filings have been duly
effected in all appropriate public offices and (ii) any cash required to be
deposited in the Debt Service Account has been so deposited so that the liens
and security interests created by the Collateral Security Documents constitute
perfected first liens (other than as to the Permitted Liens) on the Collateral
and prior (other than as to the Permitted Liens) perfected security interests in
all right, title, estate and interest of the Borrower, in and to all items of
Collateral (other than those items of Collateral which, individually or in the
aggregate, are not material) described therein (other than any item of
Collateral as to which a security interest cannot be perfected by filing,
recording, registering or, in the case of the cash, cash equivalents,
instruments and securities in the Debt Service Account, possession), prior and
superior to all other Liens, existing or future, except Permitted Liens. The
recordings and filings shown on the applicable schedules to such Collateral
Security Documents, the registration on the books of the Borrower of the pledge
effected by the Borrower Pledge Agreement and the continuous possession by the
Security Agent of the cash required to be deposited in the Debt Service Account
are all the recordings, filings and other action necessary and appropriate in
order to establish, protect and perfect the Lender's lien on and security
interest in the right, title, estate and interest of the Borrower in and to all
items of Collateral (other than those items of Collateral which, individually or
in the aggregate, are not material).
4.14 Full Disclosure. No representation, warranty or other statement
---------------
made by the Borrower or the General Partner in any Transaction Document or in
any certificate, written statement or other document furnished to the Lender by
or on behalf of the Borrower or the General Partner, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. There is no fact known
to the Borrower which the
<PAGE>
39
Borrower has not disclosed to the Lender in writing prior to the date hereof
which materially adversely affects,, or which could reasonably be expected in
the future to materially adversely affect, the properties, business, operations
or financial condition of the Borrower or the General Partner or the ability of
the Borrower or the General Partner to perform its obligations under any
Transaction Document to which it is or is to be a party.
4.15 Principal Place of Business, Etc. The principal place of
--------------------------------
business and chief executive office of the Borrower, and the office where the
Borrower keeps its records concerning the Collateral and all contracts relating
thereto, is located at 1600 Smith Street, Suite 5000, 50th Floor, Houston,
Texas.
4.16 Representations and Warranties. The representations and
------------------------------
warranties of the Borrower contained in the Transaction Documents (other than
this Agreement) were true and correct on and as of the dates when made, and,
except to the extent such representations and warranties relate solely to an
earlier date (in which case such representations and warranties shall have been
true and correct as of such earlier date), the Borrower hereby confirms each
such representation and warranty with the same effect as if set forth in full
herein.
4.17 Environmental Matters. (a) (i) There are and have been no
---------------------
Hazardous Materials at, upon, under or within or discharged or emitted from any
property of the Borrower, including, without limitation, the air, subsurface,
soil, surface and ground water and aquifers of any property (including, without
limitation, the Collateral) of the Borrower except for such Hazardous Materials
as may be permitted to be maintained thereon in accordance with any Relevant
Environmental Law and have been maintained in accordance with all Relevant
Environmental Laws; and
(ii) no Environmental Discharges have occurred at, upon, under,
within or from any property (including, without limitation, the Collateral) of
the Borrower.
(b) No Environmental Notice has been received by the Borrower with
respect to any Adverse Environmental Event.
(c) (i) With respect to any property (including, without limitation,
the Collateral) of the Borrower there are and have been no violations of any
Relevant Environmental Law, except for violations which do not constitute an
Adverse Environmental Event;
(ii) no outstanding order, judgment or decree which constitutes an
Adverse Environmental Event has been entered with respect to the Borrower or any
property (including, without limitation, the Collateral) of the Borrower; and
<PAGE>
40
(iii) no other event has occurred which constitutes an Adverse
Environmental Event.
The representations set forth in this subsection 4.17 relating to
conditions existing on any property (including, without limitation, the
Collateral) of the Borrower prior to the acquisition of such property by the
Borrower shall be made only to the best knowledge of the Borrower after diligent
inquiry.
SECTION 5. CONDITIONS PRECEDENT
--------------------
5.1 Conditions to Closing Date. The agreement of the Lender to make
--------------------------
any Loan requested to be made by it on or after the date of the Original Loan
Agreement is subject to the satisfaction of the following conditions precedent
(the date on which all of such conditions were satisfied (February 22, 1990)
being referred to herein as the "Closing Date"):
------------
(a) Pre-Completion Note. The Lender shall have received the Pre-
-------------------
Completion Note, conforming to the requirements of subsection 2.7(a), and
duly executed and delivered by the Borrower.
(b) Agreement. The Lender shall have received a counterpart of this
---------
Agreement, duly executed and delivered by the Borrower.
(c) Construction Loan Agreement. The Lender shall have received
---------------------------
counterparts of the Construction Loan Agreement, duly executed and
delivered by the Limited Partnership, GEPFC and the lenders parties
thereto.
(d) capital Contribution Agreement. The Lender shall have received
------------------------------
counterparts of the Capital Contribution Agreement, duly executed and
delivered by the respective parties thereto.
(e) Partnership Agreement. The Lender shall have received a true and
---------------------
complete copy of the Partnership Agreement, certified by the General
Partner as such on the Closing Date.
(f) Legal Opinion. The Lender shall have received the opinion of
-------------
counsel to the Borrower and the General Partner, dated the Closing Date,
substantially in the form of Exhibit B to the Original Loan Agreement.
(g) Authorizing Actions. All partnership,, corporate and other
-------------------
proceedings in connection with the transactions contemplated by this
Agreement and the other Transaction Documents, and all documents and
instruments incident thereto, shall be reasonably satisfactory in form and
substance to the Lender and its counsel; and the Lender and its counsel
shall have received such counterpart originals
<PAGE>
41
or certified or other copies of all such documents and instruments and of
all records of partnership and corporate proceedings in connection with
such transactions, and such incumbency and signature certificates of
officers of the Borrower and the General Partner, as the Lender or its
counsel may reasonably request.
(h) Good Standing Certificates. The Lender shall have received copies
--------------------------
dated as of a recent date from the Secretary of State or other appropriate
authority of such jurisdiction, evidencing the good standing of the General
Partner in Texas, New Jersey and New York and the legal existence of the
Borrower in Texas, New Jersey and New York.
(i) Financial Statements. The Lender shall have received from the
--------------------
Borrower the financial statements referred to in subsection 4.1(a) of the
Original Loan Agreement.
(j) Insurance Coverage. The Lender shall have received binders for,
------------------
or other evidence satisfactory to it (including, if requested by the
Lender, certificates of insurers, independent brokers and the Borrower) of,
the maintenance of and payment of premiums with respect to insurance
required to be maintained by the Borrower pursuant to the provisions of
this Agreement and any other Transaction Document in effect on the Closing
Date.
(k) Partnership Interest Pledge Agreements. The Lender shall have
--------------------------------------
received the Borrower Pledge Agreement and the General Partner Pledge
Agreement, each dated the Closing Date and duly executed and delivered by
the Borrower or the General Partner, as the case may be.
(l) Collateral Agency Agreement. The Lender shall have received the
----------------------------
Collateral Agency Agreement, dated the Closing Date and duly executed and
delivered by the parties thereto.
5.2 Conditions to Pre-Completion Loans. The obligation of the Lender
----------------------------------
to make any Pre-Completion Loan on any Borrowing Date during the Pre-Completion
Loan Period is subject to the satisfaction of the following conditions:
(a) Affiliate Loans. If the proceeds of any Pre-Completion Loan will
---------------
be used by the Borrower to make a loan to any of its Affiliates, such loan
shall be evidenced by a note which contains terms and conditions reasonably
satisfactory to the Lender and shall be secured in a manner reasonably
satisfactory to the Lender, and the Lender shall have received (i) copies'
of any collateral security documents reasonably requested by the Lender and
(ii) such title insurance, surveys, lien searches, opinions and other
documents (including, without limitation, valuations, appraisals, and
environmental and engineering reports) as
<PAGE>
42
the Lender shall have reasonably requested, in each case, in form and
substance reasonably satisfactory to the Lender,
(b) Perfection of Liens and Security Interests. All filings,
------------------------------------------
recordings and other actions that are necessary or desirable in order to
establish, protect, preserve and perfect the Lender's lien on and perfected
security interest in all right, title, estate and interest of the Borrower
IN and to all Collateral covered by the Collateral Security Documents
entered into on or prior to such Borrowing Date, prior and superior to all
other Liens, existing or future, except Permitted Liens, shall have been
duly made or taken and all fees, taxes and other charges relating to such
filings and recordings and other actions shall have been paid by the
Borrower. The Lender shall have received authenticated copies or other
evidence of all filings, recordings and other actions obtained or made in
order to create and perfect such first lien on and perfected security
interest in the right, title, estate and interest of the Borrower in and to
all Collateral covered by such Collateral Security Documents.
(c) Note Pledge Agreements. If the Borrower shall make a loan to any
----------------------
of its Affiliates with the proceeds of such Pre-Completion Loan or any
other Pre-Completion Loan, the Lender shall have received the Note Pledge
Agreement and any supplements thereto.
(d) Conditions to Construction Loan Agreement. The conditions
-----------------------------------------
precedent to the conversion of the pre-construction loans to construction
loans set forth in the Construction Loan Agreement shall have been duly
satisfied, or waived by the parties thereto with the consent of the Lender
by the Construction Conversion Date.
(e) Section 5.1 Conditions. The conditions to the Closing Date set
----------------------
forth in subsection 5.1 shall have been satisfied.
5.3 Conditions to Post-Completion Loans. The obligation of the Lender
-----------------------------------
to make any Post-Completion Loan on any Borrowing Date during the Post-
Completion Loan Period is subject to the satisfaction of the following
conditions:
(a) Notes. The Lender shall have received the Post-Completion Note and
-----
the Working Capital Note, conforming to the requirements of subsection
2.7(c) and 2.7(d), respectively, and duly executed and delivered by the
Borrower.
(b) Fixed Charge Coverage Ratio. The Lender shall have received within
---------------------------
S Business Days prior to any Borrowing Date, pro forma financial statements
of the Limited Partnership, reasonably acceptable to the Lender, calculated
in accordance with Schedule 2, that show the Limited
<PAGE>
43
Partnerships projections of its net income for each year during the
remaining Preferred Distribution Period. Except with respect to the Working
Capital Loan, the Fixed Charge Coverage Ratio, as calculated from such pro
forma financial statements, shall be projected to be at least equal to 1.20
to 1.00 for each year during the Preferred Distribution Period.
(c) Conditions to Capital Contribution Agreement. The conditions
--------------------------------------------
precedent to the making by the Owner Trustee of capital contributions to
the Limited Partnership on the Second Capital Contribution Date, shall have
been satisfied or waived by the parties thereto with the consent of the
Lender on or prior to the Second Capital Contribution Date.
(d) Completion Certificate. The Lender shall have received a
----------------------
counterpart of the Completion Certificate.
(e) Section 5.1 Conditions. The conditions to the Closing Date set
----------------------
forth in subsection 5.1 shall have been satisfied.
(f) Security Deposit Agreement. The Lender shall have received a copy
--------------------------
of the Security Deposit Agreement, duly executed by the Limited
Partnership, the Borrower, GEPFC, the Lender and the Security Agent.
(g) Schedule 6. The amortization schedule for the Post-Completion
----------
Loans shall have been determined to the reasonable satisfaction of the
Borrower and the Lender in accordance with the provisions of subsections
2.7(c) and 3.2(a).
5.4 Conditions to All Loans. The obligations of the Lender to make
-----------------------
any Pre-Completion Loan or Post-Completion Loan are subject to the satisfaction,
on the Borrowing Date for such Loan, of the following conditions precedent:
(a) Representations and Warranties. The representations and warranties
------------------------------
made by the Borrower or the General Partner herein, in any other
Transaction Document to which it is a party, or in any Basic Document or
Operative Document to which it is a party, or which are contained in any
certificate, document, financial or other statement furnished by the
Borrower or the General Partner hereunder or thereunder or in connection
herewith or therewith, shall be true and correct on and as of such
Borrowing Date as if made on and as of such date, except to the extent that
such representations and warranties relate specifically to an earlier date
(in which case such representations or warranties shall have been true and
correct on and as of such earlier date).
(b) No Default, Event of Default or Event of Loss. No Default or Event
---------------------------------------------
of Default shall be in existence on such
<PAGE>
44
Borrowing Date, or shall occur after giving effect to the Loan to be made
on such Borrowing Date. No Declared Event of Loss shall be in existence on
such Borrowing Date. Satisfaction of this condition with respect to any
particular Default, Event of Default or Event of Loss shall not constitute
satisfaction of this condition with respect to any other Default, Event of
Default or Event of Loss, including, without limitation, a subsequent
Default, Event of Default or Event of Loss which arises out of identical or
similar circumstances.
(c) Borrowing Certificate. In the case of each Pre-Completion Loan and
---------------------
Post-Completion Loan, the Lender shall have received from the Borrower, a
Pre-Completion Loan Borrowing Certificate or a Post-Completion Loan
Borrowing Certificate, as the case may be, dated such Borrowing Date.
(d) Notice of Borrowing. In the case of each Pre-Completion Loan and
-------------------
Post-Completion Loan, the Lender shall have received from the Borrower, a
Notice of Borrowing referred to in subsection 2.2 or 2.5, as the case may
be.
(e) Additional Documents. The Lender shall have received such other
--------------------
documents and opinions as may be reasonably requested by it.
(f) Additional Matters. All other documents and legal matters in
------------------
connection with the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to the Lender and its counsel.
SECTION 6. AFFIRMATIVE COVENANTS
---------------------
So long as the Commitments remain in effect, any Note remains
outstanding and unpaid or any other amount is Owing to the Lender hereunder or
under the Collateral Security Documents, the Borrower hereby agrees that:
6.1 Conduct of Business, Maintenance of Existence, Etc. The Borrower
--------------------------------------------------
shall at all times (i) engage solely in the business of being the sole general
partner of the Limited Partnership, making loans to Affiliates and any other
transactions contemplated by subsections 7.3 and 7.7, the performance of the
Limited Partnership's obligations pursuant to the Basic Documents and the
Operative Documents and to the extent permitted by the Amended and Restated
Partnership Agreement, the performance of the Limited Partnership's obligations
pursuant to any agreements relating to the Exxon System and (ii) preserve and
maintain in full force and effect its existence as a limited partnership under
the laws of the State of Texas and its qualification to do business in the
States of New Jersey, New York and Texas and in each other jurisdiction in which
the conduct of its business requires such qualification. The General Partner
will (i) engage solely in the business of being the sole
<PAGE>
45
general partner of the Borrower and the performance of the Borrower's
obligations pursuant to the Transaction Documents and (ii) will preserve and
maintain in full force and effect its existence as a corporation under the laws
of the State of Texas and its qualification to do business in the States of New
Jersey and New York and in each other jurisdiction in which the conduct of its
business requires such qualification.
6.2 Payment of Obligations. The Borrower will pay, discharge or
----------------------
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all of its Indebtedness and other obligations of whatever nature,
except for any Indebtedness or other obligations which are being contested in
good faith and by appropriate proceedings and to the extent that the Borrower is
complying with the relevant provisions of subsection 6.09 or 6.10, as
applicable.
6.3 Performance under Other Agreements. The Borrower shall duly
----------------------------------
perform and observe all of the covenants, agreements and conditions on its part
to be performed and observed hereunder and under the Notes and the other
Transaction Documents to which it is a party.
6.4 Insurance Coverage. Without limiting any of the other obligations
------------------
or liabilities of the Borrower under this Agreement, the Borrower shall at all
times carry and maintain or cause to be carried and maintained at its own
expense such insurance as is customarily maintained by prudent owners of
property of the type and in the location of the insured Collateral or cause to
be carried and maintained. The Borrower shall also carry and maintain any other
insurance that the Lender may reasonably require from time to time. All
insurance carried pursuant to this subsection shall be with such insurers, in
such amounts and in such form as shall be satisfactory to the Lender.
6.5 Inspection of Property; Books and Records. The Borrower shall
-----------------------------------------
keep proper books of record and account in which full, true and correct entries
shall be made of all of its transactions in conformity with GAAP, and the
Borrower shall permit representatives of the Lender to visit and inspect its
properties and, to examine its books of record and account, to discuss its
affairs, finances and accounts with its principal officers, engineers and
independent accountants all at such reasonable times during business hours and
at such intervals as the bender may request.
6.6 Compliance with Laws. (a) The Borrower shall comply with all
--------------------
laws, rules, regulations and orders, and shall from time to time obtain and
comply with all Government Approvals as shall now or hereafter be necessary
under applicable law or regulation, except any thereof the non-compliance with
which could not reasonably be expected to (i) have a material adverse affect on
the business, operations, property, condition (financial or other) or prospects
of the Borrower or the rights or interests of the Lender or (ii) materially
adversely affect
<PAGE>
46
the Borrower's ability to perform its obligations under the Transaction
Documents to which it is a party.
(b) Notwithstanding the foregoing, the Borrower shall cause all
Hazardous Materials on any Collateral to be handled and disposed of in
compliance with all Relevant Environmental Laws.
6.7 Financial Statements. (a) The Borrower shall furnish or cause to
--------------------
be furnished to the Lender:
(i) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the balance sheet of the
Borrower as of the end of such fiscal year and the related statements of
partners capital and statements of changes in partners' capital and cash
flow of the Borrower for such fiscal year, setting forth after fiscal year
1991, in each case in comparative form the figures for the previous fiscal
year certified without qualification or exception as to the scope of its
audit by independent public accountants of national standing reasonably
acceptable to the Lender;
(ii) as soon as available, but in any event within 60 days after the
end of each quarterly period of each fiscal year of the Borrower (other
than the last quarterly period of each such fiscal year), the unaudited
balance sheet of the Borrower as of the end of such quarterly period and
the related unaudited statements of income and partners' capital and
statements of changes in partners' capital and cash flow of the Borrower
for such quarterly period and for the portion of the fiscal year then
ended, setting forth after fiscal year 1991, in each case in comparative
form the figures for the previous period certified by the chief executive
officer or chief financial officer of the General Partner (subject to
normal year-end audit adjustments);
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and in accordance with GAAP.P
applied consistently throughout the periods reflected therein (except for
changes approved or required by the independent public accountants certifying
such statements and disclosed therein)
(b) Within 15 Business Days prior to the Second Capital Contribution
Date, the Borrower shall deliver to the Lender, pro forma financial statements
of the Limited Partnership, reasonably acceptable to the Lender, that show the
Limited Partnership's projections of its net income for each year during the
Preferred Distribution Period.
(c) Within 5 Business Days prior to the incurrence of any Additional
Debt, the Borrower shall deliver to the Lender, pro forma financial statements
of the Limited Partnership, reasonably acceptable to the Lender, that show the
Limited
<PAGE>
47
Partnership's projections of its net income for each year during the remaining
Preferred Distribution Period.
6.8 Certificates; Other Information. The Borrower shall furnish or
-------------------------------
cause to be furnished to the Lender:
(a) concurrently with the delivery of the financial statements
referred to in clauses (i) and (ii) of subsection 6.7(a), a certificate of
a Responsible Officer of the General Partner stating that, to the best of
his knowledge after due inquiry, the Borrower, during the period covered by
such financial statements has observed and performed in all material
respects all of its covenants and other agreements, and satisfied in all
material respects every condition, contained in this Agreement and the
other Transaction Documents to be observed, performed or satisfied by it,
and that such Responsible Officer has obtained no knowledge of any Default
or Event of Default hereunder at any time during such period or on the date
of such certificate and no knowledge of any default or event which with the
giving of notice or the lapse of time or both would constitute a default
under any of the other Transaction Documents at any time during such period
or on the date of such certificate (or, if any such Default or Event of
Default or default or event shall have occurred, a statement setting forth
the nature thereof and the steps being taken by the Borrower to remedy the
same);
(b) as soon as available, but in any event within 60 days after the
end of each quarterly period of each fiscal year of the Borrower, a
certificate of the chief executive officer or the chief financial officer
of the General Partner setting forth the amount on deposit in the Working
Capital Fund on such date and the amount of any note receivable from the
Limited Partnership in respect of loans made by the Borrower to the Limited
Partnership from funds on deposit in the Working Capital Fund;
(c) promptly after the same are sent, copies of all financial
statements and reports which the Borrower sends to its Partners;
(d) promptly after the filing thereof, the "Annual Returns" (Form
5500 series) and attachments filed annually with the Internal Revenue
Service with respect to each Single Employer Plan, if any, of the Borrower;
(e) with respect to any Single Employer Plan adopted or amended by
the Borrower or the General Partner or any Commonly Controlled Entity on or
after the first Borrowing Date, any determination letters received from the
Internal Revenue Service with respect to the qualification of such Plan, as
initially adopted or amended under Section 401(a) of the Code;
<PAGE>
48
(f) promptly after delivery or receipt thereof, a copy of each
material notice, demand or other communication delivered by or received by
the Borrower pursuant to any Transaction Document;
(g) promptly, such additional financial and other information with
respect to the Borrower, the General Partner or the Project, as the Lender
may from time to time reasonably request; and
(h) promptly, of any request made by Texas Eastern or any of its
Subsidiaries or Affiliates to pursue the feasibility and economic viability
of transmitting electrical power as described in the Texas Eastern Letter
Agreement and to provide the Lender with copies of the results of any
feasibility or other studies performed in connection therewith.
6.9 Taxes and Claims. The Borrower shall pay and discharge all taxes,
----------------
assessments and governmental charges or levies imposed on it or on its income or
profits or on any of its property prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a Lien upon the
property of the Borrower. The Borrower shall have the right, however, to contest
in good faith the validity or amount of any such tax, assessment, charge, levy
or claim by proper proceedings timely instituted, and may permit the taxes,
assessments, charges, levies or claims so contested to remain unpaid during the
period of such contest if: (a) the Borrower diligently prosecutes such contest,
(b) the Borrower sets aside on its books adequate cash reserves with respect to
such contested item, (c) during the period of such contest the enforcement of
any contested item is effectively stayed; provided, however, that this clause
--------- -------
(c) shall apply to contested income taxes of a Partner only if the failure to
pay such tax may then become a Lien on any of the property of the Borrower or
may interfere with the operation of the Facility, and (d) in the reasonable
opinion of the Lender, such contest does not involve any substantial danger of
the sale, forfeiture or loss of any of the property of the Borrower, title
thereto or any interest therein. The Borrower will promptly pay or cause to be
paid any valid, final judgment enforcing any such tax, assessment, charge, levy
or claim and cause the same to be satisfied of record.
6.10 Mechanics' and Materialmen's Liens. The Borrower shall protect
----------------------------------
and defend its interest in, and the Lender's Liens on, the Borrower's property
against any Lien for the performance of work or the supply of materials filed
against the property of the Borrower; provided, that the Borrower shall have the
--------
right to contest in good faith any such Lien by proper proceedings timely
instituted, and may permit such Lien to exist during the period of such contest
if: (a) the Borrower diligently prosecutes such contest, (b) the Borrower sets
aside on its books adequate cash reserves with respect to such contested item,
(c) during the period of such contest the enforcement of any contested item and
<PAGE>
49
the Lien relating thereto is effectively stayed, and (d) in the reasonable
opinion of the Lender, such contest does not involve any substantial danger of
the sale, forfeiture or loss of any of the property of the Borrower, title
thereto or any interest therein. The Borrower will promptly pay or cause to be
paid any valid, final judgment enforcing any such item, cause the Lien relating
thereto to be removed and otherwise cause such item to be satisfied of record.
6.11 Maintenance of Property. (a) The Borrower, at its expense, shall
-----------------------
keep all property useful and necessary to its business in good working order and
condition and make all repairs, replacements and renewals with respect thereto
and additions and betterments thereto which are necessary for such property to
comply with all Requirements of Law affecting it and all requirements of the
appropriate Board of Fire Underwriters or other similar body acting in and for
the locality in which such property is located.
(b) If, after any loss, destruction or damage with respect to the
Project referred to in clause (b) of the definition of "Event of Loss", the
conditions specified in subclauses (i), (ii) and (iii) of said clause (b) are
satisfied, the Borrower at all times thereafter will proceed diligently with all
work necessary to replace and/or repair such loss, destruction or damage to the
extent of the insurance proceeds or other funds received by it or the Limited
Partnership.
6.12 Notices. The Borrower will promptly give notice to the Lender:
-------
(a) of the occurrence of any Default, Event of Default or Event of
Loss;
(b) of the occurrence of any default or event of default under any
Pledged Note;
(c) of any litigation, investigation or proceeding affecting the
Borrower or the General Partner in which the amount involved is $500,000 or
more or in which injunctive or similar relief is sought;
(d) of the following events, as soon as possible and in any event
within 10 days after the Borrower knows or has reason to know of the
following events: (i) the occurrence or expected occurrence of any
Reportable Event with respect to any Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer Plan or
(ii) the institution of proceedings or the taking of any other action by
PBGC, the Borrower, any Commonly Controlled Entity or any Multiemployer
Plan with respect to the withdrawal from, or the terminating,
Reorganization or Insolvency of, any Plan;
<PAGE>
50
(e) of any loss or damage to the Collateral in excess of $500,000;
(f) during the Pre-Completion Loan Period, of any material delays for
any reason in construction of the Facility;
(g) of the execution and delivery of any Affiliate Note or Affiliate
Collateral Security Document;
(h) of the receipt by the Borrower of any Environmental Notice or of
any notice of any event that creates a material likelihood of the
occurrence of an Adverse Environmental Event; and
(i) of the imposition of any material Lien on or the assertion of any
material claim against any of the Borrower s property, or, during the
Security Period, any of its Affiliate's properties, to the extent such
properties are covered by any Affiliate Collateral Security Document.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer of the General Partner setting forth details of the
occurrence referred to therein and stating what action the Borrower proposes to
take with respect thereto and, with respect to a notice given pursuant to clause
(g), shall be accompanied by a copy of the Affiliate Note or Affiliate
Collateral Security Document. For all purposes of clause (d) of this subsection,
the Borrower shall be deemed to have all knowledge or knowledge of all facts
attributable to the administrator of such Plan.
6.13 Maintenance of Liens of the Collateral Security Documents. The
---------------------------------------------------------
Borrower will:
(a) promptly upon the request of the Lender and at the Borrower's
expense, execute and deliver, or cause the execution and delivery of, and
thereafter register, file or record in each appropriate governmental
office, any Collateral Security Document or any document or instrument
supplemental to or confirmatory of such Collateral Security Document or
otherwise deemed by the Lender to be necessary or desirable for the
creation or perfection of the liens and security interests purported to be
created by such Collateral Security Document; and
(b) protect and defend its interest in the Collateral against Liens
asserted by any third Person, other than Permitted Liens, and, subject to
the second sentence of subsection 6.09 and subsection 6.10, immediately
discharge any such Lien so asserted. The Borrower shall promptly notify the
Lender of any such assertion.
6.14 Agent for Service of Process. The Borrower shall appoint and
----------------------------
continuously retain CT Corporation System, or such
<PAGE>
51
other agent as shall be reasonably acceptable to the Lender, as its agent in the
State of New York for receipt of service of process and shall pay all costs,
fees, and expenses in connection therewith. The Borrower has paid all fees
necessary to retain CT Corporation System or such other agent for such purposes
for the forthcoming 12-month period.
6.15 Employee Plans. For each Plan adopted by the Borrower which is
--------------
an employee benefit plan as defined in Section 3(2) of ERISA, the Borrower shall
(a) use its best efforts to seek and receive determination letters from the
Internal Revenue Service to the effect that such Plan is qualified within the
meaning of Section 401(a) of the Code; and (b) from and after the date of
adoption of any such Plan, cause such Plan to be qualified within the meaning of
Section 401(a) of the Code and to be administered in all material respects in
accordance with the requirements of ERISA and Section 401(a) of the Code.
6.16 Fiscal Year. The fiscal year of the Borrower shall be a calendar
-----------
year.
6.17 Right of First Refusal: Further Security. After the expiration
----------------------------------------
of the Post-Completion Loan Period, the Borrower shall have the option to obtain
additional financing in accordance with the provisions of this subsection. If
the Borrower shall decide to obtain such financing, the Borrower shall offer the
Lender in writing the opportunity to provide such financing on the same terms
and conditions as the Post-Completion Loans. As soon as practicable, but in no
event later than 30 days after receipt of such offer, the Lender shall notify
the Borrower in writing whether or not the Lender has accepted such offer. If
the Lender shall accept such offer, as soon as practicable thereafter, the
Lender and the Borrower shall enter into an amendment hereto providing for the
increase in the Post-Completion Commitment by the aggregate amount of such
additional financing and any other changes as shall be agreed to by the Borrower
and the Lender to give effect to such financing. If the Lender shall refuse such
offer, the Borrower shall be permitted to offer the opportunity to provide such
financing to any other Person on such terms and conditions as shall be
acceptable to the Borrower, provided, that the Borrower complies with the
--------
provisions of subsection 7.2(b).
SECTION 7. NEGATIVE COVENANTS
------------------
So long as the Commitments remain in effect, any Note remains
outstanding and unpaid or any other amount is owing to the Lender hereunder or
under the Collateral Security Documents, the Borrower agrees that:
7.1 Merger, Sale of Assets, Purchases, Etc. The Borrower shall not
--------------------------------------
merge into or consolidate with any other Person, change its form of organization
or its business, or liquidate or dissolve itself (or suffer any liquidation or
<PAGE>
52
dissolution), or sell, lease, transfer or otherwise dispose of all or any
substantial portion of its assets other than sales of interests in the Borrower
which are permitted by the Amended and Restated Partnership Agreement. During
the Pre-Completion Loan Period, the Borrower will not purchase or acquire any
assets other than (x) Permitted Investments and (y) any other assets approved by
the Lender.
7.2 Indebtedness; Guarantee Obligations. The Borrower shall not
-----------------------------------
create, incur, assume or suffer to exist any Indebtedness or Guarantee
Obligations, except:
(a) Indebtedness or Guarantee Obligations of the Borrower to the
Lender; and
(b) after the expiration of the Post-Completion Loan Period, any
Indebtedness of the Borrower (the "Additional Debt") to an Additional
---------------
Lender, provided that (i) after giving effect to the aggregate pro forma
--------
payments of principal and interest of such Additional Debt, calculated by
amortizing such Additional Debt over the remaining term of the Post-
Completion Note, the Fixed Charge Coverage Ratio, as calculated from the
pro forma financial statements delivered pursuant to subsection 6.7(c),
shall be projected to be at least equal to 1.20 to 1.00 for each year
during the remaining Preferred Distribution Period, (ii) the Lender shall
have rejected the offer of the Borrower to provide such Additional Debt
pursuant to subsection 6.17, (iii) if such Additional Debt is secured by
any collateral other than the Collateral covered by the Collateral Security
Documents, (x) the Borrower shall grant the Lender a first priority
security interest in such collateral and the Additional Lender shall have a
second lien on such collateral and (y) each Additional Lender shall have
executed an intercreditor agreement in form and substance satisfactory to
the Lender, (iv) such Additional Debt shall be subordinate and junior in
priority of payment to the Loans and shall have such other subordination
provisions as shall be acceptable to the Lender, including, without
limitation, the agreement of the Additional Lender to not exercise any
right of acceleration of such Additional Debt or any other right to declare
such Additional Debt due and payable prior to its stated maturity, unless
(A) the Lender has declared as due and payable prior to its stated maturity
any of the Obligations and has not rescinded such declaration or (B) any
Event of Default specified in Section 8(e) or 8(f) has occurred and is
continuing and (v) such Additional Debt shall have such other terms and
conditions as shall be approved by the Lender, such approval not to be
unreasonably withheld.
7.3 Distributions, Etc. The Borrower shall not, without the prior
------------------
written consent of the Lender, make any distributions to the Partners or to any
other Person in respect of any partnership interest in the Borrower or any
payments of management fees to any Partner, whether in cash or other
<PAGE>
53
property, or redeem, purchase or otherwise acquire any interest of any Partner
in the Borrower, or permit any Partner to withdraw any capital from the
Borrower; provided, that, so long as (a) no Default or Event off Default has
--------
occurred and is continuing and (b) the Borrower has at least $10,000,000 in cash
or cash equivalents, (i) the Borrower may make loans to any Affiliate, (ii)
during and after the Post-Completion Loan Period, the Borrower may make
distributions to its Partners in respect of their partnership interests in the
Borrower, and (iii) the Borrower may pay the Development and Construction Fee
received pursuant to the Development Agreement to any Person to whom the
Borrower has assigned its rights to such Fee or has agreed to pay such Fee.
7.4 Liens. The Borrower shall not create or suffer to exist any Lien
-----
on any of its properties or assets, other than Permitted Liens and, after the
Post-Completion Loan Period, the liens permitted by subsection 7.2(b).
7.5 Nature of Business. The Borrower shall not engage in any business
------------------
other than the business of being the managing general partner of the Limited
Partnership, making loans to Affiliates and any other transactions contemplated
by subsections 7.3 and 7.7, performing the Limited Partnership's obligations
pursuant to the Basic Documents and the Operative Documents and, to the extent
permitted by the Construction Loan Agreement and the Amended and Restated
Partnership Agreement, the performance of the Limited Partnership's obligations
pursuant to any agreements relating to the Exxon System. The General Partner
will engage solely in (i) the business of being the general partner of the
Borrower and (ii) the performance of the Borrower's obligations pursuant to the
Transaction Documents.
7.6 Amendment of Contracts. ETC. The Borrower will not, without the
---------------------------
prior written consent of the Lender, agree to or permit (a) the cancellation,
suspension or termination of any Transaction Document or during the Security
Period, any Affiliate Note or Affiliate Collateral Security Document (except
upon the expiration of the stated term thereof), except as contemplated by this
Agreement and the Collateral Security Documents, (b) the assignment of the
rights or obligations of any party to any Transaction Document or during the
Security Period, any Affiliate Note or Affiliate Collateral Security Document
(except (x) as contemplated by this Agreement or the Collateral Security
Documents or (y) as permitted without the consent of the Borrower by the terms
of such Transaction Document, Affiliate Note or Affiliate Collateral Security
Document or (c) any amendment, supplement or modification of, or waiver with
respect to any of the provisions of, any Transaction Document to which the
Borrower, the General Partner or any Affiliate is a party or with respect to
which the consent of the Borrower or the General Partner is required.
7.7 Investments. The Borrower shall not make any investments
-----------
(whether by purchase of stock, bonds, notes or other
<PAGE>
54
securities, loan, advance or otherwise) other than (a) Permitted Investments,
(b) during and after the Post-Completion Loan Period, short term loans to the
Limited Partnership for working capital purposes that are made from funds on
deposit in the Working Capital Fund and bear interest at the Commercial Paper
Rate, (c) capital contributions to the Limited Partnership to cure any event
which might give rise to a Special Event described in subsection 14.1(q) of the
Amended and Restated Partnership Agreement, provided, that (i) such capital
--------
contributions shall not be made with the proceeds of any new Loan hereunder and
(ii) the Borrower shall not be permitted to cure more than two consecutive
events and four cumulative events and (d) as permitted by subsection 7.3.
7.8 Leases. The Borrower shall not enter into, or be or become liable
------
under, any agreement for the lease, hire or use of any real property or of any
personal property, except for leases of personal property which are not Capital
Leases, the aggregate annual rental under which shall not, without the prior
written consent of the Lender (such consent not to be unreasonably withheld),
exceed $200,000 in any fiscal year of the Borrower.
7.9 Change of Office. The Borrower shall not change the location of
----------------
its chief executive office or principal place of business or the office where it
keeps its records concerning the Project and contracts relating thereto from
that existing on the date of this Agreement and specified in subsection 4.15,
unless the Borrower shall have given the Lender at least 30 days' prior written
notice thereof and all action necessary or advisable in the Lender's opinion to
protect and perfect the liens and security interests with respect to the right,
title, estate and interest of the Borrower in and to the Collateral created by
the Collateral Security Documents to which the Borrower is a party shall have
been taken.
7.10 Change of Name. The Borrower shall not change its name except on
--------------
at least 60 days' prior written notice to the Lender.
7.11 Compliance with ERISA. The Borrower shall not (a) terminate any
---------------------
single Employer Plan so as to result in any material liability to PBGC, (b)
engage in or permit any Affiliate to engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or section 4975 of the Code) involving any Plan
which would subject the Borrower to any material tax, penalty or other
liability, (c) incur or suffer to exist any material "accumulated funding
deficiency" (as defined in section 302 of ERISA), whether or not waived,
involving any Plan subject to Section 412 of the Code or part 3 of Title I(b) of
ERISA, (d) allow or permit to exist any event (including a Reportable Event) or
condition which represents a material risk of incurring a material liabilitY to
PBGC, or (e) permit the present value of all benefits vested under all single
Employer Plans subject to Title IV of ERISA, based on those assumptions used to
fund the Plans, as of any valuation date with respect to such Plans to
<PAGE>
55
exceed the value of the assets of the Plans allocable to such benefits by a
material amount.
7.12 Transactions with Affiliates and Others. The Borrower shall not,
---------------------------------------
directly or indirectly, purchase, acquire, exchange or lease any property from,
or sell, transfer or lease any property to, or borrow any money from, or enter
into any management or similar fee arrangement with, any Affiliate or any
officer, director or employee of the Borrower or the General Partner, except for
(a) the transactions contemplated by the Construction Loan Agreement, (b) a
management agreement with the Limited Partnership pursuant to which the Borrower
would receive an aggregate annual fee not to exceed 1.5% of the annual gross
revenues of the Project and an agreement to pay such fee over to Cogen
Technologies Management Company, to the extent paid to the Borrower and subject
to the liens and terms of the Collateral Security Documents, (c) loans and
capital contributions to Affiliates of the Borrower permitted by subsections 7.3
and 7.7, (d) the transactions contemplated by the Development Agreement,
including without limitation, assigning the Borrower's rights to payment of the
Development and Construction Fee and (e) transactions in the ordinary course of
business and upon fair and reasonable terms no less favorable than the Borrower
could obtain, or could become entitled to, in an arm's length transaction with a
Person which is not an Affiliate.
7.13 Capital Expenditures. The Borrower shall not directly or
--------------------
indirectly make or commit to make any expenditure in respect of the purchase or
other acquisition (including installment purchases or financing leases) of fixed
or capital assets (excluding normal replacements and maintenance which are
properly charged to current operations).
7.14 Sale and Leaseback. The Borrower shall not enter into any
------------------
arrangement with any Person providing for the leasing by the Borrower of real or
personal property which has been or is to be sold or transferred by the Borrower
to such Person or to any other Person to whom funds have been or are to be
advanced by such Person on the security of such property or rental obligations
of the Borrower.
7.15 Minimum Net Worth. The Borrower shall not permit its net worth at
-----------------
any time to be less than $0.
SECTION 8. EVENTS OF DEFAULT
-----------------
If any of the Events of Default listed below in this Section 8 shall
occur and be continuing, the Lender may, (i) by notice to the Borrower, declare
the Commitments to be terminated, whereupon the same shall forthwith terminate;
and/or (ii) declare the entire unpaid principal amount of the Loans and the
Notes, all interest accrued and unpaid thereon, and all other Obligations to be
forthwith due and payable, whereupon such amounts together with any Termination
Expense (Benefit) shall
<PAGE>
56
become and be forthwith due and payable, without presentment, demand, protest,
or notice of any kind, all of which are hereby expressly waived by the Borrower;
and/or (iii) foreclose on any or all of the Collateral; and/or (iv) proceed to
enforce all other remedies available to it under applicable law. Notwithstanding
the foregoing, if an Event of Default referred to in paragraph (e) or (f) below
shall occur, automatically and without notice the actions described in clauses
(i) and (ii) above shall be deemed to have occurred.
Such Events of Default are the following:
(a) Any principal of any Loan shall not be paid when due; or any
interest on any Loan or any fee or any other amount payable to the Lender
hereunder or under any Note or under any other Transaction Document shall
not be paid when due and shall remain unpaid for five or more days; or
(b) Any representation or warranty made by the Borrower herein or by
the Borrower, the Limited Partnership or any Partner in any Transaction
Document or Operative Document (other than any Project Document) to which
the Borrower, the Limited Partnership or such Partner is a party, or any
representation, warranty or statement in any certificate, financial
statement or other document furnished to the Lender by or on behalf of the
Borrower or the General Partner hereunder or to the Lender or any Project
Limited Partner by or on behalf of the Borrower, the Limited partnership or
any Partner under any Transaction Document or Operative Document (other
than any Project Document), shall prove to have been false or misleading as
of the time made or deemed made; or
(c) (i) The Borrower or the General Partner shall fail to perform or
observe any of its covenants contained in this Agreement (other than those
referred to in paragraph (a) above) or in any other Transaction Document or
Operative Document (other than any Project Document) to which it is a party
and such failure shall continue unremedied for a period of 30 days after
written notice thereof from the Lender to the Borrower; provided, however,
--------
that if such default is susceptible to cure, such 30 day period shall be
extended for such period of time (not to exceed 60 days) during which the
Borrower or the General Partner, as the case may be, shall be diligently
using its best efforts to cure such default or (ii) the Limited Partnership
shall fail to perform or observe any of its covenants contained in the
Amended and Restated Partnership Agreement or in any other Operative
Document (other than any Project Document) to which it is a party and such
failure shall continue unremedied for a period of 30 days after written
notice thereof from any Project Limited Partner or the Lender to the
Borrower; provided however, that such 30 day period shall be extended for
-------- -------
such period of time (not to exceed 60 days) during which the Borrower on
behalf of the Limited
<PAGE>
57
Partner shall be diligently using its best efforts to cure such default; or
(d) (i) The Borrower or the General Partner, with respect to any
Indebtedness or Guarantee Obligation, the principal amount of which exceeds
$500,000, or (ii) the Limited Partnership, with respect to any Indebtedness
(other than the Reimbursement Agreement) or Guarantee Obligation, the
principal amount of which exceeds $500,000 and a default in respect of
which, if uncured, could reasonably be expected to have a material adverse
effect on the business, properties, operations, condition (financial or
otherwise) or prospects of the Limited Partnership or could reasonably be
expected to materially adversely affect the ability of the Limited
Partnership to perform its obligations under the Operative Documents to
which it is a party, shall (x) default in any payment of principal of or
interest on any such Indebtedness (other than the Notes) or Guarantee
Obligation beyond the period of grace (not to exceed 30 days), if any,
provided in the instrument or agreement under which such Indebtedness or
Guarantee Obligation was created, or (ii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) or
the beneficiary or beneficiaries of such Guarantee Obligation (or a trustee
or agent on behalf of such beneficiary or beneficiaries) to cause, with the
giving of notice if required or the passage of time, or both, such
Indebtedness to become due prior to its stated maturity or such Guarantee
Obligation to become payable; or
(e) Any of the Borrower, the General Partner or the Limited
Partnership shall (i) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (ii) admit in
writing its inability, or be generally unable, to pay its debts as such
debts become due, (iii) make a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code
(as now or hereafter in effect), (v) file a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding up, or composition or readjustment of debts, (vi)
fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against such Person in an involuntary case
under the Bankruptcy Code, or (vii) take any partnership or corporate
action for the purpose of effecting any of the foregoing; or
<PAGE>
58
(f) A proceeding or case shall be commenced without the application or
consent of the Borrower, the General Partner or the Limited Partnership, in
any court of competent jurisdiction, seeking (i) its liquidation,
reorganization, dissolution, winding-up, or the composition or readjustment
of debts, (ii) the appointment of a trustee, receiver, custodian,
liquidator or the like of the Borrower, the General Partner or the Limited
Partnership, under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts or (iii)
a warrant of attachment, execution or similar process against all or a
substantial part of the assets of the Borrower, the General Partner or the
Limited Partnership, and such proceeding or case shall continue
undismissed, or any order, judgment or decree approving or ordering any of
the foregoing shall be entered and continue unstayed and in effect, for a
period of 60 or more days, or any order for relief against such Person
shall be entered in an involuntary case under the Federal Bankruptcy Code
(as now or hereafter in effect); or
(g) A judgment or judgments for the payment of money in excess of
$1,000,000 shall be rendered against the Borrower or the Limited
Partnership and such judgment or judgments shall remain in effect and
unpaid, unstayed and unbonded for a period of 60 or more consecutive days;
or
(h) (i) During the Security Period, any Affiliate of the Borrower,
with respect to any Affiliate Note of such Affiliate, the principal amount
of which exceeds $500,000, shall (i) default in any payment of principal of
or interest on any such Affiliate Note beyond the period of grace (not to
exceed 30 days), if any, provided in such Affiliate Note, or (ii) default
in the observance or performance of any other agreement or condition
relating to any such Affiliate Note or contained in any other instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the Borrower to cause, with the
giving of notice if required or the passage of time, or both, such
Affiliate Note to become due prior to its stated maturity; or
(i) Any Collateral Security Document, once executed and delivered,
shall cease to provide the Lender the liens, priority and security
interests intended to be created thereby on all items of Collateral (other
than items of Collateral which, individually or in the aggregate, are not
material) or, shall cease, for any reason, to be in full force and effect
(other than as a result of any action by the Lender and other than with
respect to such immaterial items of Collateral) or any party thereto
(other than the Lender) shall so assert in writing; or
<PAGE>
59
(j) The General Partner shall at any time cease to be the managing
general partner of the Borrower, or shall transfer, sell, assign, mortgage,
pledge or otherwise dispose of its partnership interest in the Borrower
without the Lender's prior written consent, except as contemplated by this
Agreement or the Amended and Restated Partnership Agreement; or
(k) (i) Robert McNair or his wife or children shall fail to own and
control, directly or indirectly, a beneficial interest of at least 8.2% in
the Borrower until the expiration of seven years after the Second Capital
Contribution Date and (ii) thereafter, Robert McNair or his wife or
children or an entity with a net worth equal to at least $100,000,000 shall
fail to own and control, directly or indirectly, a beneficial interest of
at least 8.2% in the Borrower;
(l) The Limited Partnership shall abandon the Project or otherwise
cease to diligently pursue the development or construction of the Project
for a period of longer than 30 days; or
(m) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan, or
(iii) a Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate any Single Employer Plan, which Reportable Event
or institution of proceedings is, in the reasonable opinion of the Lender,
likely to result in the termination of such Plan under ERISA, or (iv) any
Single Employer Plan shall terminate under Section 4041(c) of ERISA, or (v)
the Borrower or any Commonly Controlled Entity shall, or is, in the
reasonable opinion of the Lender, likely to incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization of,
a Multiemployer Plan, or (vi) any other event or condition shall occur or
exist with respect to a Plan; and in each case in clauses (i) through (vi)
above, such event or condition, together with all other such events or
conditions, if any, could subject the Borrower to any tax, penalty or other
liabilities in the aggregate material in relation to the business,
operations, property or financial or other condition of the Borrower; or
(n) At any time, (i) any beneficial ownership interests in the
Borrower shall be levied upon, attached or seized pursuant to a court order
and such order is not vacated or stayed within 20 days of entry of such
order, (ii) the Limited Partnership shall fail to pay, satisfy or otherwise
obtain a release of any bond or lien for the performance of work or the
supply of materials filed against
<PAGE>
60
the Site within 20 days of the Borrower's or the Limited Partnership's
becoming aware of the filing thereof unless, if any such Lien arose in
connection with a claim referred to in subsection 7.2(1) of the Amended and
Restated Partnership Agreement, the Borrower on behalf of the Limited
Partner shall be diligently contesting the same in accordance with, and
subject to, subsection 7.2(1) of the Amended and Restated Partnership
Agreement or (iii) any right, title or interest of the Limited Partnership
in and to the Site or any beneficial ownership interest of the Borrower in
the Limited Partnership shall be levied upon, attached or seized pursuant
to a court order and such order is not vacated or stayed within 20 days of
entry of such order; or
(o) (i) Any participant, other than the Limited Partnership or the
Borrower, shall fail to perform or observe in any material respect any of
its covenants or obligations contained in any of the Project Documents to
which it is a party within the grace period, if any, provided for in such
Project Documents, which failure shall continue unremedied for a period of
30 days after notice by the Lender or any Project Limited Partner to the
Borrower or (ii) (x) any material provision of any Operative Document shall
at any time for any reason cease to be valid and binding or in full force
and effect (other than as a result of any action by the Lender or any
Project Limited Partner) or any party thereto (other than the Lender or
Limited Partner) shall so assert in writing, (y) any material provision of
any Operative Document shall be declared to be null and void other than as
a result of any action by the Lender or any Project Limited Partner) or (z)
any party thereto shall deny that it has any further liability or
obligation under any Operative Document to which it is a party; provided
--------
that it shall not be an Event of Default under this paragraph (o) if, (1)
within 30 days after the occurrence of any of the foregoing events with
respect to any Project Document (other than the Site Lease Agreement, the
Power Sale Agreement or the Gas Transportation Agreement), the Managing
General Partner shall have submitted a plan to the Lender to execute and
deliver a document in substitution for such Project Document, which plan
shall be reasonably satisfactory in form and substance to the Lender, and
(2) within 90 days after the occurrence of any of the foregoing events with
respect to any Project Document (other than the Site Lease Agreement, the
Power Sale Agreement or the Gas Transportation Agreement), such Project
Document shall have been replaced with another document (x) which is
executed and delivered by parties acceptable to the Lender in its
reasonable discretion and (y) which has terms and conditions similar to,
and in the reasonable opinion of the Lender, at least as favorable to the
Project as, the substituted Project Document; or
<PAGE>
61
(p) During and after the Post-Completion Loan Period, (i) on any
Interest Payment Date, the cash available in the Debt Service Account is
insufficient to pay the accrued but unpaid interest on the Post-Completion
Loans or (ii) on any Installment Payment Date, the cash available in the
Debt Service Account is insufficient to make the installment payment then
due and payable; provided, however, that the Borrower shall have the right
--------
to cure three consecutive defaults and six cumulative defaults under this
paragraph (p) from funds other than the cash available in the Debt Service
Account; or
(q) The dissolution and liquidation of the Borrower without the prior
written consent of the Lender unless (i)) an entity meeting the
requirements of subsection 10.1 of the Amended and Restated Partnership
Agreement succeeds to the Borrower's interest thereunder or (ii) the
ultimate result of such dissolution and liquidation is the incorporation of
the Borrower and the ownership provisions of such subsection 10.1 apply to
such corporation; or
(r) The Limited Partnership shall cease to have a valid leasehold
interest in the Site or good and marketable title to the Project, in each
case, free and clear of all Liens other than Permitted Liens (as defined in
the Amended and Restated Partnership Agreement); or
(s) At any time, there shall fail to be an adequate supply of water to
the Facility to meet all reasonable requirements for the operation and
maintenance of the Facility; provided that it shall not be an Event of
--------
Default under this paragraph (s) if the Managing General Partner complies
with the proviso to subsection 8(o) hereof with respect to the Water Supply
Commitment in such a manner as will ensure, in the reasonable opinion of
the Lender, that there will be such an adequate supply of water to the
Facility; or
(t) If Exxon shall operate the Facility as set forth in Section
11.6B(ii) of the Steam Supply Agreement, unless such operation is pursuant
to an operating agreement to which the Lender has given its prior written
consent; or
(u) The General Partner shall fail to follow any gas purchase plan
approved by the Lender pursuant to Section 7.2(n) of the Amended and
Restated Partnership Agreement; or
(v) Any of the General Partner, the Borrower or the Limited
Partnership or any of their Affiliates shall enter into any agreement or
other arrangement in connection with the matters described in the Texas
Eastern Letter Agreement with Texas Eastern or any of its Subsidiaries or
Affiliates or any partnership or other venture in which any such party has
an interest without the prior written consent of the Lender and such
agreement or arrangement shall continue for
<PAGE>
62
thirty days after the Borrower shall have received written notice thereof
from the Lender.
The Borrower hereby agrees that the Lender may rely on the provisions of
Schedule 4 in determining whether or not a Default or Event of Default under
Section 8(b) or 8(c) has occurred.
Upon the occurrence of and during the continuance of any Event of
Default, all remedies available to the Lender under this Agreement or any
Collateral Security Document or by statute or by rule of law may be exercised by
the Lender at any time and from time to time whether or not the Loans shall be
due and payable, and whether or not the Lender shall have instituted any
foreclosure or other action for the enforcement of any of the Transaction
Documents. For the purpose of carrying out the provisions and exercising the
rights, powers and privileges granted by this paragraph, the Borrower hereby
irrevocably constitutes and appoints the Lender its true and lawful attorney-in-
fact to execute, acknowledge and deliver any instruments and to do and to
perform any acts such as are referred to in this paragraph in the name and on
behalf of the Borrower. This power of attorney is a power coupled with an
interest and cannot be revoked.
SECTION 9. MISCELLANEOUS
-------------
9.1 Amendments and Waivers. No provision of this Agreement or of any
----------------------
other Transaction Document to which the Lender is a party may be amended,
supplemented, modified or waived, except in accordance with the terms of this
subsection 9.1. The Lender and the Borrower may, from time to time, enter into
written amendments, supplements or modifications hereto or to any other
Transaction Document to which the Lender is a party for the purpose of adding
any provisions to this Agreement or any Note or any other Transaction Document
to which the Lender is a party or changing in any manner the rights of the
Lender or of the Borrower hereunder or thereunder, and the Lender may execute
and deliver to the Borrower a written instrument waiving, on such terms and
conditions as the Lender may specify in such instrument, any of the requirements
of this Agreement or any Note or any other Transaction Document to which the
Lender is a party or any Default or Event of Default and its consequences. Any
such amendment, supplement, modification or waiver shall be binding upon the
Borrower, the Lender and all future holders of the Notes.
9.2 Notices. All notices, requests and demands to or upon the
-------
respective parties hereto to be effective shall be in writing, by telecopier,
or, if available, by telex and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or when
deposited in the mail, first class postage prepaid, or in the case of
transmission by telecopier, when confirmation of receipt is obtained, or in the
case of telex notice, when sent, answerback
<PAGE>
63
received, addressed as follows or to such other address as may be hereafter
notified by the respective parties hereto and any future holders of the Notes:
The Borrower: Cogen Technologies Linden, Ltd.
c/o Cogen Technologies
1600 Smith Street
Suite 5000, 50th Floor
Houston, Texas 77002
Attention: Robert C. McNair
Telecopy: (713) 951-7747
The Lender: State Street Bank and Trust Company
of Connecticut, National Association
750 Main Street
Hartford, Connecticut 06103
Attention: Corporate Trust Department
Telecopy: (203) 244-1899
Copy to: General Electric Power Funding
Corporation
One River Road
Building Two, Room 741
Schenectady, New York 12345
Attention: Vice President - Investments
Telecopy: (518) 385-3649
Copy to: General Electric Capital Corporation -
TIFC
1600 Summer Street
Stamford, Connecticut 06927
Attention: Energy Project Operations
Telecopy: (203) 357-6366
except that any notice, request or demand to or upon the Lender pursuant to
subsections 2.2, 2.5 and 3.7 shall not be effective until received by the Lender
9.3 Release of Collateral. As soon as practicable after the
---------------------
expiration of the Pre-Completion Loan Period, the Lender shall release its Liens
on the Collateral (other than the Liens created by the Borrower Pledge Agreement
and the Security Deposit Agreement), provided that the Fixed Charge Coverage
--------
Ratio, as calculated in accordance with Schedule 2 from the pro forma financial
statements delivered to the Lender pursuant to subsection 6.7(b), is projected
to be at least equal to 1.20 to 1.00 and no Default or Event of Default shall
have occurred and be continuing. As a condition precedent to the release of such
Collateral, the General Partner shall deliver a certificate of a Responsible
Officer of the General Partner to the effect that (i) the Fixed Charge Coverage
Ratio, as calculated from such pro forma financial statements, is projected to
be at least equal to 1.20 to 1.00 for each year during the Preferred
Distribution
<PAGE>
64
Period and (ii) immediately prior to and after giving effect to such release, no
Default or Event of Default shall have occurred and be continuing. In connection
with any such release, the Lender, upon the request and at the expense of the
Borrower, shall execute such instruments of release of such Collateral as may be
reasonably requested by the Borrower.
9.4 No Waiver; Cumulative Remedies. No failure to exercise and no
------------------------------
delay in exercising, on the part of the Lender, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
9.5 Survival. All representations and warranties made in this
--------
Agreement and in any document, certificate or statement delivered pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement and the Notes.
9.6 Expenses. Whether or not any Loan is made or any of the other
--------
transactions contemplated by this Agreement are consummated, the Borrower shall
pay (i) all reasonable out-of-pocket expenses incurred by the Lender with
respect to the negotiation, preparation, execution and delivery of this
Agreement and the Collateral Security Documents and any amendments or other
modifications hereof or thereof, (provided, however, that the amount of the fees
-----------------
of Simpson Thacher & Bartlett, counsel to the Lender payable by the Borrower in
connection with services rendered prior to and including the Closing Date with
respect to the Original Loan Agreement and the Construction Loan Agreement shall
not exceed $700,000), (ii) during the Pre-Completion Loan Period, all other
reasonable expenses incurred by the Lender in connection with evaluating any
real or personal property acquired or proposed to be acquired by any Affiliate
of the Borrower with the proceeds of a loan from the Borrower, including,
without limitation, all fees and expenses of any environmental engineer, and
(iii) all direct expenses of the Lender to protect and perfect its liens on the
Collateral, including without limitation, all title and conveyancing charges,
recording and filing fees and taxes, mortgage taxes, insurance premiums
(including title insurance premiums), and surveyors' and appraisers' fees, and
will reimburse the Lender for all expenses paid by it of the nature described in
this subsection 9.6 which have been or may be incurred by the Lender with
respect to any and all of the transactions contemplated herein.
9.7 IndemnificatiOn. The Borrower agrees to pay, indemnify and hold
---------------
the Lender, any of its affiliates and any director or officer thereof harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind
<PAGE>
65
whatsoever which may at any time (including without limitation at any time
following the payment of the Notes) be imposed on, incurred by or asserted
against the Lender, any of its affiliates or any director or officer thereof in
any way relating to or arising out of this Agreement, the other Transaction
Documents, the Affiliate Collateral Security Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (all of the foregoing, collectively, the
"indemnified liabilities") provided, that the Borrower shall have no obligation
----------------------- --------
hereunder to the Lender, any of its affiliates or any director or officer
thereof with respect to indemnified liabilities arising from (i) the gross
negligence or willful misconduct of the Lender, any of its affiliates or any
director or officer thereof, (ii) legal proceedings commenced against the
Lender, any of its affiliates or any director or officer thereof, by any
security holder or creditor of the Lender, any of its affiliates or any director
or officer thereof arising out of and based upon rights afforded any such
security holder or creditor solely in its capacity as such, or (iii) legal
proceedings commenced against the Lender, any of its affiliates or any director
or officer thereof, by any Permitted Assignee or Transferee. The agreements in
this subsection shall survive repayment of the Notes and all other amounts
payable hereunder.
9.8 Successors and Assigns; Transferees; Transferred Interests. (a)
----------------------------------------------------------
This Agreement shall be binding upon and inure to the benefit of the Borrower,
the Lender, all future holders of the Notes and their respective successors and
assigns, except that the Borrower may not assign or transfer any of its rights
or obligations under this Agreement without the prior written consent of the
Lender.
(b) The Lender may at any time assign to one or more Affiliates or one
or more other entities, including, without limitation, an owner trust (a
"Permitted Assignee"), all or a portion of its interests, rights and obligations
------------------
under this Agreement (including, without limitation, all or a portion of its
Commitments, Loans at the time owing to it and the Notes). Within five Business
Days after notice of execution and delivery of such assignment, the Borrower, at
its own expense, shall execute and deliver to the Lender in exchange for the
Lender's surrendered Note(s) new Note(s) to the order of such Permitted Assignee
in an amount reflecting the portion of the Commitments assumed by it pursuant to
such assignment and new Note(s) to the order of the Lender in an amount
reflecting the portion of the Commitments retained by it hereunder. Such new
Note(s) shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note(s), shall be dated the. date of such
surrendered Note(s) and shall otherwise be in substantially the form of Exhibit
A-2 or A-3, as the case may be. Upon (i) the execution of such assignment, (ii)
delivery of an executed copy thereof to the Borrower and (iii) payment by such
Permitted Assignee of the purchase price specified therein, (x) such Permitted
Assignee shall be a Lender party hereto and, to the
<PAGE>
66
extent provided in such assignment (but in no event in excess of the amount
assigned), shall have the rights and obligations of a Lender hereunder and (y)
the Lender shall, to the extent provided in such assignment with respect to the
interests, rights and obligations of the Lender so assigned, be released from
its obligations under this Agreement. From and after the date of any assignment
pursuant to this subsection 9.8(b), the term "Lender" in this Agreement shall be
deemed to include the Owner Trustee and all Permitted Assignees under each such
assignment.
(c) The Borrower acknowledges that the Lender may at any time sell,
assign, transfer, grant participations in, or otherwise dispose of all or any
portion of its Loans or of its right, title and interest therein or in this
Agreement and the Collateral Security Documents (collectively, "Participations")
--------------
to one or more Persons (such Persons being herein called "Transferees");
-----------
provided, however, that (i) the Lender's obligations under this Agreement and
- -------- -------
under any Collateral Security Document shall remain unchanged, (ii) the Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) the Transferees shall be entitled to the benefit of
the provisions contained in subsections 3.8, 3.9 and 3.10 hereof, and (iv) the
Borrower shall continue to deal solely and directly with the Lender in
connection with the Lender's rights and obligations under this Agreement and
under any Collateral Security Document.
(d) The Borrower authorizes the Lender to disclose to any prospective
Permitted Assignee pursuant to paragraph (b) of this subsection 9.8 or
prospective Transferee pursuant to paragraph (c) of this subsection 9.8 all
financial or other necessary information in the Lender's possession concerning
the Borrower, any Partner or the Project which has been delivered to the Lender
by or on behalf of the Borrower pursuant to this Agreement or any other
Transaction Document or which has been delivered to the Lender by or on behalf
of the Borrower or any Affiliate of the Borrower in connection with the Lender's
credit evaluation of the Borrower, the Collateral, the collateral covered by the
Affiliate Collateral Security Documents and the Project prior to or after
entering into this Agreement, provided, however, that if any such information
-------- -------
furnished to the Lender is marked in writing as being confidential information,
the Lender shall use reasonable efforts to preserve the confidentiality of such
information.
9.9 Severability. Any provision hereof which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof and without affecting the validity or enforceability
of any provision in any other jurisdiction.
9.10 Headings. The headings of the various sections and paragraphs of
--------
this Agreement are for convenience of reference
<PAGE>
67
only, do not constitute a part hereof and shall not affect the meaning or
construction of any provision hereof.
9.11 Counterparts. This Agreement may be executed by one or more of
------------
the parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
9.12 The Lender Sole Beneficiary. All conditions of the obligations of
---------------------------
the Lender to make Loans hereunder are imposed solely and exclusively for the
benefit of the Lender and its assigns and no other Person shall have standing to
require satisfaction of such conditions in accordance with their terms or be
entitled to assume that the Lender will refuse to make Loans in the absence of
strict compliance with any or all of such conditions and no Person shall, under
any circumstances, be deemed to be a beneficiary of such conditions, any or all
of which may be freely waived in whole or in part by the Lender at any time if
in its sole discretion it deems it advisable to do so. The Lender is obligated
hereunder solely to make Loans if and to the extent required by this Agreement.
9.13 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.
9.14 Submission to Jurisdiction: Waivers. (A) The Borrower hereby
-----------------------------------
irrevocably and unconditionally:
(i) Submits for itself and its property in any legal action or
proceeding relating to this Agreement or any other Transaction Document, or
for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the State of New York,
the courts of the United States of America for the Southern District of New
York, and appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in any inconvenient court and agrees not
to plead or claim the same;
(iii) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in subsection 9.2 or at such other
address of which the Lender shall have been notified pursuant thereto; and
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted
<PAGE>
68
by law or shall limit the right to sue in any other jurisdiction.
(B) The Borrower and the Lender hereby irrevocably and
unconditionally waive trial by jury in any legal action or proceeding referred
to in paragraph (A) above.
9.15 Usury Savings.
-------------
(a) As set forth in subsection 9.13, the parties to this Agreement and
the other Transaction Documents intend for the rights and obligations of the
parties hereunder and thereunder to be construed in accordance with and governed
by the laws of the State of New York. The parties understand and expect that
such intention will be given effect by all courts of competent jurisdiction. The
parties also understand that the laws of the State of New York impose no
limitations on the rate or amount of interest which may be contracted for,
taken, reserved, charged or received in connection with the transactions
contemplated hereby. However, if and to the extent that any court of competent
jurisdiction elects to apply the laws of the State of Texas to govern the rights
and obligations of the parties under this Agreement or the other Transaction
Documents, then the following provisions of this subsection 9.15 shall apply
notwithstanding anything to the contrary contained in this Agreement, the Notes
or any of the other Transaction Documents, it being the intention of the parties
that the provisions of this subsection 9.15 shall control over all other
provisions of this Agreement, the Notes and the other Transaction Documents
which may be in apparent conflict therewith (to the extent that the laws of the
State of Texas are applicable).
(b) It is the intention of the parties hereto that the Lender shall
conform strictly to usury laws applicable to the Loans being made by it.
Accordingly, the parties hereto stipulate and agree that none of the terms and
provisions contained in the Notes, this Agreement or any of the other
Transaction Documents shall ever be construed to create a contract to pay to the
Lender for the use, forbearance or detention of money interest at a rate or in
an amount in excess of the Highest Lawful Rate (as defined below) applicable to
the Lender, and that, for purposes of this subsection 9.15, "interest" shall
include the aggregate of all charges or other consideration which constitute
interest under applicable laws (whether or not denominated as interest) and are
contracted for, taken, reserved, charged or received under any of this
Agreement, the Notes or the other Transaction Documents or otherwise in
connection with the transactions contemplated by this Agreement. If as a result
of prepayment, acceleration of maturity or otherwise, the effective rate of
interest which would otherwise be payable to the Lender under this Agreement,
the Notes or any of the other Transaction Documents would exceed the Highest
Lawful Rate applicable to the Lender for the actual period the Loans of the
Lender are outstanding, or if the Lender shall receive moneys or other
consideration that are deemed to
<PAGE>
69
constitute interest which would increase the effective rate of interest payable
by the Borrower to the Lender under this Agreement, the Notes or any other
Transaction Document to a rate in excess of the Highest Lawful Rate applicable
to the Lender for the actual period the Loans of the Lender are outstanding,
then (i) the amount of interest which would otherwise be payable by the Borrower
to the Lender under this Agreement, the Notes or such other Transaction
Documents shall be reduced to the highest amount allowed under applicable law
without exceeding the Highest Lawful Rate applicable to the Lender for the
actual period the Loans of the Lender are outstanding, and (ii) any interest
paid by the Borrower to the Lender in excess of the Highest Lawful Rate
applicable to the Lender for such period shall, at the option of the Lender, be
either refunded to the Borrower or credited by the Lender on the outstanding
principal of the Loans of the Lender. The parties further stipulate and agree
that, without limitation of the foregoing, all calculations of the rate or
amount of interest contracted for, taken, reserved, charged or received by the
Lender under any of this Agreement, the Notes and the other Transaction
Documents which are made for the purpose of determining whether such rate or
amount exceeds the Highest Lawful Rate applicable to the Lender shall be made,
to the extent permitted by applicable law, by amortizing, prorating, allocating
and spreading during the period of the full stated term of all of the
Obligations (even though the Obligations may in part be denominated as separate
Loans) owed to the Lender, and if longer and if permitted by applicable law,
until payment in full, all interest at any time so contracted for, taken,
reserved, charged or received by the Lender. The right to accelerate maturity of
the Obligations does not include the right to accelerate any interest which has
not otherwise accrued on the date of such acceleration, and the Lender does not
intend to collect any unearned interest in the event of acceleration or
otherwise. The immediately preceding sentence shall not be construed to negate
the Borrower's obligation to pay interest after maturity of the Loans pursuant
to subsection 3.3.
(c) If at any time and from time to time (i) the amount of interest
payable to the Lender on any date would otherwise exceed the Highest Lawful Rate
applicable to the Lender, the amount of interest payable to the Lender shall be
limited to the Highest Lawful Rate applicable to the Lender pursuant to
subsection (b) above and (ii) in respect of any subsequent interest computation
period, the amount of interest otherwise payable to the Lender would be less
than the amount of interest payable to the Lender computed at the Highest Lawful
Rate applicable to the Lender, then the amount of interest payable to the Lender
in respect of such subsequent interest computation period shall be computed at
the Highest Lawful Rate applicable to the Lender until the earlier to occur of
(iii) the total amount of interest payable to the Lender shall equal the total
amount of interest which would have been payable to the Lender if the total
amount of interest had been computed without giving effect to subsection (b)
above, or (iv) payment in full of all Obligations owing to the Lender.
<PAGE>
70
(d) The Lender and the Borrower agree that insofar as the provisions
of Article 1.04, Subtitle 1, Title 79 of the Revised Civil Statutes of Texas,
1925, as amended, are applicable to the determination of the Highest Lawful Rate
with respect to any of the Obligations owing to the Lender, the indicated rate
ceiling computed from time to time pursuant to Section (a) of such Article shall
apply to the Obligations owing to the Lender; provided, however, that to the
extent permitted by such Article, the Lender may from time to time by notice to
the Borrower revise the election of such interest rate ceiling as such ceiling
affects the then current or future balances of the Loans and other Obligations
owing to the Lender.
(e) To the extent that Texas law is at any time applicable to this
Agreement, the Notes, the other Transaction Documents or the transactions
contemplated hereby, or any of the obligations arising thereunder, Chapter 15,
Subtitle 3, Title 79, of the Revised Civil Statutes of Texas, 1925, as amended,
shall not apply to this Agreement, the Notes, the other Credit Documents or the
transactions contemplated hereby or any of such obligations.
(f) For purposes of this subsection 9.15 only, (i) "Highest Lawful
Rate" shall mean the maximum lawful non-usurious rate of interest (if any)
which, under Applicable Law, the Lender is permitted to charge the Borrower on
the transactions evidenced by, and arising in connection with, the Transaction
Documents from time to time in effect and to which each is a party, including
changes in such Highest Lawful Rate attributable to changes under Applicable Law
which permit a greater rate of interest to be contracted for, charged,
collected, received, taken or reserved as of the effective dates of the
respective changes and (ii) "Applicable Law" means the law in effect, from time
to time, applicable to this loan transaction and each Transaction Document which
lawfully permits the charging and collection of the highest permissible lawful,
non-usurious rate of interest on each Transaction Document and the transactions
evidenced thereby, and arising in connection therewith (including, but without
limitation, the Notes), including laws of the State of Texas and, to the extent
controlling, the laws of the United States of America.
9.16 Limitations on Recourse. The Borrower hereby agrees that, except
-----------------------
as hereinafter set forth, any claim or liability under this Agreement, the
Notes, the Letters of Credit or the Collateral Security Documents asserted
against the Owner Trustee by it shall be limited to satisfaction out of, and
enforcement against, the Trust Estate (as defined in the Trust Agreement).
Notwithstanding anything to the contrary contained herein or in any other
document, certificate or instrument executed by the Owner Trustee pursuant
hereto or thereto, the Borrower hereby acknowledges and agrees that neither the
Owner Trustee, Linden Owner Partnership nor any officer, employee, partner,
servant, controlling Person, manager, agent, authorized representative or
Affiliate of the Owner Trustee or Linden Owner
<PAGE>
71
Partnership (collectively, the "Non-Recourse Persons") shall have any liability
--------------------
to the Borrower or the General Partner (such liability, including such as may
arise by operation of law, being hereby expressly waived) for the performance of
any of the obligations of the Owner Trustee contained herein or therein or shall
otherwise be liable or responsible with respect thereto, except as hereinafter
set forth. If any claim of the Borrower against the Owner Trustee or alleged
liability to the Borrower of the Owner Trustee shall be asserted under this
Agreement or the Collateral Security Documents, the Borrower agrees that, except
as hereinafter set forth, it shall not have the right to proceed directly or
indirectly against the Non-Recourse Persons or against their respective
properties and assets (other than the Trust Estate) for the satisfaction of any
such claim or liability (except to the extent enforceable out of the Trust
Estate) in respect of any such claim or liability. Notwithstanding any of the
foregoing, it is expressly understood and agreed, however, that nothing
contained in this subsection 9.16 shall in any manner or any way (a) affect or
diminish any obligation, covenant or agreement of any Non-Recourse Person made
expressly in its individual capacity under any certificate executed by such Non-
Recourse Person on its own behalf or any right or benefit of any party hereto
under any such certificate or (b) affect or diminish any rights of any Person
against any other Person arising from misappropriation or misapplication of any
funds or for such other Person's fraud, gross negligence or willful misconduct.
The foregoing acknowledgements, agreements and waivers shall survive the
termination of this Agreement and shall be enforceable by any Non-Recourse
Person.
9.17 Effectiveness. This Agreement shall become effective on the date
-------------
on which (i) it is executed and delivered by the Borrower and the Lender and
(ii) the assignment of GEPFC's interest in the Original Loan Agreement to the
Owner Trustee shall have occurred.
9.18 Prior Amendments. The Borrower and the Lender hereby agree that
----------------
the provisions of the Consent and Amendment, dated as of December 13, 1990, and
the Sixth Amendment, dated as of February 4, 1992, to the Original Loan
Agreement shall remain in full force and effect (and notwithstanding any
contrary provision contained herein) until the conditions precedent to the
Second Capital Contribution Agreement set forth in Section 2(b) and (c) of the
Capital Contribution Agreement shall have been satisfied.
<PAGE>
72
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Term Loan Agreement to be duly executed and delivered by their proper
and duly authorized officers as of the day and year first above written.
COGEN TECHNOLOGIES LINDEN, LTD.,
By: Cogen Technologies, Inc.,
its general partner
By: [SIGNATURE ILLEGIBLE]
-------------------------------------
Title: VICE PRESIDENT
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, not in its individual capacity
but as Owner Trustee, as Lender
By: [SIGNATURE ILLEGIBLE]
---------------------------------------------
Title: Assistant Vice President
<PAGE>
FIRST AMENDMENT TO
GP TERM LOAN AGREEMENT
----------------------
FIRST AMENDMENT, dated as of April 30, 1993 (the "Amendment"), to the
---------
Amended and Restated Term Loan Agreement, dated as of September 15, 1992 (the
"Term Loan Agreement"), between Cogen Technologies Linden, Ltd., a Texas limited
-------------------
partnership (the "General Partner"), and State Street Bank and Trust Company of
---------------
Connecticut, National Association (not in its individual capacity but solely as
trustee) (the "Lender").
------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the General Partner and the Lender have agreed to make
certain amendments to the Term Loan Agreement;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in
-------------
the Term Loan Agreement shall have such defined meanings when used herein.
2. Amendments to Section 1.1 of the Term Loan Agreement (Certain
-------------------------------------------------------------
Defined Terms). Section 1.1 of the Term Loan Agreement is hereby amended as
- -------------
follows:
(a) by deleting the definition of "Installment Payment Date" in its
entirety and substituting, in lieu thereof, the following new definition:
"'Installment Payment Date': each of the dates specified on
------------------------
Schedule 6, commencing with December 1, 1994."
(b) by deleting clause (b) in the definition of "Interest Payment
Date" in its entirety and substituting, in lieu thereof, the following
clause (b):
"(b) commencing with the Second Capital Contribution Date, the last
day of September, 1992, December, 1992 and March, 1993, and
thereafter, the first day of each
<PAGE>
2
March, June, September and December, commencing with June 1, 1993
and"; and
3. Amendments to Section 2.7 of the Term Loan Agreement (Notes).
------------------------------------------------------------
Section 2.7 of the Term Loan Agreement is hereby amended as follows:
(a) by deleting the reference to "10.50%" in clause (ii) of the last
sentence of paragraph (c) and inserting, in lieu thereof, "11.40%";
(b) by inserting the words "as amended, supplemented or otherwise
modified from time to time," in the first parenthetical in paragraph (d)
before the words "the Working Capital Note"; and
(c) by deleting the words "the date which is 15 years after the
Second Capital Contribution Date" from clause (v) of paragraph (d) and
inserting, in lieu thereof, the date "September 1, 2007".
4. Amendments to Section 3.2 of the Term Loan Agreement (Commitment
----------------------------------------------------------------
Reductions; Optional and Mandatory Prepayments). Section 3.2 of the Term Loan
- ----------------------------------------------
Agreement is hereby amended as follows:
(a) by deleting the second sentence of paragraph (a) in its entirety
and inserting, in lieu thereof, the following sentence:
"The Borrower shall pay the Working Capital Loan on September 1,
2007."
(b) by deleting the reference to "10.50%" in clause (ii) of the third
sentence of paragraph (a) and inserting, in lieu thereof, "11.40%".
5. Amendments to Section 3.4 of the Term Loan Agreement (Making of
---------------------------------------------------------------
Payments). Section 3.4 of the Term Loan Agreement is hereby amended by deleting
- --------
the words "unless the result of such extension would be to extend such payment
into another calendar month, in which event such payment shall be made on the
immediately preceding Working Day" from the last sentence thereof and inserting,
in leiu thereof, the words "and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension".
6. Amendments to Schedules. (a) Schedule 4 to the Term Loan
-----------------------
Agreement is hereby amended by deleting the words "22-1/2 year" from paragraph 3
of Section A thereof and substituting in lieu thereof, the words "22 year and 7
month".
<PAGE>
3
(b) Schedule 6 to the Term Loan Agreement is hereby amended by
deleting Schedule 6 in its entirety and inserting, in lieu thereof, a new
Schedule 6 attached hereto as Exhibit A.
7. Full Force and Effect. Except as expressly amended and modified
---------------------
by this Amendment, the Term Loan Agreement shall continue to be, and shall
remain, in full force and effect in accordance with its terms.
8. No Other Amendments. This Amendment shall be effective solely to
-------------------
the extent set forth herein, and is not and shall not be construed (i) to be an
amendment of any other term or condition of the Term Loan Agreement or (ii) to
prejudice any other right or rights which the Lender may now have or may have in
the future under or in connection with the Term Loan Agreement.
9. Counterparts. This Amendment may be executed by the parties
------------
hereto in any number of separate counterparts, all of which counterparts, taken
together, shall be deemed to constitute one and the same instrument.
10. Conditions Precedent. This Amendment shall become effective as of
--------------------
the date first above written upon receipt by the Lender of (i) this Amendment,
together with Endorsement No. 1 to the Working Capital Note in the form of
Exhibit B hereto, each duly executed by the General Partner and the Lender, (ii)
a First Amendment to the Amended and Restated Partnership Agreement dated as of
the date hereof, executed by the Limited Partner and the General Partner and
(iii) a First Amendment to the Security Deposit Agreement dated as of the date
hereof executed by the Security Agent, the Escrow Agent, the Limited
Partnership, the General Partner and Lender.
11. Governing Law. This Amendment and the rights and obligations of
-------------
the parties hereunder shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York.
<PAGE>
4
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
COGEN TECHNOLOGIES LINDEN, LTD.
By: Cogen Technologies, Inc.,
its general partner
By: /s/ Lawrence Thomas
-----------------------------
Title: LAWRENCE THOMAS
VICE PRESIDENT
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION (not
in its individual capacity, but solely
as trustee), as Lender
By: _______________________________
Title
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
COGEN TECHNOLOGIES LINDEN, LTD.
By: Cogen Technologies, Inc.,
its general partner
By:_________________________________
Title:
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION (not
in its individual capacity, but solely
as trustee), as Lender
By: [SIGNATURE ILLEGIBLE]
---------------------------------
Title: Assistant Vice President
<PAGE>
EXECUTION COPY
--------------
================================================================================
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
Dated as of
September 15, 1992
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS
-----------
1.1 Defined Terms....................................................... 2
1.2 Other Definitions................................................... 23
ARTICLE II
FORMATION AND CONTINUATION OF PARTNERSHIP
2.1 Formation of Partnership; Name...................................... 24
2.2 Purpose; Business of the Partnership................................ 24
2.3 Authorizations...................................................... 24
2.4 Principal Office; Offices; Addresses................................ 26
2.5 Further Filings..................................................... 26
2.6 Term................................................................ 26
ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 Partners and Contributions.......................................... 27
3.2 Interest on Capital Contributions................................... 27
3.2 Withdrawal of Initial Limited Partner............................... 27
ARTICLE IV
DISTRIBUTIONS
4.1 Distributable Cash.................................................. 28
4.2 Distributions Prior to the Second Capital Contribution Date......... 28
4.3 Distributions After the Second Capital Contribution Date
and Prior to the Flip Date..................................... 28
4.4 Distributions Subsequent to the Flip Date........................... 29
4.5 Arrears Account..................................................... 29
4.6 Tax Indemnity....................................................... 29
4.7 Net Cash From Sales or Refinancing.................................. 30
4.8 Special Event....................................................... 31
4.9 Failure to Make Second Capital Contribution......................... 31
4.10 Debt Service Account Interest....................................... 31
ARTICLE V
ALLOCATION OF CERTAIN PROFITS AND LOSSES
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
FOR BOOK AND TAX PURPOSES
5.1 Intentionally Omitted........................................... 31
5.2 Operating Profits............................................... 31
5.3 Operating Losses................................................ 33
5.4 Depreciation.................................................... 34
5.5 Gains........................................................... 35
5.6 Losses.......................................................... 36
5.7 Qualified Income Offset......................................... 36
5.8 Minimum Gain Chargeback......................................... 36
5.9 Allocation of Organizational Expenses............................ 37
5.10 Partner Nonrecourse Deductions.................................. 37
5.11 Curative Allocations............................................ 37
5.12 Tax Allocations................................................. 37
5.13 Property Subject to 704(c) and 704(b)........................... 37
5.14 Gross Income Allocation......................................... 37
5.15 Debt Service Account Interest................................... 38
5.16 Limitations..................................................... 38
5.17 Ordering Rules.................................................. 38
ARTICLE VI
BOOKS OF ACCOUNT, RECORDS, REPORTS AND TAX MATTERS
6.1 Books and Records............................................... 38
6.2 Information Kept by Managing General Partner.................... 39
6.3 Fiscal Year..................................................... 39
6.4 Partnership Funds............................................... 39
6.5 Income Tax Elections/Return Preparation......................... 40
6.6 Tax Accounting Matters.......................................... 40
6.7 Financial Statements............................................ 41
6.8 Computations.................................................... 43
6.9 Taxes and Tax Controversies..................................... 44
6.10 Inspection; Reports to Regulatory Authorities................... 45
ARTICLE VII
MANAGEMENT
7.1 Appointment; Powers of the Managing General Partner............. 45
7.2 Certain Management Duties and Responsibilities of the Managing
General Partner................................................ 48
7.3 Restrictions on Powers of the Managing General Partner.......... 55
7.4 Fee............................................................. 58
7.5 Limitations on Liability of Managing General Partner............ 59
7.6 Partnership Information Meetings................................ 60
7.7 Limitations on the Partners..................................... 60
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.8 Cooperation Regarding Permits and Power Purchase Agreement...... 60
7.9 Time Devoted to Partnership..................................... 60
7.10 Other Business Activities....................................... 61
7.11 Special Indemnity............................................... 61
ARTICLE VIII
CALLS FOR AND PAYMENT OF FUNDS.................... 61
ARTICLE IX
CONDITIONS PRECEDENT
9.1 Conditions to the Contributions on the Initial Capital
Contribution Date............................................. 61
9.2 Conditions to the Contributions on or Prior to the Second
Capital Contribution Date...................................... 61
ARTICLE X
TRANSFER AND ENCUMBRANCE
10.1 Transfer of Partnership Interest; General Provisions............ 62
10.2 Additional Partners............................................. 63
10.3 Revisions to this Agreement Upon Transfer or Encumbrance........ 64
10.4 Amendment to Certificate of Limited Partnership.................. 64
10.5 Voluntary Withdrawal by Limited Partners........................ 64
ARTICLE XI
OPTIONS TO PURCHASE
11.1 Fair Market Sales Value Purchase Options........................ 66
ARTICLE XII
NOTICES
12.1 Notices......................................................... 68
12.2 Addresses....................................................... 68
ARTICLE XIII
WITHDRAWAL.............................. 69
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE XIV
SPECIAL EVENTS AND DISSOLUTION; LIQUIDATION; TERMINATION
14.1 Special Events...................................................... 69
14.2 Certain Remedies Following Special Event............................ 75
14.3 Events of Dissolution............................................... 78
14.4 Procedure in Dissolution and Liquidation............................ 78
14.5 Disposition of Documents and Records................................ 79
14.6 Termination......................................................... 80
ARTICLE XV
RIGHTS AND OBLIGATIONS OF LIMITED PARTNER
15.1 Management of the Partnership....................................... 80
15.2 Limitation on Liability of Limited Partners......................... 80
15.3 Limitation on Liability of Owner Trustee............................ 80
ARTICLE XVI
MISCELLANEOUS
16.1 Further Assurance................................................... 81
16.2 Amendments and Waivers.............................................. 81
16.3 Successors and Assigns.............................................. 82
16.4 Indemnification..................................................... 82
16.5 Incorporation By Reference.......................................... 82
16.6 Severability........................................................ 82
16.7 Headings and Table of Contents...................................... 83
16.8 Counterparts........................................................ 83
16.9 Submission to Jurisdiction; Waivers................................. 83
16.10 GOVERNING LAW....................................................... 83
16.11 Entire Agreement.................................................... 83
16.12 Arbitration of Gas Purchase Plan Disputes........................... 84
</TABLE>
-iv-
<PAGE>
Schedules
Schedule 1 Name; Addresses; Capital Contributions
Schedule 2 Tax Assumptions
Schedule 3 Permits
Schedule 4 Site
Schedule 5 Calculation of Distributions
Schedule 6 Spare Parts Inventory
Schedule 7 Distribution Table
Schedule 8 Insurance
Schedule 9 Termination Expense (Benefit)
Schedule 10 Certain Provisions Relating to Special Events
-v-
<PAGE>
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (the
"Agreement") of COGEN TECHNOLOGIES LINDEN VENTURE, L.P. (the "Partnership") is
--------- -----------
made and entered into as of the 15th day of September, 1992 by and among ("Cogen
-----
Linden", the "General Partner" or the Managing General Partner"), ROBERT C.
- ------ --------------- ------------------------
McNAIR (the "Initial Limited Partner") and STATE STREET BANK AND TRUST COMPANY
-----------------------
OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity but as
trustee (in such capacity, the "Owner Trustee" or the "Preferred Limited
------------- -----------------
Partner", or the "Common Limited Partner", as applicable) under a Trust
- ------- ----------------------
Agreement, dated as of December 28, 1990 (as amended, supplemented or otherwise
modified from time to time, the "Trust Agreement"), between the Owner Trustee
---------------
and Linden Owner Partnership, a Delaware partnership ("Linden Owner
------------
Partnership").
- -----------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Cogen Linden and the Initial Limited Partner are parties to a
Limited Partnership Agreement dated as of December 4, 1989 (as heretofore
amended, supplemented, restated or otherwise modified, the "Original Partnership
--------------------
Agreement") and Cogen Linden and the Initial Limited Partner desire to amend and
- ---------
restate in its entirety the Original Partnership Agreement in order to make the
Owner Trustee the sole limited partner of the Partnership and Cogen Linden the
sole general partner of the Partnership; and
WHEREAS, pursuant to the Original Partnership Agreement, Cogen Linden
contributed $50 to the capital of the Partnership in exchange for its General
Partnership Interest (as hereinafter defined) in the Partnership and the Initial
Limited Partner contributed $50 to the capital of the Partnership in exchange
for its limited partner interest in the Partnership; and
WHEREAS, pursuant to the Original Partnership Agreement, Cogen Linden
may admit additional limited partners to the Partnership and upon such admission
the Initial Limited Partner shall withdraw from the Partnership; and
WHEREAS, pursuant to the Capital Contribution Agreement (as
hereinafter defined), the Owner Trustee has agreed, subject to the terms and
conditions set forth herein, to make a capital contribution to the Partnership
on the Initial Capital Contribution Date (as hereinafter defined) in exchange
for the Common Limited Partnership Interest (as hereinafter defined), and,
subject to the terms and conditions set forth therein, to make additional
capital contributions to the Partnership on or
<PAGE>
before the Second Capital Contribution Date (as hereinafter defined) in respect
of the Common Limited Partnership Interest and in exchange for the Preferred
Limited Partnership Interest (as hereinafter defined); and
WHEREAS, on the Initial Capital Contribution Date, upon return of his
capital contribution to the Partnership and immediately following the admission
of the Owner Trustee as a limited partner of the Partnership, the Initial
Limited Partner shall withdraw from the Partnership;
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings contained herein, the parties hereto hereby agree that as of the
Initial Capital Contribution Date, the Initial Limited Partner shall cease to be
a Partner, the Partnership shall be continued between the General Partner and
the Owner Trustee and the Original Partnership Agreement shall be amended and
restated in its entirety as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Defined Terms. Terms used but not defined herein shall have
-------------
their respective meanings in the Construction Loan Agreement (as hereinafter
defined) (after giving effect to any waiver or amendment thereof with the
consent of the Preferred Limited Partner and notwithstanding the termination or
expiration thereof) and the following terms shall have the following meanings:
"Adjusted Capital Account Deficit" shall mean, with respect to any
--------------------------------
Partner, the deficit balance, if any, in such Partner's Capital Account as
of the end of the relevant fiscal year, after giving effect to the
following adjustments:
(i) credit to such Capital Account any amounts which such
Partner is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentence of Regulations Section 1.704-2(g) (1) and 1.704-
2(i) (5);
(ii) debit to such Capital Account the items described in
Regulations Sections 1.704-1(b) (2) (ii) (d) (4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulations Section 1.704-1(b) (2) (ii) (d)
and shall be interpreted consistently therewith.
<PAGE>
3
"Affiliate" shall mean, with respect to any Person, (a) any Person which,
---------
directly or indirectly, is in control of, is controlled by, or is under common
control with such Person, or (b) any Person who is a director or officer (i) of
such Person, (ii) of any Subsidiary of such Person or (iii) of any Person
described in clause (a) above. For purposes of this definition, control of a
Person shall mean the power, direct or indirect, (i) to vote 10% or more of the
securities having ordinary voting power for the election of directors of such
Person, or (ii) to direct or cause the direction of the management and policies
of such Person, whether by contract or otherwise; provided that for purposes of
--------
this definition, the Limited Partner (unless and until it exercises its rights
to become Managing General Partner under subsection 14.2 or 14.3) shall not be
deemed to be an Affiliate of the Partnership.
"Agent" shall mean GEPFC, as agent for the lenders parties to the
-----
Construction Loan Agreement, or any entity acting as successor agent under the
Construction Loan Agreement.
"Agreement" shall mean this Amended and Restated Agreement of Limited
---------
Partnership, as the same may be amended, supplemented, restated or otherwise
modified from time to time.
"Applicable Laws" shall mean all applicable laws, ordinances, judgments,
---------------
decrees, injunctions, writs and orders of any Governmental Authority and rules,
regulations, orders, interpretations, licenses and permits of any federal,
state, county, municipal, regional or other Governmental Authority.
"Appraisal Procedure" shall mean a procedure whereby two independent
-------------------
appraisers, one chosen by the Managing General Partner and one by the Preferred
Limited Partner (or, if only the Common Limited Partnership Interest is the
subject of the appraisal, the Common Limited Partner or, if both Limited
Partnership Interests are the subject of the appraisal, both the Preferred
Limited Partner and the Common Limited Partner), shall agree upon the
determinations then the subject of appraisal. The Managing General Partner or
such Limited Partner, as the case may be, shall deliver a written notice to the
other appointing its appraiser within 15 days (5 days in the case of subsection
14.2(g) (iii) hereof and subsection 11 (b) of the Capital Contribution
Agreement) after receipt from the other of a written notice appointing its
appraiser. Each appraiser then shall prepare a written appraisal with respect to
the determinations which then are the subject of appraisal. If within 30 days
(20 days in the case of subsection 14.2(g) (iii) hereof and 10 days in the case
of subsection 11 (b) of the Capital Contribution Agreement) after appointment of
the two appraisers they are unable to agree upon the amount in
<PAGE>
4
question, a third independent appraiser shall be chosen within 10 days (5 days
in the case of subsection 14.2(g) (iii) hereof and subsection 11(b) of the
Capital Contribution Agreement) thereafter by the mutual consent of such first
two appraisers or, if such first two appraisers fail to agree upon the
appointment of a third appraiser, such appointment shall be made by the American
Arbitration Association, or any organization successor thereto, from a panel of
arbitrators having experience in the business of operating a cogeneration
facility and a familiarity with equipment used or operated in such business. The
decision of the third appraiser so appointed and chosen shall be given within 30
days (20 days in the case of subsection 14.2(g) (iii) hereof and 10 days in the
case of subsection 11(b) of the Capital Contribution Agreement) after the
selection of such third appraiser. If three appraisers shall be appointed and
the determination of one appraiser is disparate from the median by more than
twice the amount by which the other determination is disparate from the median,
then the determination of such appraiser shall be excluded, the remaining two
determinations shall be averaged and such average shall be binding and
conclusive on the Managing General Partner and such Limited Partner; otherwise
the average of all three determinations shall be binding and conclusive on the
Managing General Partner and such Limited Partner. If the Managing General
Partner or such Limited Partner shall appoint an appraiser and the other Person
shall fail to appoint an appraiser in the manner specified herein, the
determination of the appraiser so appointed shall be binding and conclusive on
the Managing General Partner and such Limited Partner. The expenses of the
appraisal procedure shall be borne solely by the Partnership.
"Arrears Account" shall mean an account maintained with respect to the
---------------
Preferred Limited Partnership Interest that (i) is increased by the excess, if
any, at the end of each quarter after the Second Capital Contribution Date of
the amount specified in subsection 4.3(a) to the distributed with respect to the
Preferred Limited Partnership Interest in such quarter over the amount actually
distributed pursuant to such subsection with respect to the Preferred Limited
Partnership Interest in such quarter, (ii) is increased each quarter by the
Implicit Rate, compounded quarterly, times the amount described in clause (i)
and (iii) is decreased at the end of each quarter after the Second Capital
Contribution Date by distributions during such quarter with respect to the
Preferred Limited Partnership Interest pursuant to subsection 4.5 hereof.
"Business Day" shall mean a day other than a Saturday, Sunday or other day
------------
on which commercial banks in New York City or Linden, New Jersey are authorized
or required by law to close.
<PAGE>
"Capital Account" shall mean, with respect to any General Partner or
---------------
Limited Partner, the Capital Account maintained for such Partner in accordance
with the following provisions:
(i) To each Partner's Capital Account there shall be credited such
Partner's Capital Contributions, such Partner's distributive share of
Operating Profits, Gains and any items in the nature of income or gain
which are specially allocated pursuant to subsections 5.7, 5.8, 5.11, 5.14
and 5.15 hereof.
(ii) To each Partner's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any property (other than money)
(net of any liabilities assumed by such Partner or to which the property is
subject) distributed to such Partner pursuant to any provision of this
Agreement, and such Partner's distributive share of Operating Losses,
Depreciation, Losses, Organizational Expenses and any items in the nature
of deductions or losses which are specially allocated pursuant to
subsections 5.10 and 5.11 hereof.
(iii) In the event all or a portion of an interest in the Partnership
is transferred in accordance with the terms of this Agreement in a
transaction that does not result in a termination of the Partnership under
Code Section 708(b) (1) (B), the transferee shall succeed to the Capital
Account of the transferor to the extent it relates to the transferred
interest.
(iv) In determining the amount of any liability for purposes of
clause (i) and clause (ii) hereof, there shall be taken into account Code
Section 752(c) and any other applicable provisions of the Code and the
Regulations.
(v) Each Partner's Capital Account shall in all other respects be
maintained in accordance with the provisions of Regulations Section 1.704-
1(b).
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations.
"Capital Contribution" shall mean, with respect to any Partner, the amount
--------------------
of money and the initial Gross Asset Value of any property (other than money)
(net of any liabilities assumed by the Partnership or to which the property is
subject) contributed to the Partnership with respect to any partnership interest
held by such Partner pursuant to the terms of this Agreement.
<PAGE>
6
"Capital Contribution Agreement" shall mean the Capital Contribution
------------------------------
Agreement dated as of February 15, 1990, among the Partnership, Cogen Linden,
the Agent, GEPFC and the Owner Trustee, as amended, supplemented, restated or
otherwise modified from time to time.
"Cash Equivalents" shall mean (a) obligations of, or guaranteed as to
----------------
interest and principal by, the United States of America or any agency thereof,
in each case maturing within one year from the date of acquisition thereof, (b)
open market commercial paper of any corporation incorporated under the laws of
the United States of America or any state thereof and not an Affiliate of the
Partnership or the General Partner maturing no more than one year from the date
of creation thereof which paper is rated "prime-2" or its equivalent by Moody's
Investors Service Inc. or "A-2" or its equivalent by Standard & Poor's
Corporation, (c) certificates of deposit issued by any domestic commercial bank
of recognized stature having capital and surplus in excess of $500,000,000 or
any domestic branch of any foreign commercial bank of recognized stature having
capital and surplus in excess of $500,000,000 in each case maturing within one
year from the date of acquisition thereof, (d) repurchase agreements fully
collateralized by obligations described in clause (a) above in each case
maturing within one year from the date of acquisition thereof, or (e) a money
market fund registered under the Investment Company Act of 1940, the portfolio
of which is limited to obligations described in clause (a) above; provided,
--------
however, that the aggregate amount at any one time so invested (A) in open
- -------
market commercial paper issued by any corporation shall not exceed $5,000,000
and (B) in certificates of deposit issued by any one bank shall not exceed
$10,000,000.
"Certificate of Limited Partnership" shall mean the Certificate of Limited
----------------------------------
Partnership of the Partnership, dated December 4, 1989, filed with the Secretary
of State of the State of Delaware on December 6, 1989, and all amendments
thereto and restatements thereof.
"Code" shall mean the Internal Revenue Code of 1986, as the same may be
----
amended from time to time, or any corresponding provisions of succeeding law.
"Common Limited Partner" shall mean the Limited Partner that is the owner
----------------------
of the Common Limited Partnership Interest and is shown as such on the books and
records of the Partnership.
"Common Limited Partnership Interest" shall mean the limited partner
-----------------------------------
interest in the Partnership that has the rights and privileges granted to such
interest in this Agreement.
<PAGE>
7
"Commonly Controlled Entity" shall mean an entity, whether or not
--------------------------
incorporated, which is under common control with the Managing General Partner
within the meaning of Section 4001 of ERISA or is part of a group which includes
the Managing General Partner and which is treated as a single employer under
Code Section 414.
"Con Ed" shall mean Consolidated Edison Company of New York, a New York
------
corporation.
"Construction Loan Agreement" shall mean the Construction Loan Agreement
---------------------------
dated as of February 15, 1990, among the lenders parties thereto, the
Partnership and the Agent, as amended, supplemented, restated or otherwise
modified from time to time.
"Contractual Obligation" shall mean, as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its property is bound.
"Contribution Dates" shall mean, collectively, the Initial Capital
------------------
Contribution Date and the Second Capital Contribution Date.
"Cost Portion" shall have the meaning specified in subsection 7.4 hereof.
------------
"CTI" shall mean Cogen Technologies, Inc., a Texas corporation.
---
"Debt Service Account Interest" shall mean the interest and other income
-----------------------------
earned on the funds in the Debt Service Account (as defined in the Security
Deposit Agreement).
"Depreciation" shall mean, for each fiscal year or other period, an amount
------------
equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to the tangible and intangible assets of the Partnership
for such year or other period, except that if the Gross Asset Value of an asset
differs from its adjusted basis for federal income tax purposes at the beginning
of such year or other period, Depreciation shall be an amount which bears the
same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization or other cost recovery deduction for such year or
other period bears to such beginning adjusted tax basis; provided, however, that
-------- -------
if the federal income tax depreciation amortization or other cost recovery
deduction for such year is zero, Depreciation shall be determined with reference
to such beginning Gross Asset Value using any reasonable method elected by the
Managing General Partner.
<PAGE>
8
"Discounted Value" shall mean, at the date of determination thereof, the
----------------
amount calculated by discounting 99% of all remaining scheduled distributions
pursuant to Section 4.3(a) hereof (taking into account all amounts previously
distributed to the Limited Partners pursuant to Sections 4.3(b), (c) and (d) for
purposes of determining such remaining distributions) from their scheduled
distribution dates, in accordance with accepted financial practice and at a
discount factor (applied on a quarterly basis) equal to the Treasury Yield.
"Distributable Cash" shall mean the excess of gross cash proceeds from
------------------
Partnership operations less the portion thereof used to pay or establish
reserves (including, without limitation, any additions to the Operation and
Maintenance Account) for all Partnership operating, maintenance and improvement
expenses (excluding any such expenses required to be paid out of the Operation
and Maintenance Account), taxes (other than income taxes) and payments in lieu
of taxes, insurance premiums, any other similar amount payable by the Managing
General Partner or the Partnership under any Project Document, payments due
under contracts which are permitted under the terms of the Operative Documents
to which the Partnership is a party, payments required by FERC and any other
governmental entity, fees and expenses of trustees, security agents and escrow
agents and other reasonable expenses incurred in connection with the Project,
and the Cost Portion of the Management Fee (including, without limitation, costs
incurred in connection with the procurement of gas for the Facility), and
exclusive of any Net Cash from Sales or Refinancing and any Debt Service Account
Interest (but Distributable Cash shall include the interest and other income
earned on, prior to the Second Capital Contribution Date, the Accounts and,
thereafter, the Escrow Accounts (each as defined in the Security Deposit
Agreement)). For purposes of Article IV, Distributable Cash shall be determined
(i) for the first 144 months after the Second Capital Contribution Date, without
giving effect to any reduction in respect of the Profit Portion, (ii)
thereafter, until the Flip Date (x) for purposes of subsections 4.3(a) and
4.3(b), without giving effect to any reduction in respect of the Profit Portion,
and (y) for purposes of subsections 4.3(c) and 4.3(d), by giving effect to any
such reduction, and (iii) after the Flip Date, (x) for purposes of subsections
4.4(a), 4.4(b) and 4.4(c), without giving effect to any reduction in respect of
the Profit Portion, and (y) for purposes of subsection 4.4(d), by giving effect
to any such reduction. "Distributable Cash" shall not be reduced by
depreciation, amortization, cost recovery deductions or similar allowances.
"Environmental Discharge" shall mean any discharge or release of pollutants
-----------------------
or effluent or emissions of any kind in violation of any Relevant Environmental
Law.
<PAGE>
9
"Equity Letters of Credit" shall mean, collectively, (a) the Irrevocable
------------------------
Letter of Credit to be issued by GECC pursuant to the Reimbursement Agreement in
favor of Con Ed for the account of the Partnership, (b) any letter of credit
issued by GECC pursuant to the Reimbursement Agreement in favor of Elizabethtown
Water for the account of the Partnership and (c) any letter of credit issued by
GECC pursuant to the Reimbursement Agreement in replacement of any letter of
credit issued by GECC pursuant to the Construction Loan Agreement in favor of
Con Ed, PSE&G, Exxon or Elizabethtown Water for the account of the Partnership,
in each case, as amended, supplemented, restated or otherwise modified from time
to time.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"Escrow Agent" shall have the meaning specified in the Security Deposit
------------
Agreement.
"Fair Market Sales Value" shall mean, with respect to any interest in the
-----------------------
Partnership or any portion thereof, the cash price that would be obtained in an
arm's - length transaction between an informed and willing buyer and an informed
and willing seller, both under no compulsion, respectively, to buy or sell, and
neither of which is related to, or an Affiliate of, the Partnership, the General
Partner or any Limited Partner, giving due consideration, in the determination
of such fair market sales value, to the Partnership's rights at such time to use
the Project, together with the right to sell the steam and electricity therefrom
and to use the necessary ancillary rights and to obtain the necessary services
and materials in connection with the operation of the Facility. The Managing
General Partner and the Limited Partner may agree upon a determination of Fair
Market Sales Value, provided, that in the event that they are unable to agree
--------
upon such a determination, such Fair Market Sales Value shall be determined in
accordance with the Appraisal Procedure.
"FERC" shall mean the Federal Energy Regulatory Commission.
----
"FERC Order" shall mean the certification issued by FERC with respect to
----------
the status of the Project as a Qualifying Facility.
"Financing Lease" shall mean (a) any lease of property, real or personal,
---------------
if the then present value of the minimum rental commitment thereunder should, in
accordance with GAAP, be capitalized on a balance sheet of the lessee, and (b)
any other such lease the obligations under which are capitalized on a balance
sheet of the lessee.
<PAGE>
10
"Flip Date" shall mean the earlier of (i) the date, after the Second
---------
Capital Contribution Date, at the end of the Quarterly Period during which the
Preferred Limited Partner has received an aggregate amount of Limited Partner
Benefits with respect to the Preferred Limited Partnership Interest equal to the
Preferred Limited Partner's Return of and on Equity and (ii) the date which is
twenty-two years and six months after the Second Capital Contribution Date
(unless at such time a Special Event has occurred and is continuing).
"Floating Rate" shall mean LIBOR or LIBOR (Reference Banks), as applicable.
-------------
"GAAP" shall mean generally accepted accounting principles in the United
----
States of America in effect from time to time.
"Gains" and "Losses" shall mean the gain or loss resulting from any
----- ------
disposition of Partnership property with respect to which gain or loss is
recognized for federal income tax purposes; provided, however, that such gain or
-------- -------
loss shall be computed by reference to Gross Asset Value rather than adjusted
tax basis of such property.
"GECC": General Electric Capital Corporation, a New York corporation, or
----
its successors or assigns.
"General Partner" shall mean Cogen Linden, its permitted successors and
---------------
assigns, and any other Person properly holding a General Partnership Interest
pursuant to this Agreement, when acting in such capacity.
"General Partnership Interest" shall mean the interest of a General
----------------------------
Partner in the Partnership.
"GEPFC" shall mean General Electric Power Funding Corporation, a Delaware
-----
corporation, or its successors or assigns.
"Governmental Authority" shall mean any nation or government, any state or
----------------------
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Gross Asset Value" shall mean, with respect to any asset, the asset's
-----------------
adjusted basis for federal income tax purposes, except as follows:
(i) the initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, as determined by the contributing Partner and the Partnership;
<PAGE>
11
(ii) the Gross Asset Value of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as determined
by the Managing General Partner (provided, however, that the adjustments
-------- -------
that occur upon the admission of the Owner Trustee shall be made pursuant
to Schedule 2 hereof), as of the following times: (1) the acquisition of an
additional interest in the Partnership by any new or existing Partner in
exchange for more than a de minimis Capital Contribution; (2) the
----------
distribution by the Partnership to a General Partner or a Limited Partner
of more than a de minimis amount of property as consideration for an
----------
interest in the Partnership if the Managing General Partner reasonably
determines that such adjustment is necessary or appropriate to reflect the
relative economic interests of the General Partner and the Limited Partner
in the Partnership; and (3) the liquidation of the Partnership within the
meaning of Regulations Section 1.704-1(b) (2) (ii) (g);
(iii) the Gross Asset Value of any Partnership asset distributed to
any General Partner or Limited Partner shall be the gross fair market value
of such asset on the date of distribution; and
(iv) the Gross Asset Values of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Regulations Section 1.704-1(b) (2) (iv) (m);
provided, however, that Gross Asset Values shall not be adjusted to the
-------- -------
extent the Managing General Partner determines that an adjustment pursuant
to clause (ii) of this definition is necessary or appropriate in connection
with a transaction that would otherwise result in an adjustment pursuant to
clause (iv) of this definition. If the Gross Asset Value of an asset has
been determined or adjusted pursuant to clauses (i) and (ii) of this
definition or clause (iv) of this definition, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect
to such asset.
"Hazardous Materials" shall mean asbestos and any toxic or hazardous
-------------------
substances, materials, wastes or contaminants, medical wastes, infectious
wastes, polychlorinated biphenyls ("PCB's"), paint containing lead and urea
formaldehyde foam insulation, as any of such terms is defined from time to time
in or for the purposes of any Relevant Environmental Law.
<PAGE>
12
"Implicit Rate" shall mean, with respect to each month during the period
-------------
from the Second Capital Contribution Date to the Flip Date, a rate per annum
equal to 8.383%
"Indebtedness" of a Person, shall mean, at a particular date, the sum
------------
(without duplication) at such date of (a) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services
(other than obligations under agreements for the purchase of goods and services
in the normal course of business which are not more than 90 days past due), or
which is evidenced by a note, bond, debenture or similar instrument, (b) all
obligations of such Person under Financing Leases, (c) all obligations of such
Person in respect of letters of credit, acceptances, or similar obligations
issued or created for the account of such Person, (d) all liabilities secured by
any lien on any property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof and (e) any
obligation of such Person or a Commonly Controlled Entity to a Multiemployer
Plan.
"Initial Capital Contribution Date" shall have the meaning specified in the
---------------------------------
Capital Contribution Agreement.
"Initial Limited Partner" shall mean Robert C. McNair.
-----------------------
"Insolvency" shall mean, with respect to any Multiemployer Plan, the
----------
condition that such Plan is insolvent within the meaning of such term as used in
Section 4245 of ERISA.
"LIBOR" shall mean, with respect to any one month period, the rate per
-----
annum determined on the basis of the offered rates for deposits in U.S. dollars
for such period which appear on the Reuters Screen LIBO Page as of 11:00 a.m.,
London time, on the day that is two Working Days prior to the beginning of such
period. If at least two such offered rates appear on the Reuters Screen LIBO
Page, the rate in respect of such period will be the arithmetic mean of such
offered rates. If fewer than two offered rates appear, the rate in respect of
such period will be determined as if the parties had specified "LIBOR (Reference
Banks)" as the applicable Floating Rate.
"LIBOR (Reference Banks)" shall mean, with respect to any one month period,
-----------------------
a rate per annum equal to the arithmetic mean of the rates quoted by Bankers
Trust Company and Chemical Bank (or, if either Bankers Trust Company or Chemical
Bank shall cease to exist, Barclays Bank PLC shall be substituted for the bank
which cease to exist, or if both Bankers Trust Company and Chemical Bank shall
cease to exist, Barclays Bank PLC and National Westminster Bank PLC shall be
substituted for such banks) in New York City at approximately 11:00 a.m., New
York City time, on the first day of such period for loans in U.S. dollars to
prime banks
<PAGE>
13
in the London interbank market for a period equal to the number of days in such
period and in an amount substantially equal to the amount of Distributable Cash
anticipated to be distributed during such period.
"Lien" shall mean any mortgage, deed of trust, security interest, pledge,
----
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any Financing Lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction).
"Limitation Partner" shall mean, with respect to either the Preferred
------------------
Limited Partnership Interest or the Common Limited Partnership Interest, the
Owner Trustee or any of its designees or assignees that has been admitted to the
Partnership as a limited partner of the Partnership pursuant to subsection 10.1
hereof, and any other Person properly holding a Limited Partnership Interest
pursuant to this Agreement, and admitted to the Partnership as a limited partner
of the Partnership and shown as such on the books and records of the
Partnership, when acting in such capacity; provided, however, that after the
-------- -------
Flip Date, the term "Limited Partner" shall not include the Preferred Limited
Partner.
"Limited Partner Benefits" shall mean, with respect to each Limited
------------------------
Partnership Interest, the sum of the following, determined at the end of each
Quarterly Period: (i) the cumulative cash distributions with respect to such
Limited Partnership Interest made by the Partnership after the Initial Capital
Contribution Date, plus (ii) 38% of the net taxable losses of the Partnership
allocated (and not subsequently reallocated to the General Partner) for income
tax purposes with respect to such Limited Partnership Interest after the Initial
Capital Contribution Date through the end of such Quarterly Period, plus (iii)
income tax credits of the Partnership to the extent properly allocable (and not
subsequently disallowed) to such Limited Partnership Interest after the Initial
Capital Contribution Date through the end of such Quarterly Period, but only to
the extent that the Limited Partner holding such Limited Partnership Interest
actually realizes a current income tax benefit with respect to such credit (the
ability of such Limited Partner to currently utilize a tax credit shall be
determined by the independent accountants of such Limited Partner, who shall
certify such determination to the General Partner, minus (iv) 38% of the net
taxable income allocated with respect to such Limited Partnership Interest (or
realized with respect to a distribution on such Limited
<PAGE>
14
Partnership Interest that is treated for federal income tax purposes as other
than a distribution under Code Section 731) after the Initial Capital
Contribution Date through the end of such Quarterly Period.
"Limited Partner's Return of and on Equity" shall mean, with respect to
-----------------------------------------
each Limited Partnership Interest separately, the aggregate Limited Partner
Benefits with respect to such Limited Partnership Interest that would be
required to provide a return of and on the aggregate Capital Contributions made
or to be made with respect to such Limited Partnership Interest at an annual
rate (calculated quarterly) equal to (a) in the case of the Preferred Limited
Partnership Interest, the Minimum Rate, and (b) in the case of the Common
Limited Partnership Interest, (X) the Minimum Rate (the "First Level Return of
---------------------
and on Equity"), (Y) the Minimum Rate plus 100 basis points (the "Second Level
- ------------- ------------
Return of and on Equity") or (Z) the Minimum Rate plus 200 basis points (the
- -----------------------
"Third Level Return of and on Equity").
-----------------------------------
"Limited Partnership Interest" shall mean, as the context may require, the
----------------------------
Preferred Limited Partnership Interest or the Common Limited Partnership
Interest; provided, that, after the Flip Date, the term, "Limited Partnership
--------
Interest" shall not include the Preferred Limited Partnership Interest.
"Linden Owner Partnership" shall have the meaning ascribed thereto in the
------------------------
Preamble hereto.
"Management Fee" shall mean the management fee to be paid to the Managing
--------------
General Partner pursuant to subsection 7.4 hereof.
"Managing General Partner" shall mean Cogen Linden as the initial managing
------------------------
general partner of the Partnership or any substitute managing general partner
appointed pursuant to subsection 14.2 hereof and shown as such on the books and
records of the Partnership.
"Managing General Partner Group" shall have the meaning specified in
------------------------------
subsection 7.5 hereof.
"Minimum Rate" shall mean 6.338% per annum.
------------
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan as
------------------
defined in Section 4001(a) (3) of ERISA.
<PAGE>
15
"Net Cash From Sales or Refinancing" shall mean the net cash proceeds from
----------------------------------
all sales and other dispositions (excluding dispositions in the ordinary course
of business or in the case of any involuntary conversion of assets having an
aggregate book value not exceeding $500,000, but including, without limitation,
(i) the proceeds of insurance received by the Partnership or the Managing
General Partner from any insurer pursuant to the insurance maintained under
subsection 7.2(f) hereof and subsection 6.5 of the General Partner Credit
Agreement and (ii) all awards and proceeds of a Taking with respect to the
Project) and all refinancing of Partnership property, less any portion thereof
used to establish reserves or to pay the cost of renewing, repairing, rebuilding
or otherwise replacing damaged or destroyed or lost property in respect of which
insurance proceeds or awards or proceeds of a Taking were received in accordance
with subsection 4.05(d) of the Security Deposit Agreement. "Net Cash From Sales
or Refinancing" shall include only principal payments with respect to any note
or other obligation received by the Partnership in connection with sales and
other dispositions (other than in the ordinary course of business or in the case
of any involuntary conversion of assets having an aggregate book value not
exceeding $500,000) of Partnership property.
"Nonrecourse Deductions" shall have the meaning set forth in Regulations
----------------------
Section 1.704-2(b) (1). The amount of Nonrecourse Deductions for a Partnership
fiscal year equals the net increase, if any, in the amount of Partnership
minimum gain during that fiscal year, determined according to the provisions of
Regulations Section 1.704-2(d).
"Operating Profits" and "Operating Losses" shall mean, for each monthly
----------------- ----------------
period, an amount equal to the Partnership's taxable income or loss for such
month, determined in accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss or deduction required to be stated separately
pursuant to Code Section 703(a) (1) shall be included in taxable income or
loss), with the following adjustment:
(i) income of the Partnership that is exempt from federal income tax
and not otherwise taken into account in computing Operating Profits or
Operating Losses pursuant to this definition shall be added to such taxable
income or loss;
(ii) any expenditures of the Partnership described in Code Section
705(a) (2) (B) or treated as Code Section 705(a) (2) (B) expenditures
pursuant to Regulations Section 1.704-1(b) (2) (iv) (i), and not otherwise
taken into account in computing Operating Profits or Operating Losses
pursuant to this definition shall be subtracted from such taxable income or
loss; and
<PAGE>
16
(iii) notwithstanding any other provision of this definition, any items
which are specially allocated pursuant to subsections 5.4, 5.5, 5.6, 5.7,
5.8, 5.9, 5.10, 5.11, 5.12, 5.13, 5.14 and 5.15 hereof shall not be taken
into account in computing Operating Profits or Operating Losses.
"Operating Budget" shall have the meaning specified in subsection 6.7(b).
----------------
"Operation and Maintenance Account" shall mean the Operation and
---------------------------------
Maintenance Account established pursuant to the Security Deposit Agreement.
"Operative Documents" shall mean collectively, this Agreement, the
-------------------
Capital Contribution Agreement, the Security Deposit Agreement, the Equity
Letters of Credit, the Reimbursement Agreement, the Recognition Agreements
and the Project Documents.
"Organizational Expenses" shall mean organizational expenses as defined
-----------------------
under Code Section 709.
"Partner" shall mean Cogen Linden and the Owner Trustee so long as they
-------
hold a General Partnership Interest or Limited Partnership Interest and any
other General Partner(s) or Limited Partner(s); collectively, the "Partners".
--------
"Partner Nonrecourse Deductions" shall have the meaning specified in
------------------------------
Regulations Section 1.704-2(i).
"Partnership" shall mean the limited partnership governed by this
-----------
Agreement formed under and pursuant to the Partnership Act and known as
"Cogen Technologies Linden Venture, L.P.", as it may from time to time be
constituted.
"Partnership Act" shall mean the Delaware Revised Uniform Limited
---------------
Partnership Act, 6 Del. Code (S) (S) 17-101, et seq., as it may be amended
---- ---- -- ----
from time to time, and any successor to said Partnership Act.
"Partnership Business" shall have the meaning specified in subsection
--------------------
2.2.
"Partnership Fuel Component" shall have the meaning specified in
--------------------------
subsection 6.7(b) (viii).
"PBGC" shall mean the Pension Benefit Guarantee Corporation.
----
"Permits" shall mean all material permits and licenses necessary for
-------
construction and operation of the Project, a list of which is attached hereto
as Schedule 3.
<PAGE>
17
"Permitted Indebtedness" shall have the meaning specified in subsection
----------------------
7.3(a) (iv).
"Permitted Liens" shall mean (i) Liens created by the Collateral Security
---------------
Documents (as defined in the General Partner Credit Agreement); (ii) Liens in
favor of any Person (other than the General Partner, the Initial Limited
Partner or any Affiliate of any such Person) which arise in the ordinary
course of business of the Partnership (including, without limitation,
materialmen's, mechanics', workers', repairmen's and employees' Liens and
similar Liens which arise in connection with any tax, assessment,
governmental charge or levy) but not (unless otherwise permitted by this
Agreement) in connection with any Indebtedness or Guarantee Obligation and
which do not in the aggregate materially impair the use and value of the
Partnership's property or assets in the conduct of its business; provided,
--------
that if any such Lien arose in connection with any tax, assessment,
governmental charge or levy or any claim referred to in subsection 7.2(a) or
7.2(b) or any charge or claim of a mechanic or a materialman referred to in
subsection 7.2(1), the Managing General Partner shall be diligently
contesting the same in accordance with, and subject to, the provisions of
subsection 7.2(a), 7.2(b) or 7.2(1), as the case may be; and provided,
--------
further, that any such Lien arose out of transactions relating to the
-------
Project; (iii) Liens arising out of judgments or awards which are bonded or
with respect to which at the time an appeal or proceeding for review is being
prosecuted in good faith and for the payment of which adequate cash reserves
shall have been provided; (iv) mineral rights, utility easements, any other
easements, and any covenants running with the land relating to the Site or
any similar deed restrictions, the existence and use of any of which do not
materially interfere with the use and enjoyment of the Facility or the Site;
(v) any exceptions to title which are contained in the title insurance policy
delivered pursuant to the Capital Contribution Agreement; (vi) the rights of
Exxon under the Site Lease Agreement; and (vii) Liens in favor of the Limited
Partner as contemplated by subsections 10.5 and 14.2(g) hereof.
"Person" shall mean an individual, partnership, corporation, business
------
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan" shall mean at a particular time, any employee benefit plan which
----
is covered by ERISA and in respect of which the Managing General Partner or a
Commonly controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as defined
in Section 3(5) of ERISA.
<PAGE>
18
"Power Purchase Agreement" shall mean the Power Purchase Agreement, dated
------------------------
April 14, 1989, between Con Ed and CTI, as assigned to the Partnership, as
amended, supplemented, restated or otherwise modified from time to time.
"Preferred Limited Partner" shall mean the Limited Partner that is the
-------------------------
owner of the Preferred Limited Partnership Interest and is shown as such on
the books and records of the Partnership.
"Preferred Limited Partnership Interest" shall mean the limited partner
--------------------------------------
interest in the Partnership that has the rights and privileges granted to
such interest in this Agreement.
"Premium" shall mean, with respect to the Common and the Preferred
-------
Limited Partnership Interests, an amount equal to (i) the excess, if any, of
the Discounted Value over (ii) the Unamortized Investment. The Premium shall
in no event be less than zero.
"Profit Portion" shall mean, with respect to any month commencing with
--------------
the first calendar month after the Second Capital Contribution Date, the
portion of the Management Fee equal to the excess of (1) 1.5% of gross
revenues of the Project for such month over (ii) the Cost Portion for such
month.
"Project" shall mean the 614 megawatt combined cycle cogeneration
-------
facility constructed by the Partnership on the Site pursuant to the EPC
Contracts, and all real and personal property, transmission lines, easements,
leasehold interests, licenses, permits and contract rights now owned or
hereafter acquired by Cogen Linden or the Partnership in connection
therewith, other than the interest of any Partner hereunder.
"Project Documents" shall mean the collective reference to the Power
-----------------
Purchase Agreement, the Site Lease Agreement, the Steam Sale Agreement, the
Water Supply Commitment, the Gas Transportation and Swing Supply Agreement,
the Operation and Maintenance Agreement, the Easement Agreement and, so long
as any of the provisions thereof are in effect, the Turnkey Contract and the
Equipment Supply Contract.
"Prudent Utility Practice" shall mean, at a particular time, those
------------------------
practices, methods, acts and omissions applicable to the operation and
maintenance of the Facility as are in accordance with standards of prudence
applicable to the electric utility industry for cogeneration facilities
located in the Northeastern United States known at the time the decision in
question is made, which would have been expected to accomplish the desired
result at a reasonable cost consistent with reliability, safety and
expediency.
<PAGE>
19
Prudent Utility Practice is not intended to be limited to the optimum
practice, method, act or omission, at the exclusion of all others, but rather
is a spectrum of possible practices, methods, acts and omissions which could
have been expected to accomplish the desired result at a reasonable cost
consistent with reliability, safety and expediency.
"PUC" shall mean the Board of Public Utilities of the State of New Jersey
---
or similar regulatory authority of any other jurisdiction.
"Public Utility Status" shall have the meaning specified in subsection
---------------------
10.5(a) hereof.
"Purchase Notice" shall mean an irrevocable written notice delivered by
---------------
the Managing General Partner or the General Partner to the Limited Partner
pursuant to subsection 11.1 or 14.2, evidencing the Managing General
Partner's or the General Partner's intent to exercise any purchase option
provided for therein.
"Quarterly Period" shall mean any three month period, commencing with the
----------------
Initial Capital Contribution Date.
"Regulations" shall mean the temporary, proposed and final regulations
-----------
under the Code and any successor provisions thereto.
"Reimbursement Agreement" shall mean the Letter of Credit and
-----------------------
Reimbursement Agreement, to be entered into by the Partnership and GECC on or
prior to the Second Capital Contribution Date, substantially in the form of
Exhibit D to the Capital Contribution Agreement, as amended, supplemented,
restated or otherwise modified from time to time.
"Relevant Environmental Law" shall mean, as to any Person, any law,
--------------------------
treaty, rule or regulation, or any determination of an arbitrator or a court
or other Governmental Authority, relating to the handling, treatment, storage
or disposal of Hazardous Materials, the occurrence or remediation of any
Environmental Discharge, environmental protection or any other environmental
matter, in each case applicable to or binding upon such Person or any of its
properties or to which such Person or any of its properties is subject, the
violation of which or series of related violations of which, or which
determination, creates a material likelihood that such Person will be subject
to penalties, fines or remediation costs in excess of $250,000 or to
injunctive or similar relief.
"Reorganization" shall mean, with respect to any Multiemployer Plan, the
--------------
condition that such Plan is in
<PAGE>
20
reorganization within the meaning of such term as used in Section 4241 of
ERISA.
"Reportable Event" shall mean any of the events set forth in Section
----------------
4043(b) of ERISA, other than those events as to which the thirty-day notice
period is waived under subsections .13, .14, .16, .18, 19, or .20 of PBGC
Reg. 2615.
"Requirement of Law" shall mean, as to any Person, (a) the Certificate of
------------------
Incorporation and By-Laws or partnership agreement or other Organizational or
governing documents of such Person, (b) any law, treaty, rule or regulation
or determination of an arbitrator or a court or other Governmental Authority
(other than any Relevant Environmental Law), in each case applicable to or
binding upon such Person or any of its properties or to which such Person or
any of its properties is subject and the violation of which, or which
determination, could reasonably be expected to (i) have a material adverse
effect on the business, operations, properties, condition (financial or
otherwise) or prospects of such Person or (ii) materially adversely affect
the ability of such Person to perform its obligations under the Operative
Documents to which it is a party and (c) any Relevant Environmental Law.
"Responsible Officer" of a Person, shall mean the chief executive officer
-------------------
of such Person or of the general partner of such Person, or with respect to
financial matters, the chief financial officer of such Person or of the
general partner of such Person.
"Second Capital Contribution Date" shall have the meaning specified in
--------------------------------
the Capital Contribution Agreement.
"Securities Act" shall mean the Securities Act of 1933, or any similar
--------------
Federal statute, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder, all as the same shall be in effect at the
time.
"Security Agent" shall mean Midlantic National Bank or any bank acting as
--------------
successor security agent under the Security Deposit Agreement.
"Security Deposit Agreement" shall mean the Security Deposit Agreement,
--------------------------
dated as of February 15, 1990, among the Partnership, the Agent and the
Security Agent, as the same may be amended, supplemented or otherwise
modified to the Second Capital Contribution Date, and as the same will be
amended and restated by the Amended and Restated Security Deposit Agreement,
to be entered into by the Partnership, the Limited Partner, the General
Partner, the lender under the General Partner Credit Agreement, the Escrow
Agent and the Security Agent on or prior to the Second Capital
<PAGE>
21
Contribution Date, substantially in the form of Exhibit J to the Capital
Contribution Agreement as further amended, supplemented, restated or
otherwise modified from time to time.
"Single Employer Plan" shall mean any Plan which is covered by Title IV
--------------------
of ERISA, but which is not a Multiemployer Plan.
"Site" shall mean the land described in Schedule 4.
----
"Special Event" shall have the meaning specified in subsection 14.1.
-------------
"Stipulated Redemption Value" shall mean, at any time, with respect to
---------------------------
each Limited Partnership Interest separately, an amount which, together with
the Limited Partner Benefits received as of such time in respect of such
Limited Partnership Interest (taking into account any gain or loss recognized
by the Limited Partner on such sale), would equal (a) in the case of the
Preferred Limited Partnership Interest, the Preferred Limited Partner's
Return of and on Equity and (b) in the case of the Common Limited Partnership
Interest, the Common Limited Partner's Third Level Return of and on Equity.
"Subsidiary" shall mean, as to any Person, a corporation of which shares
----------
of stock 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 are at the time
owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person, or a
limited partnership of which such Person or any of its Subsidiaries is a
general partner or a business trust in which such Person holds a majority
interest (comparable to that for a corporation as described above).
"Tax Indemnity Amount" shall mean, with respect to each of the Common
--------------------
Limited Partner and the Preferred Limited Partner, the sum of (i) the Tax
Loss Amount, plus (ii) from the date of the Tax Indemnity Event, the Implicit
Rate, compounded quarterly, times the Tax Loss Amount, plus (iii) the amount
of all income taxes payable by such Limited Partner as a result of the
allocation of income to such Limited Partner in connection with the
distribution required by subsection 4.6 with respect to the Tax Indemnity
Amount (which allocation will take into account all of the elements of the
Tax Indemnity Amount, including the calculation required pursuant to this
clause (iii)), minus (iv) distributions to such Limited Partner pursuant to
subsection 4.6 hereof.
<PAGE>
22
"Tax Indemnity Event" shall mean (i) any act or omission of the General
-------------------
Partner not specifically required or permitted under this Agreement that
results in any loss of or delay in realization of or inability to claim the
full tax depreciation deductions with respect to the Project or the
Organizational Expenses with respect to the Partnership shown on Schedule 2
by the Limited Partner, (ii) any federal tax election made by the Partnership
that has an adverse impact on the Limited Partner (with respect to the tax
depreciation deductions with respect to the Project or the Organizational
Expenses with respect to the Partnership shown on Schedule 2) and with
respect to which election the General Partner either (x) fails to consult
with the Limited Partner or (y) fails to follow the request of the Limited
Partner with respect to such election, and (iii) any failure by the
Partnership to make a tax election specifically requested by the Limited
Partner, but only if the making of such tax election would not have an
adverse impact on the General Partner.
"Tax Loss Amount" shall mean, with respect to either the Common Limited
---------------
Partner or the Preferred Limited Partner, an amount equal to the present
value as of the date of the Tax Indemnity Event, using a discount rate equal
to the Implicit Rate, of the sum of (i) the aggregate net additional taxes
payable by such Limited Partner as a result of a Tax Indemnity Event (offset
by any net additional savings of such Limited Partner as a result of such Tax
Indemnity Event) from time to time computed on the basis of a 38% tax rate,
plus (ii) the amount of any net interest thereon, plus (iii) any penalties or
additions to tax payable as a result of a Tax Indemnity Event.
"Tentative Purchase Notice" shall mean a written notice delivered by the
-------------------------
Managing General Partner or the General Partner to the Limited Partner
pursuant to subsection 11.1 or 14.2, evidencing the Managing General
Partner's or the General Partner's interest in exercising any purchase option
provided for therein.
"Termination Expense (Benefit)" shall mean, in connection with (i) any
-----------------------------
purchase of any Limited Partnership Interest pursuant to Section 10.5(a) or
14.2(g), (ii) any sale or refinancing of the Facility, or (iii) any Special
Event, any net loss or expense (or any net income or gain) resulting from the
prepayment or termination of any fixed rate debt (including any funding of
the equity investments of the partners in the Linden Owner Partnership)
incurred to finance such Limited Partnership Interest and any net loss or
expense (or any net income or gain) resulting from the cancellation or
termination of any interest rate hedging arrangement entered into for the
purpose of fixing or limiting the interest rate on any floating rate debt
(including any funding of the equity investments of the partners in the
Linden Owner Partnership) incurred to
<PAGE>
23
finance such Limited Partnership Interest. A net loss or expense shall be a
positive number and net income or gain shall be a negative number.
Termination Expense (Benefit) shall be calculated in accordance with the
provisions set forth in Schedule 9.
"Texas Eastern" shall mean the collective reference to Texas Eastern
-------------
Transmission Corporation, Houston Center Corporation and Texas Eastern
Cryogenics, Inc.
"Texas Eastern Letter Agreement" shall mean that certain letter dated
------------------------------
June 18, 1991 from Cogen Technologies, Inc. to Texas Eastern regarding the
possibility of pursuing the feasibility of transmitting electrical power from
Staten Island, New York to Linden, New Jersey.
"TMP" shall have the meaning specified in subsection 6.9.
---
"Treasury Yield" shall mean the yield to maturity implied by the Treasury
--------------
Constant Maturity Series yields reported (for the latest day for which such
yields shall have been so reported as of the Business Day next preceding the
date on which the General Partner shall purchase the Limited Partnership
Interests pursuant to Section 11.1 in Federal Reserve Statistical Release
H.15(519) (or any successor publications of the Federal Reserve Board)) for
actively traded U.S. Treasury Securities having a constant maturity equal to
the average remaining life of the Unamortized Investment as shown on Schedule
7 as of such date.
"Unamortized Investment" shall mean as of any date the excess of (i)
----------------------
$500,000,000 over (ii) the sum of (X) an amount equal to (a) $500,000,000
multiplied by (b) the sum of the cumulative Monthly Equity Return Components
shown on Schedule 7 as of such date plus (Y) the sum of the accreted values
of all previous distributions to the Limited Partner pursuant to Sections
4.3(b), (c) and (d) (calculated by compounding quarterly each distribution at
the pre-tax equivalent of the Minimum Rate from the date of distribution to
the date of calculation).
"Working Capital Fund" shall have the meaning specified in the General
--------------------
Partner Credit Agreement.
"Working Capital Proceeds" shall mean the proceeds from any loan made by
------------------------
the General Partner to the Partnership for working capital purposes from
amounts on deposit in the Working Capital Fund.
1.2 Other Definitions. The words "hereof" and "hereunder" and words of
-----------------
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section,
subsection,
<PAGE>
24
schedule and exhibit references are to this Agreement unless otherwise
specified.
ARTICLE II
FORMATION AND CONTINUATION OF PARTNERSHIP
-----------------------------------------
2.1 Formation of Partnership; Name. By the Original Partnership
------------------------------
Agreement, the General Partner and the Initial Limited Partner agreed to form
the Partnership pursuant to the Partnership Act. The Partnership was formed on
December 6, 1989 by the filing of the Certificate of Limited Partnership. The
name of the Partnership is "Cogen Technologies Linden Venture, L.P." The
business of the Partnership shall be conducted under such name or Cogen
Technologies Linden Venture, Limited Partnership.
2.2 Purpose; Business of the Partnership. The Partnership was formed for
------------------------------------
the purpose of constructing, owning, developing, operating, maintaining,
repairing and disposing of the Project or any part thereof; constructing,
installing, leasing or otherwise acquiring, maintaining, repairing and disposing
of any additional improvements to the Project of any kind necessary or desirable
in connection therewith and, by means thereof, producing and selling steam and
electricity; constructing and operating the Exxon System; and any other purpose
necessary, incidental or ancillary to any of the foregoing. The foregoing
purposes, as effectuated pursuant to the provisions of subsection 2.3, are
herein referred to as the "Partnership Business".
2.3 Authorizations. (a) The Partnership is hereby authorized to engage
--------------
in all activities and transactions and to do all things and to hold all
interests in real, personal and mixed property, contract rights and other
property, necessary, appropriate, proper, advisable or desirable for, or
incidental or convenient to, the Partnership Business, including, but not
limited to, the power to enter into, make and perform any agreement, contract,
commitment, arrangement or undertaking (including, without limitation, the other
Operative Documents), to acquire, hold, purchase, lease, dispose of, mortgage,
pledge, hypothecate or assign, and to exercise all rights, powers, privileges
and other incidents of ownership or possession with respect to, any property,
whether real, personal or mixed, and to incur Permitted Indebtedness and to
secure the payment of any such Permitted Indebtedness of the Partnership by any
Permitted Lien.
(b) In furtherance of the Partnership's objects and purposes, the
Partnership shall have any and all powers necessary, convenient or incidental to
or for the accomplishment of its objects and purposes, alone or with others,
including, without limitation, the following:
<PAGE>
25
(i) to design, plan, finance, construct, own, develop, maintain,
operate, lease and dispose of the Facility for the generation and
sale of electricity and the production and sale of steam, and
engaging in any and all activities necessary or incidental to the
foregoing;
(ii) to negotiate and enter into, and make, execute, deliver and perform,
all contracts, agreements and other undertakings, as the same may be
amended, restated, supplemented or otherwise modified from time to
time, and to grant liens, security interests in and other
encumbrances on, in and against the Partnership's properties, all as
may be necessary, convenient or incidental to carry out its objects
and purposes, including, but not limited to, the following:
(1) construction loan agreements;
(2) notes, including, but not limited to, pre-construction notes and
construction notes;
(3) capital contribution agreements;
(4) borrower indemnity agreements;
(5) collateral security documents, including, but not limited to,
mortgages, security agreements, security deposit agreements,
assignments regarding contracts and consents to assignments
regarding contracts;
(6) power sale agreements;
(7) equipment supply agreements;
(8) additional contracts, including, but not limited to, site lease
agreements, steam sale agreements, water supply commitments, gas
transportation agreements, gas sourcing agreements, gas purchase
agreements, turnkey contracts, operation and maintenance
agreements, butane agreements and easement agreements;
(9) reimbursement agreements; and
(10) recognition agreements regarding contracts; and
(iii) to have letters of credit issued for its account and on its behalf.
<PAGE>
26
2.4 Principal Office; Offices; Addresses. (a) The principal office and
------------------------------------
place of business of the Partnership shall be located at the offices of the
Managing General Partner at 1600 Smith Street, Suite 5000, Houston, Texas 77002,
and the registered office of the Partnership in the State of Delaware shall be
the Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801; subject to subsection 7.2(c), either office may be changed to
such other place as the Managing General Partner may from time to time
designate. The registered agent of the Partnership for service of process on the
Partnership at such address in Delaware is The Corporation Trust Company.
(b) The Managing General Partner may also maintain solely for the conduct
of the Partnership Business an office or offices at another location or
locations and in connection therewith rent or acquire office space, engage
personnel, whether part-time or full-time, and do such other acts as it deems
necessary or advisable in connection with the maintenance and administration of
any such office. Any costs and expenses expected to be incurred in connection
with any such office shall be set forth in the Operating Budget delivered and
approved by the Preferred Limited Partner pursuant to subsection 6.7(b).
(c) The name and business or residence address of each Partner are set
forth in Schedule 1 hereto, as the same may be amended from time to time.
2.5 Further Filings. If at any time necessary or advisable, the Managing
---------------
General Partner shall promptly (a) register the Partnership under any assumed,
trade or fictitious name under the Partnership Act, or similar law, if any, in
force and effect in the State of Delaware and (b) qualify the Partnership to do
business in any jurisdiction in which the conduct of its business or the
ownership or leasing of its assets requires it to be so qualified. The Managing
General Partner shall make all filings and do all other things reasonably
possible (including publication or periodic filings of any certificate) that may
or hereafter be required for the perfection and continued maintenance of the
Partnership as a limited partnership, or to protect the limited liability of the
Limited Partner as a limited partner, under the laws of the State of Delaware.
2.6 Term. The term of the Partnership commenced on the date of filing of
----
the Certificate of Limited Partnership in the Office of the Secretary of State
of the State of Delaware and shall continue until termination of the Partnership
in accordance with Article XIV hereof.
<PAGE>
27
ARTICLE III
CAPITAL CONTRIBUTIONS
---------------------
3.1 Partners and Contributions. The General Partner has made a
--------------------------
contribution of $50 in cash to the capital of the Partnership. Subject to the
terms and conditions of the Capital Contribution Agreement, the initial capital
contribution of the Limited Partner specified in Section 2(a) (i) thereof shall
be made on the Initial Capital Contribution Date. Subject to the terms and
conditions of the Capital Contribution Agreement, the Limited Partner shall make
the additional capital contributions specified in Section 2(a) (ii) thereof (a)
in respect of the Common Limited Partnership Interest, on or prior to the Second
Capital Contribution Date and (b) in respect of the Preferred Limited
Partnership Interest, on the Second Capital Contribution Date. The General
Partner shall contribute to the Partnership on the Second Capital Contribution
Date its $25,000,000 account receivable from the Partnership, and thereafter
shall contribute to the Partnership an amount equal to the excess of (i) all
costs of constructing the Project (including those reflected in the Completion
Budget) over (ii) the sum of (I) the balance in the Revenue Account as of the
Second Capital Contribution Date, (II) TO the extent included as a cost of
constructing the project, the $25,000,000 account receivable of the General
Partner referred to above and (III) $500,000,000. The Gross Asset Values of the
licenses, permits, contracts and other intangible assets of the Partnership will
be increased, pursuant to clause (ii) (1) of the definition of Gross Asset
Value, at the time of each contribution by the Limited Partner, by an amount
equal to one-half of the aggregate Limited Partner contributions at such time,
and the Capital Account balance of the General Partner will be increased by a
corresponding amount pursuant to the proviso at the end of subsection 5.5
hereof. The Limited Partner shall have no rights as a Preferred Limited Partner
until it has acquired the Preferred Limited Partnership Interest on the Second
Capital Contribution Date.
3.2 Interest on Capital Contributions. No Partner shall be entitled to
---------------------------------
interest on its Capital Contributions.
3.3 Withdrawal of Initial Limited Partner. The Initial Limited Partner
-------------------------------------
has made a contribution of $50 in cash to the capital of the Partnership. The
greater of such capital contribution or the Initial Limited Partner's capital
account balance will be distributed to the Initial Limited Partner immediately
following the making of the contributions by the Limited Partner to the
Partnership pursuant to the second sentence of subsection 3.1 hereof and the
admission of.the Owner Trustee as a limited partner of the Partnership, at which
time the Managing General Partner and the Limited Partner hereby consent to the
Initial Limited Partner's withdrawal of its capital contribution and at which
time the Initial Limited Partner shall withdraw as a limited partner of the
Partnership. The Managing General Partner and the Limited Partner hereby waive
<PAGE>
28
and release the Initial Limited Partner from any liability and from any right,
claim or action that they or the Partnership may have against the Initial
Limited Partner for such withdrawal or as a result of his status as a Partner of
the Partnership. The Initial Limited Partner is not entitled to receive any
other amount or payment upon or by reason of the withdrawal of the Initial
Limited Partner from the Partnership or by reason of the Initial Limited Partner
having been a limited partner of the Partnership.
ARTICLE IV
DISTRIBUTIONS
-------------
4.1 Distributable Cash. Beginning with the first month following the
------------------
Second Capital Contribution Date, the Managing General Partner shall distribute
Distributable Cash to the Partners no less frequently than monthly in the manner
provided in this Article IV.
4.2 Distributions Prior to the Second Capital Contribution Date.
-----------------------------------------------------------
Distributable Cash prior to the Second Capital Contribution Date (i) shall be
distributed to the Initial Limited Partner in accordance with the Original
Partnership Agreement as in effect prior to this Agreement and (ii) after all
distributions thereunder have been made to the Initial Limited Partner in
accordance with the terms thereof, shall be transferred from the Revenue Account
to the Completion Account for application in accordance with the Security
Deposit Agreement.
4.3 Distributions After the Second Capital Contribution Date and Prior
------------------------------------------------------------------
to the Flip Date. Except as provided in subsections 4.5, 4.6 and 14.4(c),
- ----------------
Distributable Cash for each month after the Second Capital Contribution Date and
prior to the Flip Date shall be distributed within 15 days after the end of such
month as follows:
(a) First, 98% to the Preferred Limited Partner, 1% to the Common Limited
Partner and 1% to the General Partner, until the Partners have received
pursuant to this subsection 4.3(a) an aggregate amount in such month equal
to the amount calculated with respect to such month in Schedules 5 and 7
hereto.
(b) Second, 99% to the General Partner and 1% to the Common Limited
Partner until the General Partner and the Common Limited Partner have
received pursuant to this subsection 4.3(b) an aggregate amount in such month
equal to 200% of the amount calculated with respect to such month in
Schedules 5 and 7 hereto; provided, however, that in each of the first 144
--------- -------
months after the Second Capital Contribution Date, the amount to be
distributed to the General Partner pursuant to this subsection 4.3(b) shall
be reduced by the
<PAGE>
29
Profit Portion of the Management Fee with respect to such month (whether such
Profit Portion is paid or not), but the distributions to the Common Limited
Partner pursuant to this subsection 4.3(b) shall be made as though such
reduction had not occurred.
(c) Third, 9% to the Common Limited Partner, 1% to the Preferred Limited
Partner and 90% to the General Partner until the Common Limited Partner has
received an aggregate amount of Limited Partner Benefits with respect to the
Common Limited Partnership Interest equal to the First Level Return of and on
Equity.
(d) Fourth, 9% to the Preferred Limited Partner, 1% to the Common Limited
Partner and 90% to the General Partner.
4.4 Distributions Subsequent to the Flip Date. Except as provided in
-----------------------------------------
subsections 4.6 and 14.4(c), after the Flip Date, Distributable Cash shall be
distributed as follows:
(a) First, 30% to the Common Limited Partner and 70% to the General
Partner until the Common Limited Partner has received an aggregate amount of
Limited Partner Benefits with respect to the Common Limited Partnership
Interest equal to the First Level Return of and on Equity.
(b) Second, 20% to the Common Limited Partner and 80% to the General
Partner until the Common Limited Partner has received an aggregate amount of
Limited Partner Benefits with respect to the Common Limited Partnership
Interest equal to the Second Level Return of and on Equity.
(c) Third, 10% to the Common Limited Partner and 90% to the General
Partner until the Common Limited Partner has received an aggregate amount of
Limited Partner Benefits with respect to the Common Limited Partnership
Interest equal to the Third Level Return of and on Equity.
(d) Fourth, 1% to the Common Limited Partner and 99% to the General
Partner.
4.5 Arrears Account. In the event that the Arrears Account has a
---------------
positive balance at any time prior to the Flip Date, then notwithstanding
subsections 4.3(b), 4.3(c) and 4.3(d) hereof, Distributable Cash otherwise
distributable pursuant to subsection 4.3(b), 4.3(c) or 4.3(d), after application
of subsection 4.3(a), or amounts that would otherwise have been paid to the
General Partner as the Management Fee, shall instead be distributed 98% to the
Preferred Limited Partner, 1% to the Common Limited Partner and 1% to the
General Partner until the balance in the Arrears Account is zero.
4.6 Tax Indemnity. Notwithstanding anything else contained herein, if a
-------------
Tax Indemnity Event occurs, then an amount of Distributable Cash that would
otherwise have been distributed
<PAGE>
30
to the General Partner under this Article IV, or amounts that would otherwise
have been paid to the General Partner as the Management Fee, for any month shall
instead be distributed to the Preferred Limited Partner or the Common Limited
Partner, as the case may be, until (i) the balance in the Tax Indemnity Account
equals zero or, at the election of the Managing General Partner, (ii) the
Preferred Limited Partner or the Common Limited Partner, as the case may be, has
received an amount of Distributable Cash in such period pursuant to this
subsection 4.6 equal to the amount of net additional taxes payable with respect
to such period plus the amount of all income taxes payable by such Limited
Partner as a result of the allocation of income to such Limited Partner in
connection with such distribution (which allocation will take into account all
of the elements of the Tax Indemnity Amount, including the calculation of income
taxes payable).
4.7 Net Cash From Sales or Refinancing. Except as provided in
----------------------------------
subsection 14.4(c), any Net Cash From Sales or Refinancing shall be distributed
as follows:
(a) First, to the Preferred Limited Partner in an amount sufficient
(taking into account the corresponding Gain or Loss allocated pursuant to
subsection 5.5 or 5.6) to provide the Preferred Limited Partner with its
Preferred Limited Partner's Return of and on Equity together with any
Termination Expense (Benefit) relating thereto.
(b) Second, to the General Partner until the General Partner has
received cumulative distributions pursuant to this subsection 4.7(b) equal
to 200% of the distributions received by the Preferred Limited Partner
pursuant to subsection 4.7(a).
(c) Third, 30% to the Common Limited Partner and 70% to the General
Partner, until the Common Limited Partner has received with respect to the
Common Limited Partnership Interest (taking into account the corresponding
Gain or Loss allocated pursuant to subsection 5.5 or 5.6) its First Level
Return of and on Equity together with any Termination Expense (Benefit), in
the case of the Common Limited Partner.
(d) Fourth, 20% to the Common Limited Partner and 80% to the General
Partner, until the Common Limited Partner has received with respect to the
Common Limited Partnership Interest (taking into account the corresponding
Gain or Loss allocated pursuant to subsection 5.5 or 5.6) its Second Level
Return of and on Equity together with any Termination Expense (Benefit), in
the case of the Common Limited Partner.
(e) Fifth, 10% to the Common Limited Partner and 90% to the General
Partner, until the Common Limited Partner has received with respect to the
Common Limited Partnership
<PAGE>
31
Interest (taking into account the corresponding Gain and Loss allocated
pursuant to subsection 5.5 or 5.6) its Third Level Return of and on Equity
together with any Termination Expense (Benefit), in the case of the Common
Limited Partner.
(f) Sixth, 1% to the Common Limited Partner and 99% to the General
Partner.
4.8 Special Event. Notwithstanding anything else contained herein, if
-------------
a Special Event occurs and is continuing, Distributable Cash shall be
distributed in accordance with subsection 14.2.
4.9 Failure to Make Second Capital Contribution. If the conditions
-------------------------------------------
specified in Section 2(c) of the Capital Contribution Agreement are not
satisfied or waived and the Limited Partner does not make the additional capital
contributions specified in Section 2(a) (ii) of such Agreement on the Second
Capital Contribution Date, the Limited Partnership Interest held by the Limited
Partner after the Second Capital Contribution Date shall be converted into and
become an interest that is entitled to 1/30 (or such greater numerator over 30
if the Common Limited Partner has at such time already contributed more than
$1,000,000 of its $30,000,000 total capital contribution to the Partnership) of
the entitlements to Distributable Cash, items of taxable income, gain, loss and
deductions, and other entitlements of the Common Limited Partner under this
Agreement.
4.10 Debt Service Account Interest. Debt Service Account Interest
-----------------------------
shall be distributed monthly 100% to the General Partner in accordance with the
provisions of the Security Deposit Agreement.
ARTICLE V
ALLOCATION OF CERTAIN PROFITS AND LOSSES
----------------------------------------
FOR BOOK AND TAX PURPOSES
-------------------------
5.1 Intentionally Omitted.
5.2 Operating Profits. Operating Profits of the Partnership accuring
-----------------
after the Second Capital Contribution Date shall be allocated among the Partners
as follows:
(a) First, 98% to the Preferred Limited Partner, 1% to the Common
Limited Partner and 1% to the General Partner until the Preferred Limited
Partner has been allocated on a cumulative basis pursuant to this
subsection 5.2(a) an amount of Operating Profits equal to the aggregate
amount of Distributable Cash it has received over the term of the
Partnership pursuant to subsections 4.3(a) and 4.5 hereof; provided,
--------
however, that if any distribution in respect of
-------
<PAGE>
32
the Preferred Limited Partnership Interest is treated for federal income
tax purposes as other than a partnership distribution under Code Section
731, no amount of Operating Profits shall be allocated to the Preferred
Limited Partner pursuant to this subsection with respect to such
distribution, but the Common Limited Partner and the General Partner will
nonetheless be allocated an amount of Operating Profits equal to the amount
they would have been allocated if this proviso had not been in effect.
(b) Second, to the extent Operating Losses have been allocated
pursuant to subsection 5.3(b) hereof, proportionately to the Preferred
Limited Partner and the Common Limited Partner to the extent of such
Operating Losses.
(c) Third, 100% to the Preferred Limited Partner or the Common
Limited Partner, as the case may be, until such Limited Partner has been
allocated an amount of Operating Profits pursuant to this subsection 5.2(c)
equal to the aggregate amount of Distributable Cash it has received over
the term of the Partnership pursuant to subsection 4.6.
(d) Fourth, 99% to the General Partner and 1% to the Common Limited
Partner until the General Partner has been allocated on a cumulative basis
pursuant to this subsection 5.2(d) an amount of Operating Profits equal to
the aggregate amount of Distributable Cash it has received over the term of
the Partnership pursuant to subsection 4.3(b) hereof; provided, however,
-------- -------
that if there is a reduction in the amount of Distributable Cash received
by the General Partner pursuant to subsection 4.3(b) by reason of the
proviso in such subsection, there shall be a corresponding reduction in the
allocation to the General Partner pursuant to this subsection 5.2(d), but
the allocation to the Common Limited Partner pursuant to this subsection
5.2(d) shall be made as though such reduction had not occurred.
(e) Fifth, 9% to the Common Limited Partner, 1% to the Preferred
Limited Partner and 90% to the General Partner until the Common Limited
Partner has been allocated on a cumulative basis pursuant to this
subsection 5.2(e) an amount of Operating Profits equal to the aggregate
amount of Distributable Cash it has received over the term of the
partnership pursuant to subsection 4.3(c); provided, however, that the
-------- -------
proviso in subsection 5.2(a) shall apply to this subsection 5.2(e) as well.
(f) Sixth, 9% to the preferred Limited Partner, 1% to the Common
Limited Partner and 90% to the General Partner until the Preferred Limited
Partner has been allocated on a cumulative basis pursuant to this
subsection 5.2(f) an amount of Operating Profits equal to the aggregate
amount of Distributable Cash it has received over the term of the
Partnership pursuant to subsection 4.3(d); provided,
--------
<PAGE>
33
however, that the proviso in subsection 5.2(a) hereof shall apply to this
-------
subsection 5.2(f) as well.
(g) Seventh, 30% to the Common Limited Partner and 70% to the General
Partner until the Common Limited Partner has been allocated on a cumulative
basis pursuant to this subsection 5.2(g) an amount of Operating profits
equal to the aggregate amount of Distributable Cash it has received over
the term of the Partnership pursuant to subsection 4.4(a).
(h) Eighth, 20% to the Common Limited Partner and 80% to the General
Partner until the Common Limited Partner has been allocated on a cumulative
basis pursuant to this subsection 5.2(h) an amount of Operating Profits
equal to the aggregate amount of Distributable Cash it has received over
the term of the Partnership pursuant to subsection 4.4(b)
(i) Ninth, 10% to the Common Limited Partner and 90% to the General
Partner until the Common Limited Partner has been allocated on a cumulative
basis pursuant to this subsection 5.2(i) an amount of Operating Profits
equal to the aggregate amount of Distributable Cash it has received over
the term of the partnership pursuant to subsection 4.4(c).
(j) Tenth, to the extent the General Partner has received
Distributable Cash pursuant to subsections 4.3 and 4.4 in excess of the
amount of Operating Profits it has been allocated pursuant to this
subsection 5.2 ("Excess Cash"), 100% to the General Partner to the extent
------------
of such Excess Cash.
(k) Eleventh, 1% to the Common Limited Partner and 99% to the General
Partner;
provided, however, that with respect to the first taxable year to which
- --------- -------
subsection 4.6 applies, the Common Limited Partner shall be allocated in the
aggregate an amount of Operating Profits no less than 10.01% of the total
Operating Profits with respect to such year; and provided further, that, with
-------- -------
respect to paragraphs (a) and (c) through (i) of this subsection 5.2, to the
extent that the Distributable Cash referred to in such paragraphs shall include
any proceeds from the sale of any assets, the Operating Profit allocation in
such subsection shall be reduced by an amount equal to the relevant Partners'
shares of the Gross Asset Values of such assets, as adjusted to date.
5.3 Operating Losses. Operating Losses of the Partnership accruing
----------------
after the Second Capital Contribution Date shall be allocated among the Partners
as follows:
(a) First, 100% to the General Partner until the Capital Account of
the General Partner equals zero.
<PAGE>
34
(b) Second, pro rata between the Preferred Limited Partner and the
--- ----
Common Limited Partner (in proportion to their respective Capital Account
balances) until the Capital Accounts of the Preferred Limited Partner and
the Common Limited Partner equal zero.
(c) Third, 100% to the General Partner.
5.4 Depreciation. (a) Except as provided in subsection 5.4(b),
------------
Depreciation with respect to the tangible assets of the Project shall be
allocated as follows:
(i) First, 100% to the Common Limited Partner until the Capital
Account balance of the Common Limited Partner equals the remaining
amount of unamortized Organizational Expenses.
(ii) Second, 100% to the Preferred Limited Partner until the
Capital Account balance of the Preferred Limited Partner equals zero.
(iii) Third, 100% to the Common Limited Partner, to the extent of
the Nonrecourse Deductions or Partner Nonrecourse Deductions with
respect to the Project.
(iv) Fourth, 100% to the General Partner, to the extent that such
Depreciation does not constitute a Nonrecourse Deduction or Partner
Nonrecourse Deduction.
(b) All other Depreciation with respect to assets acquired subsequent
to the Second Capital Contribution Date shall be allocated in accordance with
Code Section 704(b) between the Partners based upon how the basis of the asset
was funded. For example, Depreciation with respect to an asset funded by a
contribution or a loan from a Partner shall be allocated to that Partner, and
Depreciation with respect to an asset funded from net income of the Partnership
shall be allocated between the Partners based upon their overall shares of the
net income of the Partnership for such period.
(c) Amortization with respect to the permits, contracts, licenses and
other intangible assets of the Partnership existing on the Second Capital
Contribution Date shall be allocated 100% to the General Partner.
(d) Notwithstanding paragraphs (a) and (c) of this subsection 5.4, if
the Gross Asset Value on the Second Capital Contribution Date (determined in
accordance with Schedule 2 hereto) of the tangible assets of the Project, or of
any of the permits, contracts, licenses and other intangible assets described in
paragraph (c), is attributable to either capital contributions of, or net income
allocated to, (i) in the case of the tangible assets of the Project, the General
Partner (determined after taking into account depreciation accrued prior to the
Second Capital Contribution Date), and (ii) in the case of
<PAGE>
35
the intangible assets, the Common Limited Partner or the Preferred Limited
Partner, such Partner will be allocated an amount of the total Depreciation with
respect to such asset in each period based upon the ratio of (X) the portion of
the Gross Asset Value of such asset as of the Second Capital Contribution Date
attributable to its contributions or income described above to (Y) the total
Gross Asset Value of the asset as of the Second Capital Contribution Date, both
as adjusted from time to time by Depreciation deductions.
5.5 Gains. Upon the sale, transfer or other disposition of any
-----
property the proceeds from which are distributed pursuant to subsection 4.7
hereof, any Gain realized by the Partnership shall be allocated as follows:
(a) First, 100% to the Preferred Limited Partner until the Capital
Account balance of the Preferred Limited Partner, plus the Limited Partner
Benefits received by the Preferred Limited Partner with respect to the
Preferred Limited Partnership Interest to that point (taking into account
the Gain allocated pursuant to this subsection 5.5(a)), equal its Limited
Partner's Return of and on Equity.
(b) Second, 100% to the General Partner until the Capital Account
balance of the General Partner, as adjusted by any losses allocated to the
General Partner pursuant to subsection 5.6 from the disposition of other
assets in the same transaction, equals twice the Capital Account balance of
the Preferred Limited Partner (as determined pursuant to subsection 5.5
(a)).
(c) Third, 30% to the Common Limited Partner and 70% to the General
Partner until the Capital Account balance of the Common Limited Partner,
plus the Limited Partner Benefits received by the Common Limited Partner
with respect to the Common Limited Partnership Interest to that point
(taking into account the Gain allocated pursuant to this subsection
5.5(c)), equal its First Level Return of and on Equity.
(d) Fourth, 20% to the Common Limited Partner and 80% to the General
Partner until the Capital Account balance of the Common Limited Partner,
plus the Limited Partner Benefits received by the Common Limited Partner
with respect to the Common Limited Partnership Interest to that point
(taking into account the Gain allocated pursuant to this subsection
5.5(d)), equal its Second Level Return of and on Equity.
(e) Fifth, 10% to the Common Limited Partner and 90% to the General
Partner until the Capital Account balance of the Common Limited Partner,
plus the Limited Partner Benefits received by the Common Limited Partner
with respect to the Common Limited Partnership Interest to that point
<PAGE>
36
(taking into account the Gain allocated pursuant to this subsection
5.5(e)), equal its Third Level Return of and on Equity;
(f) Sixth, 1% to the Common Limited Partner and 99% to the General
Partner;
provided, however, that for purposes of determining the Capital Account balances
of the Partners at each Capital Contribution Date any Gain from the sale of the
permits, contracts, licenses or other intangible assets of the Partnership at or
prior to the Second Capital Contribution shall be allocated 100% to the General
Partner.
5.6 Losses. Upon the sale, transfer or other disposition of any
------
property the proceeds from which are distributed pursuant to subsection 4.7
hereof, or on the abandonment or other disposition of any tangible or intangible
asset with respect to which no proceeds are realized at a loss in excess of
$30,000, any Loss realized by the Partnership shall be allocated as follows:
(a) First, 100% to the General Partner until the Capital Account of
the General Partner equals zero.
(b) Second, pro rata between the Preferred Limited Partner and the
Common Limited Partner (in proportion to their respective Capital Account
balances) until the Capital Accounts of the Preferred Limited Partner and
the Common Limited Partner equal zero.
(c) Third, 100% to the General Partner.
5.7 Qualified Income Offset. Notwithstanding anything herein to the
-----------------------
contrary, in the event any Partner unexpectedly receives any adjustments,
allocations or distributions described in paragraphs (b) (2) (ii) (d) (4), (5)
or (6) of Regulations Section 1.704-1, there shall be specially allocated to
such Partner such items of Partnership income and gain, at such times and in
such amounts as will eliminate as quickly as possible that portion of its
Adjusted Capital Account Deficit caused or increased by such adjustments,
allocations or distributions.
5.8 Minimum Gain Chargeback. Notwithstanding any other provision in
-----------------------
this Article V, if there is a net decrease in Partnership minimum gain
(determined in accordance with Regulation Section 1.704-2(d)) or a net decrease
in Partner Nonrecourse Debt minimum gain (determined in accordance with
Regulation Section 1.704-2(i)) during any Partnership taxable year, each Partner
shall be specially allocated items of Partnership income and gain for such year
(and, if necessary, subsequent years) equal to such Partner's share of the net
decrease in Partnership minimum gain and Partner Nonrecourse Debt minimum gain.
Each Partner's share of such net decreases shall be determined in accordance
with Regulation Sections 1.704-2(g)
<PAGE>
37
and 1.704-2(i). The items to be so allocated shall be determined in accordance
with Regulations Sections 1.704-2(f) and 1.704-2(i). This subsection 5.8 is
intended to comply with the minimum gain chargeback requirements in such
Regulation Sections and shall be interpreted consistently therewith.
5.9 Allocation of Organizational Expenses. Organizational Expenses
-------------------------------------
shall be allocated 100% to the Common Limited Partner until the Capital Account
balance of the Common Limited Partner equals zero.
5.10 Partner Nonrecourse Deductions. Notwithstanding subsection 5.4
------------------------------
hereof, Partner Nonrecourse Deductions attributable to otherwise nonrecourse
debt with respect to which a Partner (or a related person within the meaning of
Regulations Section 1.752-4(b)) is the creditor or otherwise bears the "economic
risk of loss" under Regulations Section 1.752-2 ("Partner Nonrecourse Debt")
shall be allocated to such Partner.
5.11 Curative Allocations. The allocations set forth in subsections
--------------------
5.7 and 5.8 hereof are intended to comply with certain requirements of
Regulations Section 1.704-1(b). Notwithstanding any other provisions of this
Article V (other than subsections 5.7 and 5.8), allocations that have taken
place pursuant to subsections 5.7 and 5.8 shall be taken into account in
allocating other Operating Profits, Operating Losses, Depreciation and other
items, so that, to the extent possible, the net amount of such other allocations
and the subsections 5.7 and 5.8 allocations to each Partner shall equal the net
amount that would have been allocated to each Partner if the subsections 5.7 and
5.8 allocations had not occurred.
5.12 Tax Allocations. Except as provided in subsection 5.13 hereof,
---------------
for income tax purposes each item of income, gain, loss and deduction shall be
allocated in the same manner as the corresponding book item is allocated for
Capital Account purposes.
5.13 Property Subject to 704(c) and 704(b). In the case of any
-------------------------------------
Partnership asset the Gross Asset Value of which differs from its adjusted tax
basis, income, gain, loss and deduction with respect to such asset shall, solely
for tax purposes, be allocated in accordance with the principles of Code
Sections 704(b) and 704(c) to take account of such difference. Thus, for
example, income tax depreciation with respect to the income tax basis of any
asset that is funded (either directly or through repayment of a Partnership
borrowing) by a Limited Partner capital contribution shall be allocated to that
Limited Partner by reason of the allocation in subsection 5.4(d) of Depreciation
to that Limited Partner.
5.14 Gross Income Allocation. (a) To the extent all or any portion of
-----------------------
any payment to the General Partner or an Affiliate of the General Partner in any
year (other than a distribution made pursuant to Article IV hereof) is treated
as a
<PAGE>
38
non-deductible distribution to such Partner or Affiliate, the General Partner
will be allocated an amount of gross income in such period (or in the next
succeeding periods to the extent there is insufficient gross income in such
period) equal to the amount of the payment.
(b) To the extent the General Partner has been allocated Depreciation
with respect to the Project pursuant to clause (iv) of subsection 5.4(a), the
General Partner will be allocated an amount of gross income in such period (or
in the next succeeding periods to the extent there is insufficient gross income
in such period) equal to the amount of Depreciation so allocated.
Notwithstanding the above, Depreciation with respect to the tangible assets of
the Project that is allocated to the General Partner pursuant to subsection
5.4(d) hereof because the General Partner prior to the Second Capital
Contribution Date has made capital contributions to the Partnership or has been
allocated net income shall not be matched with an allocation of gross income
pursuant to this subsection 5.14(b).
5.15 Debt Service Account Interest. All interest and other income
-----------------------------
attributable to Debt Service Account Interest shall be allocated 100% to the
General Partner.
5.16 Limitations. Notwithstanding anything to the contrary in this
-----------
Article V, no allocation under this Article V shall be made to a Partner that
would cause such Partner to have, or that would increase, an Adjusted Capital
Account Deficit.
5.17 Ordering Rules. For purposes of Article V hereof, the following
--------------
ordering rules shall apply:
(a) First, all distributions of Distributable Cash under Article IV
shall be deemed to have been made.
(b) Next, Operating Profits and Operating Losses and items other than
Gain and Loss shall be allocated in accordance with Article V hereof.
(c) Finally, Gain or Loss from the sale or other disposition of
Partnership property shall be allocated in accordance with this Article V.
ARTICLE VI
BOOKS OF ACCOUNT, RECORDS, REPORTS AND TAX MATTERS
--------------------------------------------------
6.1 Books and Records. Proper and complete records and books of
-----------------
account for the Partnership shall be kept by the Managing General Partner in
which shall be appropriately entered all transactions and other matters relative
to the Partnership's business as are usually entered into records and books of
account maintained by partnerships engaged in businesses of like character.
Except as otherwise provided in this Agreement, all
<PAGE>
39
decisions regarding accounting and tax matters shall be made by the Managing
General Partner in its sole discretion taking into account such advice from the
Partnership's professional tax and accounting advisors as the Managing General
Partner deems appropriate, having given due consideration to the advice and
recommendations of the Limited Partner, the Limited Partner's tax counsel and
other advisors. The books and records shall at all times be made available at
the principal office of the Partnership and shall be open to the reasonable
inspection and examination of any Partner or its duly authorized representatives
during normal business hours for any purpose reasonably related to the interest
of such Partner as a partner in the Partnership. The Partnership will be on the
accrual method for both tax and accounting purposes.
6.2 Information Kept by Managing General Partner. The Managing
--------------------------------------------
General Partner shall keep at the principal office of the Partnership all the
following:
(a) A current list of the full name and last known business or
residence address of each Partner set forth in alphabetical order together
with the Capital Contribution of each Partner;
(b) a copy of the original Certificate of Limited Partnership and all
certificates of amendment thereto and restatements thereof, together with
executed copies of any powers of attorney pursuant to which any such
certificate has been executed;
(c) copies of the Partnership's federal, state and local income tax
or information returns and reports, if any, for the six most recent taxable
years;
(d) copies of this Agreement and all amendments hereto and
restatements hereof;
(e) financial statements of the Partnership for the six most recent
fiscal years;
(f) the Partnership's books and records as they relate to the
internal affairs of the Partnership for at least the current and past three
fiscal years; and
(g) all other material information received by the Managing General
Partner from or with respect to the Partnership.
6.3 Fiscal Year. The fiscal year of the Partnership shall end on
-----------
December 31st of each year.
6.4 Partnership Funds. The funds (other than Working Capital
-----------------
Proceeds) of the Partnership shall be deposited in the relevant accounts
maintained by the Escrow Agent (or, prior to the Second Capital Contribution
Date, the Security Agent)
<PAGE>
40
pursuant to the Security Deposit Agreement, and be invested in such interest-
bearing or non-interest-bearing investments as are specified therein. All
withdrawals from any such accounts shall be made in accordance with the terms of
the Security Deposit Agreement. The Working Capital Proceeds shall be deposited
in a separate bank account of the Partnership, be invested from time to time
only in such Cash Equivalents as may be determined by the Managing General
Partner and be used solely for the working capital purposes of the Partnership.
Any funds withdrawn from the Revenue Account (as defined in the Security Deposit
Agreement) pursuant to Section 4.01(a) of the Security Deposit Agreement shall
be deposited in a separate bank account of the Partnership, be invested from
time to time only in such Cash Equivalents as may be determined by the Managing
General Partner and be used solely for the payment of expenses set forth in the
Operating Budget. Partnership funds shall not be commingled with those of any
other Person.
6.5 Income Tax Elections/Return Preparation. (a) Prior to the Flip
---------------------------------------
Date, the Managing General Partner shall not make any material federal income
tax elections affecting the depreciation deductions with respect to the Project
or the Organizational Expenses with respect to the Partnership shown on Schedule
2, or extend the statute of limitations for assessment OF tax deficiencies,
unless it has received the prior written consent of the Limited Partner.
However, the sole remedy available to the Limited Partner for the failure of the
General Partner to obtain the consent of the Limited Partner with respect to an
election described above shall be the creation of a Tax Indemnity Event.
(b) All tax returns and reports of the Partnership shall be prepared
and timely filed under the direction of the Managing General Partner, and,
except as otherwise provided in this Agreement, all tax audits and litigation
with respect thereto shall be conducted under the direction of the Managing
General Partner.
(c) Prior to the Flip Date, the Managing General Partner covenants
and agrees that, as early as reasonably possible prior to its filing of the
Partnership's federal and state income tax returns, it will provide the Limited
Partner with a proposed pro forma of such Partnership returns showing the tax
positions which it intends to reflect in the Partnership's returns, and will
provide the Limited Partner with reasonable opportunity fully to consult with
and/or advise the Managing General Partner with respect to all positions
intended to be reflected.
6.6 Tax Accounting Matters. (a) The Partnership's Capital Accounts
----------------------
and its books and records related thereto shall be maintained in accordance with
the accounting methods used in preparing the Partnership's federal income tax
return notwithstanding the fact that the Partnership shall also maintain books
and records in accordance with GAAP.
<PAGE>
41
(b) All items of income and deductions recognized during a month
shall be allocated as of the end of each month, based on the facts and
circumstances existing as of the end of that month.
6.7 Financial Statements. (a) The Managing General Partner shall
--------------------
furnish to each other Partner:
(i) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Partnership and the Managing General
Partner, (A) a copy of the balance sheet of each of the Partnership and the
Managing General Partner as at the end of such fiscal year and the related
statements of income and partners' capital and changes in partners' capital
and cash flow for such fiscal year, setting forth, after fiscal year 1991,
in each case in comparative form the figures for the previous year,
reported on, without a qualification or exception as to the scope of the
audit, by independent certified public accountants of nationally recognized
standing reasonably acceptable to the Preferred Limited Partner, and (B)
prior to the Flip Date, if the Partnership shall construct and operate the
Exxon System, such other financial statements showing the Project as a
separate component as may be reasonably requested by the Limited Partner;
and
(ii) prior to the Flip Date, as soon as available, but in any event
not later than 60 days after the end of each of the first three quarterly
periods of each fiscal year of the Partnership and the Managing General
Partner, the unaudited balance sheet of each of the Partnership and the
Managing General Partner as at the end of each such quarter and the related
unaudited statements of income and partners' capital and changes in
partners' capital and cash flow of the Partnership and the Managing General
Partner for such quarter and the portion of the fiscal year through such
date, setting forth, after fiscal year 1991, in each case in comparative
form the figures for the previous year, certified by a Responsible Officer
of the Managing General Partner (subject to normal year-end audit
adjustments);
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
approved by such accountants or officer, as the case may be, and disclosed
therein).
(b) Certificates: Other Information. Prior to the Flip Date, the
-------------------------------
Managing General Partner shall furnish to each other Partner:
(i) concurrently with the delivery of the financial statements
referred to in subsection 6.7(a) (i), a certificate of the independent
certified public accountants reporting on such financial statements stating
that in
<PAGE>
42
making the examination necessary therefor no knowledge was obtained of any
Special Event or of any event which, with the passage of time or the giving
of notice or both, would constitute a Special Event, except as specified in
such certificate;
(ii) concurrently with the delivery of the financial statements
referred to in subsections 6.7(a) (i) and (ii), a certificate of a
Responsible Officer of the Managing General Partner stating that, to the
best of such officer's knowledge, the Managing General Partner during such
period has observed or performed all of its covenants and other agreements,
and satisfied every condition contained in this Agreement and the other
Operative Documents, to be observed, performed or satisfied by it, and that
such officer has obtained no knowledge of any Special Event or of any event
which, with the passage of time or the giving of notice or both, would
constitute a Special Event, except as specified in such certificate;
(iii) not later than 30 days prior to the end of each fiscal year of
the Partnership, a copy of the monthly operating budget (which includes
revenues (including, without limitation, amounts to be deposited in the
Operation and Maintenance Account) and expenses), the capital expenditures
budget and the general and administrative budget (collectively, the
"Operating Budget") for the next fiscal year of the Partnership, and a copy
-----------------
of the projections by the Managing General Partner of the Operating Budget
and cash flow of the Partnership for the next five succeeding fiscal years,
such Operating Budget to be approved by the Preferred Limited Partner (which
approval shall not be unreasonably withheld or delayed) and such Operating
Budget and projections to be accompanied by a certificate of a Responsible
Officer of the Managing General Partner to the effect that such Operating
Budget and projections have been prepared in good faith on a reasonable
basis and that such officer has no reason to believe they are incorrect or
misleading in any material respect;
(iv) promptly after becoming available, but in any event within 30
days after the end of each calendar month (except the last month of each
quarter), a report, certified by a Responsible Officer of the Managing
General Partner, setting forth the power production and the revenues of the
Project during such month and setting forth any extraordinary items incurred
in connection with the Project but not included in the Operating Budget
delivered pursuant to subsection 6.7(b) (iii), together with a comparison of
the projected power production and revenues of the Project for such month;
(v) promptly after becoming available, but in any event within 30
days after the end of each calendar quarter, a report, certified by a
Responsible Officer of the Managing
<PAGE>
43
General Partner, setting forth the year-to-date revenues, operating
expenses, general and administrative expenses and capital expenditures of
the Partnership, together with a comparison of the Operating Budget for
such period, and a projection of revenues and expenses for the remainder of
the Partnership's fiscal year;
(vi) upon the Limited Partner's request, quarterly and annual funds
flow statements detailed to its reasonable satisfaction;
(vii) upon request by the Limited Partner, which request shall not be
made more frequently than once in any twelve-month period, a revised plan
for the procurement of natural gas for the Facility for the next four years
demonstrating to the reasonable satisfaction of the Preferred Limited
Partner how the Partnership will comply with the provisions of subsection
7.2(m);
(viii) not later than 30 days after the end of each Annual Period (as
defined in the Power Purchase Agreement), commencing with the first Annual
Period after the first anniversary of the Second Capital Contribution Date
and ending on the last day of the Annual Period occurring immediately prior
to the Flip Date, a report, certified by a Responsible Officer of the
Managing General Partner setting forth a comparison of (a) the sum of all
costs incurred in such Annual Period by the Partnership with respect to Fuel
acquired for use at the Facility, including without limitation, the Fuel
commodity, transportation, storage costs and any costs related thereto (the
"Partnership Fuel Component") and (b) the Fuel Component Ceiling (as defined
--------------------------
in the Power Purchase Agreement) for such Annual Period, together with any
supporting data or explanation of the methodology used which the Preferred
Limited Partner may reasonably request; and
(ix) promptly, such additional financial and other information as
the Limited Partner may from time to time reasonably request for a purpose
which is reasonably related to the interest of such Partner as a partner in
the Partnership.
6.8 Computations. The Managing General Partner may rely upon, and
------------
shall have no liability to any other Partner if it relies upon, the opinion of
Arthur Andersen & Co. or any other independent nationally recognized accountant
and/or attorneys retained by the Partnership from time to time and reasonably
acceptable to the Limited Partner with respect to all matters (including
disputes with respect thereto) relating to computations and determinations
required to be made under this Article VI or under Articles IV or V hereof.
<PAGE>
44
6.9 Taxes and Tax Controversies. For the purposes of receiving
---------------------------
notices from the Internal Revenue Service (the "IRS") on behalf of the Limited
---
Partner, keeping each Partner informed of all administrative and judicial
proceedings relating to the adjustment of Partnership items at the Partnership
level, and for all other relevant purposes, the Managing General Partner shall
hereby be designated the Tax Matters Partner (the "TMP"), with all of the
---
rights, duties, powers, and obligations provided for in Sections 6221 through
6232, inclusive, of the Code; provided, however, that, with respect to all
-------- -------
taxable years beginning on or before the Flip Date, without the consent of the
Limited Partner (or, if there shall be more than one Limited Partner, a majority
in interest of such Limited Partners), the TMP will not:
(a) take any action to extend any statute of limitations with respect
to the tax returns of the Partnership;
(b) make any decision on behalf of the Partnership, which will be
binding upon the Limited Partner, to contest in judicial proceedings any
adverse IRS decision related to a Partnership return of income, including
the decision of whether to contest in Tax Court or in district court or the
Court of Claims; or
(c) file any return or statement of income with respect to the
Partnership or any Partner, or take any position with any taxing authority,
other than in accordance with the tax assumptions set forth in Schedule 2
hereof; provided, however, if the IRS challenges the treatment of any item
--------- -------
on the Partnership's tax return filed in accordance with the tax assumptions
set forth on Schedule 2 hereof, the TMP shall not be required to file future
Partnership tax returns in accordance with such assumption unless (i) such
issue is being contested by the Partnership and (ii) the TMP receives an
opinion of tax counsel acceptable to the TMP to the effect that there is
sufficient authority in support of such position that the filing of future
Partnership tax returns in accordance therewith will not subject the General
Partner (as TMP and as a Partner in the Partnership) to any penalty,
interest or addition to tax as a result thereof or the Limited Partner
agrees to indemnify the General Partner for any such penalty, interest or
addition to tax.
Additionally, the TMP covenants to notify the Limited Partner promptly as to the
beginning of any audit or administrative or judicial proceedings with respect to
Partnership tax matters and as to all material developments in such matters, to
provide the Limited Partner with copies of all reports, notices and
correspondence relating to such matters and, with respect to taxable years
beginning on or before or including the Flip Date, to consult with the Limited
Partner with respect to the conduct on behalf of the Partnership of any audit or
administrative or judicial proceedings in which the Partnership is a party, and
to convey to the IRS all procedural requests made by the Limited
<PAGE>
45
Partner. In the event of any audit or administrative or judicial proceeding,
with respect to taxable years beginning on or before or including the Flip Date,
that involves an issue that may have a material adverse impact on the Limited
Partner, the Limited Partner may, at its option and at the expense of the
Partnership, assume control of all or any portion of such audit or proceeding.
6.10 Inspection; Reports to Regulatory Authorities. The Partners and
---------------------------------------------
their respective authorized representatives may inspect the Project and the
books and records of the Managing General Partner relating to the Project during
normal business hours for any purpose reasonably related to the interest of the
Partners as partners of the Partnership and make copies and extracts therefrom,
and may discuss the Partnership's affairs, finances and accounts with the
employees and accountants of the Managing General Partner and the Partnership
(and by this provision the Managing General Partner authorizes such accountants
to discuss with each of the Partners and their respective authorized
representatives the affairs, finances and accounts of the Partnership), all at
such times and as often as may be reasonably requested. The Managing General
Partner shall furnish each of the Partners statements accurate in all material
respects regarding the condition and state of repair of the Project, all at such
times and as often as may be reasonably requested. None of the Partners shall
have any duty to make any such inspection or inquiry or incur any liability or
obligation by reason of not making any such inspection or inquiry. To the extent
permitted by Applicable Law, the Managing General Partner shall prepare and file
in timely fashion or, where any Partner shall be required to file, on reasonable
notice, the Managing General Partner shall prepare and deliver to such Partner
within a reasonable time prior to the date for filing, any report with respect
to the Project that shall be required to be filed with any Governmental
Authority. Each of the Partners shall notify the Managing General Partner at
least 30 days prior to any filing deadline if any such notice, application or
document is necessary on its behalf and if the Managing General Partner would
not reasonably be aware of the necessity of such filing.
ARTICLE VII
MANAGEMENT
----------
7.1 Appointment; Powers of the Managing General Partner. (a) The
---------------------------------------------------
General Partner and the Limited Partner hereby appoint Cogen Linden as the
initial Managing General Partner. Cogen Linden shall serve as the Managing
General Partner until it shall cease to be a General Partner or the Managing
General Partner pursuant to subsection 14.2 or otherwise with the consent of the
Limited Partner.
(b) The Managing General Partner, acting as such and subject to
subsection 7.3 and to any other specific limitations contained in this
Agreement, shall have full and exclusive power
<PAGE>
46
and discretion to manage the day-to-day business and affairs of the Partnership,
including the construction, equipping, management, control, operation,
maintenance and repair of the Project, and to engage in all activities and
transactions and all other acts and things that in its judgment are necessary,
appropriate, proper, advisable or desirable to effect, or incidental or
convenient to, the furtherance of the Partnership Business, including, but not
limited to, the power to:
(i) Accounting Records. Maintain the accounting books and records of
------------------
the Partnership, and have charge and supervision over and care and custody
of all moneys, securities, and disbursements of the Partnership;
(ii) Contracts. Negotiate the terms of and make, enter into, execute,
---------
deliver and perform any and all agreements, contracts, commitments,
arrangements and undertakings, as the same may be amended, restated,
supplemented or otherwise modified from time to time, all as may be
necessary, convenient or incidental to carry out the Partnership's objects
and purposes, including, but not limited to, the following:
(1) construction loan agreements;
(2) notes, including, but not limited to, preconstruction notes and
construction notes;
(3) capital contribution agreements;
(4) borrower indemnity agreements;
(5) collateral security documents, including, but not limited to,
mortgages, security agreements, security deposit agreements,
assignments regarding contracts and consents to assignments
regarding contracts;
(6) power sale agreements;
(7) equipment supply agreements;
(8) additional contracts, including, but not limited to, site lease
agreements, steam sale agreements, water supply commitments, gas
transportation agreements, gas sourcing agreements, gas purchase
agreements, turnkey contracts, operation and maintenance
agreements, butane agreements and easement agreements ;
(9) recognition agreements regarding contracts;
(10) reimbursement agreements;
<PAGE>
47
(11) the granting, on behalf of the Partnership, of security
interests, liens, and other encumbrances on, in and against the
Partnership's properties; and
(12) causing the Partnership to have letters of credit issued for
the Partnership's account and on the Partnership's behalf.
(iii) Authorization. Grant special or limited authority to employees
-------------
and agents of the Partnership to make, execute, deliver and perform the
agreements described in paragraph (ii) of this subsection 7.1(b);
(iv) Investments. Invest and reinvest available funds of the
-----------
Partnership in Cash Equivalents in accordance with the terms of the
Security Deposit Agreement and subsection 6.4 hereof;
(v) Proceedings. Pursue or defend any claim, action, proceeding or
-----------
debt due to, owned by or asserted against the Partnership, by litigation or
otherwise; provided, however, that (1) the Managing General Partner shall
-------- -------
permit any Partner, at such Partner's sole option, to intervene and
participate in any arbitration proceeding under any Project Document and
(2) without the approval of the Preferred Limited Partner, the Managing
General Partner shall not initiate any lawsuit except to collect debts or
to enforce contractual obligations in the ordinary course of business or
unless the Managing General Partner reasonably determines that there exists
a threat of irreparable and immediate harm to the Project and the convening
of a meeting is not practicable. The Managing General Partner shall seek
ratification from the Preferred Limited Partner as soon as practicable
thereafter;
(vi) Accounts. Open, maintain and close depositories and bank
--------
accounts for the deposit and withdrawal of money and give signatory powers
to designated Persons in accordance with the terms of the Security Deposit
Agreement and subsection 6.4 hereof;
(vii) Advisors. Select, retain, direct, consult and discharge
--------
attorneys, accountants, engineers, financial advisors, consultants and
other experts, agents and advisors for the Partnership and determine their
compensation and the terms of their engagement on behalf of the Partnership
in accordance with the Operating Budget; and
(viii) Reports. Prepare and file any reports, returns, requests,
-------
applications or other filings relating to taxes, legal requirements or
governmental regulations pertaining to the Partnership or the business or
activities of the Partnership, and act as TMP.
<PAGE>
48
7.2 Certain Management Duties and Responsibilities of the Managing
--------------------------------------------------------------
General Partner. Prior to the Flip Date (except with respect to paragraphs (e)
- ---------------
and (h) of this subsection 7.2), the Managing General Partner shall do the
following:
(a) Payment of Obligations. To the extent of available Partnership
----------------------
funds (including, without limitation, Working Capital Proceeds), pay,
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all the Partnership's obligations and
liabilities of whatever nature, except when the amount or validity thereof
is currently being diligently contested in good faith by appropriate
proceedings timely instituted, cash reserves in conformity with GAAP with
respect thereto have been provided on the books of the Managing General
Partner or the Partnership, as the case may be, and the Partnership or the
Managing General Partner, as the case may be, is complying with the other
relevant provisions of paragraphs (b) and (1) of this subsection.
(b) Taxes: Charges: Laws. (i) To the extent of available Partnership
--------------------
funds (including, without limitation, Working Capital Proceeds), promptly
cause the Partnership to pay all applicable taxes except to the extent that
(1) such taxes are being diligently contested in good faith, by appropriate
proceedings timely instituted, (2) a bond has been posted and a cash
reserve in conformity with GAAP has been established in an amount at least
equal to such taxes and any interest and penalty that may be payable
thereon, (3) during the period of such contest the enforcement of any
contested item is effectively stayed and (4) such contest does not involve
any substantial danger of the sale, forfeiture or loss of any part of the
Project, title thereto or any interest therein and does not interfere with
the operation of the Facility; and (ii) comply and cause the Partnership to
comply with all Requirements of Law.
(c) Chief Place of Business. Maintain its chief place of business at
-----------------------
1600 Smith Street, Houston, Texas; not permit the Partnership to keep any
place of business outside of the States of New Jersey, New York and Texas;
not permit the Partnership to keep any assets outside of the States of New
Jersey, New York and Texas; not change its name; and not do business under
any name other than Cogen Technologies Linden, Ltd. (or Cogen Technologies
Linden, Limited Partnership), without, in each case, the prior written
consent of each of the Partners, which consent shall not be unreasonably
withheld.
(d) Performance of Obligations; Enforcement of Rights. Fully and
-------------------------------------------------
faithfully carry out all of its obligations, and cause the Partnership to
fully and faithfully carry out all of the Partnership's obligations, from
time to time under or in respect of the Basic Documents and the Operative
Documents, except to the extent that the failure to comply
<PAGE>
49
therewith could not reasonably be expected to have a material adverse
effect on the business, properties, operations, condition (financial or
otherwise) or prospects of the Managing General Partner or the Partnership,
as the case may be, and, without limiting the generality of the foregoing,
to the extent of available Partnership funds (including, without
limitation, Working Capital Proceeds), pay all amounts payable by the
Partnership thereunder. The Managing General Partner will use its best
efforts to take any and all such action as may be necessary to enforce its
and the Partnership's rights and to collect any and all sums due it or the
Partnership under the Project Documents and will use its best efforts to
obtain all necessary Permits and other approvals of Governmental
Authorities to keep such Project Documents in full force and effect.
Without limiting the generality of the foregoing, it will:
(i) do or cause to be done all things reasonably necessary to
preserve and keep unimpaired in all material respects its and the
Partnership's rights and those of its assignees under the Project
Documents and to prevent any default under any thereof or any
termination, surrender, cancellation, forfeiture or impairment in any
material respect of any thereof, including, without limitation, all
things necessary to defend any appeal of the FERC Order; and
(ii) not receive or collect any payments under the Project
Documents in advance of the time when the same become due and payable
thereunder unless such money is held by the Security Agent or the
Escrow Agent pursuant to the Security Deposit Agreement until due and
payable.
(e) Maintenance of Existence. Preserve, renew and keep in full force
------------------------
and effect its and the Partnership's existence and to the extent of
available Partnership funds (including, without limitation, Working Capital
Proceeds), take all reasonable action to maintain all rights, privileges
and franchises necessary or desirable in the normal conduct of the
Partnership business and its business on behalf of the Partnership; comply
and to the extent of available Partnership funds (including, without
limitation, Working Capital Proceeds), cause the Partnership to comply with
all Requirements of Law and with all Contractual Obligations except to the
extent that the failure to comply with any such Contractual Obligation
could not reasonably be expected to have a material adverse effect on the
business, operations, financial or other condition or prospects of the
Managing General Partner, the Project or the Partnership or on the ability
of the Managing General Partner or the Partnership to perform its
obligations hereunder, under the other Operative Documents or under the
Basic Documents; and not merge or consolidate with any other Person nor
sell, convey or otherwise dispose of any part of its assets to any
<PAGE>
50
Person except as permitted by the Basic Documents and the Operative
Documents.
(f) Maintenance of Property; Insurance. Keep all of the Partnership's
----------------------------------
material property useful and necessary in its business in good working
order and condition except for normal wear and tear; to the extent of
available Partnership funds (including, without limitation, Working Capital
Proceeds), maintain insurance on all the property of the Partnership in
accordance with the provisions of Schedule 8; comply and cause the
Partnership to comply in all material respects with all warranties,
covenants and agreements made, given or undertaken by it in favor of
insurers in connection with such insurance policies; and furnish to the
Limited Partner, upon written request, full information as to the insurance
carried for any purpose reasonably related to the interest of such Partner
as a partner in the Partnership.
(g) Further Assurances. Promptly and duly execute and deliver to each
------------------
Partner such documents and assurances to take such further action as any
Partner may from time to time reasonably request in order to carry out more
effectively the intent and purpose of the Operative Documents and the Basic
Documents and to establish, protect and perfect the right and remedies
created or intended to be created in favor of each Partner.
(h) Governmental Regulation. (i) Take all actions as may from time to
-----------------------
time be reasonably necessary so that none of the Partners, their respective
Affiliates or the Partnership will, as a result of the construction,
ownership or operation of the Project, the supply of fuel or water thereto
or the sale of steam or electricity therefrom or the entering into or
performance of any Operative Document or Basic Document or any transaction
contemplated hereby or thereby, become subject to the jurisdiction of any
federal, state or local Governmental Authority or regulatory commission or
group to whose jurisdiction the same would not otherwise be subject
(including, without limitation, the Securities and Exchange Commission, FERC
and any PUC) or be deemed to be, or be subject to regulation as, a public
utility, an electric utility, an electric company or a public utility
holding company under any Applicable Law (including, without limitation, the
Public Utility Holding Company Act of 1935, as amended, the Federal Power
Act and the laws under which any PUC is empowered to act) other than as an
operator of a "qualifying cogeneration facility" under PURPA, except where
(x) the effect of such determination would result only in the imposition of
reporting or safety requirements which, in the reasonable opinion of the
Limited Partner, are non-burdensome in nature and (y) in the event that
steam from the Project is supplied, directly or indirectly, to Persons other
than Exxon under the Steam Supply Agreement or otherwise, the Partnership
has obtained a declaratory order or other official assurance, in each
<PAGE>
51
case in form and substance reasonably satisfactory to the Limited Partner,
from the New Jersey Board of Public Utility Commissioners to the effect
that such sales will not result in any Partner, Affiliate thereof or the
Partnership being deemed to be, or subject to regulation as, a "public
utility" under any Applicable Law (other than regulation of the nature
described in clause (x) above) and (ii) promptly and duly prepare and, if
necessary, execute and file, and prepare for execution and filing by any
Partner, any of its Affiliates or the Partnership, such notices,
applications and other documents as shall be necessary so that the
construction, ownership or operation of the Project, the supply of fuel and
water thereto and the sale of steam and electricity therefrom and the
entering into and performance of any Operative Document shall not subject
any such Partner, its Affiliates or the Partnership to any such regulation.
(i) Compliance with FERC Order, etc. At all times cause the
-------------------------------
Partnership to comply in all material respects with the terms and
conditions of the FERC Order and of each other license required for the
ownership or operation of the Project; not amend, modify, terminate,
transfer, pledge or otherwise dispose of, or forfeit, surrender, permit or
consent to the amendment, modification, termination, transfer, pledge,
other disposition, forfeiture, or surrender of, any such license; or take
any other action under any such license having a material adverse effect on
any Partner; provided, however, that the Managing General Partner shall
--------- -------
have the power to amend or modify any such license (other than the FERC
Order or any other order or license affecting the exemption of the Project
from regulation as a utility), (x) after providing the Limited Partner with
30 days' advance written notice of the proposed amendment or modification
and all information reasonably necessary to analyze the consequences
thereof (except, if the Managing General Partner reasonably determines that
there is an emergency requiring immediate action and the giving of such
notice is not practicable, the Managing General Partner shall give the
Limited Partner such notice not later than the close of business on the
Business Day immediately following the date of commencement of such
emergency), and (y) so long as such amendment or modification could not
reasonably be expected to have a material adverse effect on the business,
operations, property or financial or other condition or prospects of the
Partnership, the Managing General Partner or the Project, the projected
availability of Distributable Cash in excess of the distributions required
to be made to the Preferred Limited Partner and the Common Limited Partner
pursuant to subsection 4.3(a), or on the ability of the Managing General
Partner or the Partnership to perform its obligations under this Agreement
or any other Operative Document.
<PAGE>
52
(j) Notices. Promptly (in the case of paragraphs (i) (y), (ii), (iv),
-------
(v), (vii), (ix), (x) and (xii)) and within five days (in the case of
paragraphs (i) (x), (iii), (vi), (viii) and (xi)) give notice to each Partner:
(i) of the occurrence of (x) any Special Event or (y) any
event which, with the passage of time or the giving of notice or both,
would constitute a Special Event;
(ii) of any default or event of default under any
Indebtedness, Guarantee Obligation or other Contractual Obligation of
the Managing General Partner or the Partnership, that, if not cured,
could have a material adverse effect on the business, operations,
property or financial or other condition or prospects of the
Partnership, the Managing General Partner or the Project, on the
projected availability of Distributable Cash in excess of the
distributions required to be made to the Preferred Limited Partner and
the Common Limited Partner pursuant to subsection 4.3(a) or on the
ability of the Managing General Partner or the Partnership to perform
its obligations under this Agreement or under any other Operative
Document;
(iii) of any litigation or proceeding affecting the
Partnership, the Managing General Partner or the Project in which the
amount involved is $2,000,000 or more and not covered by insurance or
in which injunctive or similar relief is sought;
(iv) of the receipt by the Partnership or the Managing General
Partner of any Environmental Notice or of any notice of any event that
creates a material likelihood of the occurrence of an Adverse
Environmental Event;
(v) of the following events, as soon as possible and in any
event within 30 days after the Managing General Partner knows or has
reason to know thereof: (x) the occurrence or expected occurrence of
any Reportable Event with respect to any Plan, or any withdrawal from,
or the termination, Reorganization or Insolvency of any Multiemployer
Plan, or (y) the institution of proceedings or the taking of any other
action by the PBGC or the Partnership or any Commonly Controlled
Entity or any Multiemployer Plan with respect to the withdrawal from,
or the termination, Reorganization or Insolvency of, any Plan;
(vi) of the receipt by the Managing General Partner or the
Partnership of any material notice, demand or declaration from any
other party to any of the Project Documents relating to any default or
event
<PAGE>
53
of default thereunder, the termination thereof or the renewal or
nonrenewal thereof;
(vii) of any request by a party to a Project Document for an
arbitration proceeding under and pursuant to the provisions of such
Project Document;
(viii) of the institution by FERC or any other Governmental
Authority of any proceeding to revoke or modify the FERC Order or any
other license required for the ownership or operation of the Project;
(ix) of the receipt by the Managing General Partner or the
Partnership of any notice or declaration by any Governmental Authority
which relates to, or could result in, Public Utility Status with
respect to the Partnership, the Managing General Partner, the Limited
Partner or any of their respective Affiliates;
(x) of any change which could reasonably be expected to have
a material adverse effect on the business, operations, financial or
other condition or prospects of the Partnership, the Managing General
Partner or the Project;
(xi) of any lien, other than a Permitted Lien, on the property
of the Partnership or the Managing General Partner; and
(xii) of any request made by Texas Eastern or any of its
Subsidiaries or Affiliates to pursue the feasibility and economic
viability of transmitting electrical power as described in the Texas
Eastern Letter Agreement and to provide each Partner with copies of
the results of any feasibility or other studies performed in
connection therewith.
Each notice pursuant to this paragraph (i) shall be accompanied by a
statement of the Responsible Officer of the Managing General Partner
setting forth details of the occurrence referred to therein and stating
what action the Managing General Partner proposes to take with respect
thereto.
(k) Operation and Maintenance. To the extent of available Partnership
-------------------------
funds (including, without limitation, Working Capital Proceeds), maintain
the Project in such condition that the Facility will have the capacity and
functional ability to perform, on a continuing basis (ordinary wear and
tear excepted), in normal commercial operation, the functions and
substantially all the ratings for which it was specifically designed in
accordance with the Plans and Specifications; operate, service, maintain
and repair all necessary or useful components thereof so that
<PAGE>
54
the condition and operating efficiency thereof will be maintained and
preserved (ordinary wear and tear excepted) in all material respects in
accordance with (i) Prudent Utility Practice and good commercial practice
for items of a similar size and nature, (ii) such operating standards as
shall be required to enforce any material warranty claims against dealers,
manufacturers, vendors, contractors and subcontractors and (iii) the terms
and conditions of all insurance policies maintained by the Partnership or
the Managing General Partner in effect at any time with respect thereto;
and develop and maintain in accordance with Prudent Utility Practice, the
spare parts inventory specified in Schedule 6 hereto for the steam and gas
turbines, the heat recovery steam generator, the boiler feed pumps, the
step up transformers, the switchgear and the catalysts for the Project.
(l) Liens. To the extent of available Partnership funds (including,
-----
without limitation, Working Capital Proceeds), protect and defend the
Partnership's interest in the Project against any Lien for the performance
of work or the supply of materials filed against the Project, and remove
any such Lien, except to the extent that (i) the claim giving rise to such
Lien is being diligently contested in good faith, by appropriate
proceedings timely instituted, (ii) the Partnership has posted a bond and
established a cash reserve in an amount at least equal to such claim on the
books of the Partnership, (iii) during the period of such contest the
enforcement of any contested item is effectively stayed and (iv) such
contest does not involve any substantial danger of the sale, forfeiture or
loss of any part of the Project, title thereto or any interest therein and
does not interfere with the operation of the Facility.
(m) Gas Supply Arrangements. (i) Use and cause the Partnership to use
-----------------------
reasonable efforts to pursue a gas procurement policy which (x) takes into
consideration the gas purchasing policies of Con Ed so that on a long-term
basis the risk that the Project's weighted average cost of gas will exceed
the weighted average cost of gas of Con Ed is minimized and (y) provides
for reasonable diversity in the sources of supply of natural gas to the
Project; and prior to the execution of any Gas Purchase Agreement that has
a term of two years or more, use and cause the Partnership to use
reasonable efforts to obtain verification by an independent engineer of the
natural gas reserves of any supplier with whom the Managing General Partner
or the Partnership proposes to enter into a Gas Purchase Agreement (or any
group of Gas Purchase Agreements from the same or related suppliers)
representing more than 5% of the projected annual gas requirements of the
Facility; provided, however, that neither the Managing General Partner nor
--------- -------
the Partnership need obtain independent verification of the natural gas
reserves of any supplier which has an investment
<PAGE>
55
grade rating and is a party to a Gas Purchase Agreement which does not
contain any limitation on recourse to such supplier other than limitations
on consequential damages and provisions for liquidated damages.
(ii) In connection with the obligation set forth in subsection (i)
(x) above, at the end of each Annual Period (as defined in the Power
Purchase Agreement), (x) review the gas procurement policy pursued during
such Annual Period to ascertain if such policy tracked the gas procurement
policy of Con Ed and (y) review the gas procurement policy for the
succeeding Annual Period to ascertain what adjustments, if any, will be
necessary to cause the Partnership and the Managing General Partner to
comply with the obligation set forth in subsection (i) (x) above. A
summary of the results of such review and proposed adjustments, if any,
shall be provided to the Preferred Limited Partner in partial satisfaction
of subsection (i) (x) above, together with any supporting data or
explanation of the methodology used which the Preferred Limited Partner may
reasonably request.
(n) Gas Purchase Plan. If the excess of the Partnership Fuel
-----------------
Component for any Annual Period (as defined in the Power Sale Agreement),
commencing with the second Annual Period to end after the Second Capital
Contribution Date, over the Fuel Component Ceiling (as defined in the Power
Purchase Agreement) for such Annual Period is equal to or greater than (x)
during the period from and including the date which is two Annual Periods
after the Second Capital Contribution Date to but excluding the date which
is six Annual Periods after the Second Capital Contribution Date, 8% of
Distributable Cash for such period, (y) during the period from and
including the date which is six Annual Periods after the Second Capital
Contribution Date to but excluding the date which is twelve Annual Periods
after the Second Capital Contribution Date, 10% of Distributable Cash for
such period or (z) on and after the date which is twelve Annual Periods
after the Second Capital Contribution Date, 12% of Distributable Cash for
such period, submit and cause the Partnership to submit a gas purchase plan
to the Preferred Limited Partner for its approval (such approval not to be
unreasonably withheld) not later than 30 days after the end of such Annual
Period.
7.3 Restrictions on Powers of the Managing General Partner. (a) The
------------------------------------------------------
Managing General Partner shall not do any of the following unless it shall have
the prior written approval of the Preferred Limited Partner and the Common
Limited Partner (unless otherwise provided herein):
(i) Certain Contracts. Prior to the Flip Date, enter, or permit the
-----------------
Partnership to enter, into any agreement or commitment specified in
subsection 8.19 or 8.20 of the Construction Loan Agreement; or appoint, or
permit, the Partnership to appoint, any operator of the Facility other
<PAGE>
56
than the operator in exsistence on the Initial Capital Contribution Date;
provided, that the Limited Partner shall not unreasonably withhold its
--------
consent to the appointment of any operator which is financially capable of
performing its obligations as the operator of the Facility and has the
personnel, experience, equipment and other resources reasonably required to
perform its obligations as the operator of the Facility;
(ii) Contracts with Affiliates. Except as permitted by the General
-------------------------
Partner Credit Agreement, approve the terms of any agreement, contract,
instrument or other transaction between the Partnership and any Partner, or
between the Managing General Partner or the Partnership and any Affiliate,
in each case on terms more favorable to such Partner or such Affiliate than
would have been obtainable in an arm's-length dealing;
(iii) Sale of Assets. Authorize or permit any sale, lease, exchange,
--------------
transfer or other disposition of the Project or any other assets of the
Partnership, in each case with a value in excess of $1,000,000;
(iv) Indebtedness. Prior to the Flip Date, authorize the incurrence,
------------
assumption or guaranty by the Partnership of any Indebtedness, except the
Indebtedness in respect of the Reimbursement Agreement, Indebtedness in
respect of loans from the Managing General Partner pursuant to the General
Partner Credit Agreement for working capital purposes not in excess of
$10,000,000 at any time, Indebtedness contemplated by subsections 10.5 and
14.2 (g) hereof, Indebtedness under the Construction Loan Agreement and any
other Indebtedness which arises out of an emergency requiring immediate
action or is contained in a budget previously approved by the Preferred
Limited Partner Cany such Indebtedness permitted hereunder being "Permitted
---------
Indebtedness")
------------
(v) No Other Business. Engage prior to the Flip Date, or cause the
-----------------
Partnership to engage at any time, in any activity other than the
activities contemplated to be engaged in by it under the Operative
Documents, the Basic Documents or the General Partner Credit Agreement or
enter into, or permit the Partnership to enter into, any contract or
agreement other than as explicitly provided for herein, in the other
Operative Documents or in the General Partner Credit Agreement;
(vi) Liens. Create or otherwise allow any Lien to be on or otherwise
-----
to affect any property included in, the Project, except Permitted Liens;
(vii) No Amendments or Assignments. Except for change orders to or
----------------------------
final settlement of any EPC Contract and for which there will be no
recourse against the Project or the Partners and which do not affect in any
material respect the
<PAGE>
57
operating capacity, performances, cost efficiency, utility, remaining
economic useful life, reliability, value or residual value of the
Project, amend in any material respect, modify in any material respect,
waive compliance with any material provision of, terminate, assign any
rights the Partnership may have under, consent to or permit the
assignment by any other Person of any right such Person may have under,
give consents or exercise rights under or agree to any such amendment,
modification, termination, consent or waiver of compliance with any
material provision of, or any such assignment or exercise of any rights
under, any project Document without the prior written consent of each of
the Partners. Each of the Partners shall respond to any request for its
consent under this paragraph (vii) within 30 days after receipt of all
information necessary to analyze the consequences thereof (or within such
shorter period as may be reasonably requested by the Managing General
Partner if the Managing General Partner reasonably determines that there
is an emergency requiring immediate action) and shall not unreasonably
withhold its consent to any such amendment, modification, waiver,
termination, assignment, consent, exercise or agreement which could not
have a material adverse effect on the business, operations, properties,
financial or other condition or prospects of the Partnership or the
Project or could not materially adversely affect the projected
availability of Distributable Cash in excess of the distributions
required to be made to the Preferred Limited Partner and the Common
Limited Partner pursuant to subsection 4.3 (a);
(viii) Private Placement. Take, or permit any of its Affiliates to
-----------------
take, any action which would subject any interest in the Partnership to
the provisions of Section 5 of the Securities Act of 1933;
(ix) Settlement of Proceedings. Compromise, settle or abandon any
-------------------------
claim, action, proceeding or debt due to, owned by or asserted against
the Partnership, in each case, in an amount equal to $1,000,000 or more;
and
(x) Gas Purchase Agreements. Prior to the Flip Date, (x) enter
-----------------------
into, or permit the Partnership to enter into, any Gas Purchase Agreement
(l) with any of their respective Affiliates on terms that are less
favorable than terms available with non-affiliated Persons or (2) which
provides for the payment of burdensome liquidated damages by the Managing
General Partner or the Partnership or (y) enter into, or permit the
Partnership to enter into, any Gas Purchase Agreement with a term
(including any renewal terms) of six months or more which (l) contains any
material restrictions on assignment by the Managing General Partner or the
Partnership or (2) contains any provision that would result in the
termination, cancellation or suspension of such Gas Purchase Agreement upon
the exercise by the
<PAGE>
58
Preferred Limited Partner of any of its remedies hereunder or upon the sale
of the Facility.
(b) The Managing General Partner shall be prohibited from taking any
action in connection with the governance of the partnership which is
inconsistent with the express provisions of this Agreement, without the
approval of the Preferred Limited Partner.
(c) Notwithstanding anything to the contrary in this subsection 7.3,
the Partners hereby ratify the entering into by the Limited Partnership of
(i) each of the Operative Documents in effect on the date hereof and (ii) each
other written agreement, contract, commitment or undertaking in effect on the
date hereof, a copy of which has been delivered to and approved by the Agent.
7.4 Fee. The Managing General Partner shall be entitled to an annual
---
management fee equal to 1.5% of the annual gross revenues of the project (the
"Management Fee"), the Cost Portion (as defined below) of which shall be
--------------
payable in equal monthly installments during each twelve month period
commencing on the first day of the first month after the Second Capital
Contribution Date and the Profit Portion of which shall be payable in monthly
installments during each twelve month period commencing on the first month after
the Second Capital Contribution Date, provided, that no Special Event shall have
--------
occurred and be continuing, the Arrears Account shall not have a positive
balance and no amount shall be owed to the Limited Partner under subsection 4.6,
provided, however, that notwithstanding the occurrence of a Special Event, a
- -------- -------
positive balance in the Arrears Account or the existence of any amount owing to
the Limited Partner under subsection 4.6, any substitute Managing General
Partner appointed pursuant to subsection 14.2 shall be entitled to reimbursement
for its reasonable costs and expenses in connection with management and
administration of the Project. The portion of such fee which represents costs
and expenses (the "Cost Portion") of the Managing General Partner in connection
------------
with management of the Project shall be set forth in the Operating Budget for
each fiscal year and shall be equal to $3,000,000 for each twelve month period
commencing on the first day of the first month after the Second Capital
Contribution Date, such amount (i) to be increased by $100,000 for the second
twelve month period and (ii) to be adjusted for each subsequent twelve month
period based on the Gross National Product deflator in effect during such
period. The Management Fee shall be paid in accordance with the terms of the
Security Deposit Agreement and this Agreement. In accordance with the foregoing,
the Profit Portion (i) for the first 144 months after the Second Capital
Contribution Date, shall be payable out of amounts otherwise distributable to
the General Partner pursuant to subsection 4.3(b) and (ii) thereafter, until the
Flip Date, shall be payable after distributions have been made pursuant to
subsection 4.3(b) and prior to distributions being made pursuant to subsection
4.3 (c) and (iii) on and after the Flip Date, shall be payable after
distributions have been made pursuant to subsection 4.4 (c)
<PAGE>
59
and prior to distributions being made pursuant to subsection 4.4 (d). The
Managing General Partner may enter into a management agreement with and pay its
Management Fee or any portion thereof received by it in accordance with this
Agreement and the Security Deposit Agreement to Cogen Technologies Management
Company.
7.5 Limitations on Liability of Managing General Partner. Neither
----------------------------------------------------
the Managing General Partner, any Affiliate thereof nor the partners,
shareholders, directors, officers, employees or agents thereof or of any
Affiliate thereof (jointly and severally, the "Managing General Partner Group")
------------------------------
shall be liable, responsible or accountable in damages or otherwise to the
Partnership or any other Partner for any loss, damage or liability sustained by
the Partnership or any such other Partner, including, without limitation, a loss
resulting from a breach of fiduciary duty, duty of care or duty of loyalty (a
"Loss"), arising out of (a) an error of judgment made, or an action taken or
----
omitted, which such Person in good faith reasonably believed to be in accordance
with Prudent Utility Practice, as applicable, and otherwise in accordance with
good commmercial practice, (b) the error of judgment made, action taken or
omitted, dishonesty or bad faith, of any agent or independent contractor
selected or retained in good faith in the reasonable exercise of the Managing
General Partner's duties hereunder, and in accordance with Prudent Utility
Practice, as applicable, and otherwise in accordance with good commercial
practice, other than independent contractors or agents which are Affiliates of
the Managing General Partner in which case the standards of clause (a) above
shall apply as to whether the Managing General Partner Group shall have
liability for a Loss, (c) action taken or omitted in good faith by any member of
the Managing General Partner Group in accordance with the advice of legal
counsel and accountants as to matters that such member reasonably believes to be
within such Person's professional competency or (d) in cases not involving
actions or failure to act comprising Prudent Utility Practice or good commercial
practice, actions taken or omitted in good faith by any member of the Managing
General Partner Group which such member reasonably believed to be in or not
opposed to the best interests of the Partnership, and not materially detrimental
to the best interests of any other Partner. The Partners further agree that (i)
unless the Managing General Partner Group's action or failure to act (including,
without limitation, breach of fiduciary duty, duty of care or duty of loyalty)
constitutes fraud or a willful and deliberate intent to cause injury to the
Partnership or any Partner, or any member of the Managing General Partner Group
shall have knowingly made a misrepresentation herein, in any other Operative
Document or in any certificate or other document delivered pursuant hereto or
thereto, any Loss shall include only actual damages suffered by the Limited
Partner, and shall not include special, punitive or other penal damages, lost
profits or damage to the general business reputation of the Limited Partner or
any of its Affiliates, and (ii) any liability of the Managing General Partner
Group for any Loss not involving fraud, a willful and deliberate intent to cause
injury to the Partnership or any Partner or knowing
<PAGE>
60
misrepresentation the part of the Managing General Partner Group shall be
limited to the Managing General Partner's interest in the Partnership
7.6 Partnership Information Meetings. Following the Initial Capital
--------------------------------
Contribution Date and until the end of the first calendar quarter after the
commencement of commercial operation of the Facility, the Managing General
Partner shall once each calendar quarter, with the first such meeting to be
held during the first calendar quarter after the date hereof, call a meeting
with the Limited Partner to discuss and report on Facility operations.
Thereafter, the Managing General Partner shall call such a meeting at least
semi-annually.
7.7 Limitations on the Partners. No Partner other than the Managing
---------------------------
General Partner shall have any right or authority to act on behalf of or in
the name of the Partnership or to bind the Partnership in any manner except
with the prior written consent of the Managing General Partners, as provided
in Article XIV, as provided in any Recognition Agreement or as provided
pursuant to a contract approved as required under subsection 7.3. No Partner
shall have any right or authority to act for or bind the Partnership except as
expressly set forth herein. No Partner shall take any action in conflict with
the foregoing provisions of this subsection 7.7 or represent, directly or by
course of conduct, that it has any right, power or authority to take any such
action. Notwithstanding anything in this Agreement to the contrary, the
Limited Partner is hereby authorized to enter into any agreement under which
the Limited Partner has rights, duties or obligations relating to contracts
entered into by the Partnership, including any such agreement denominated as a
"Recognition Agreement," all without affecting the Limited Partner's limited
liability as a limited partner of the Partnership. The Managing General
Partner shall use its best efforts to cause the Partnership to cooperate to
the fullest extent necessary to assure the Limited Partner's ability to
perform under any recognition agreement relating to contracts entered into by
the Partnership.
7.8 Cooperation Regarding Permits and Power Purchase Agreement. The
----------------------------------------------------------
General Partner agrees to cooperate fully with the Partnership and with the
Managing General Partner so as to keep the Permits (including, without
limitation, the FERC Order) and the Power Purchase Agreement in full force and
effect. As promptly as practicable after it is permitted by Applicable Law,
agreement or contract, as the case may be, the General Partner shall cause the
Partnership (and shall cooperate with the Partnership and the Managing General
Partner, to the extent necessary) to apply for a renewal of the Permits and a
renewal or replacement of the Power Purchase Agreement for the periods available
and to actively prosecute such application.
7.9 Time Devoted to Partnership. Each of the General Partner and the
---------------------------
Managing General Partner shall devote whatever time and attention to the
business, affairs and operations of the
<PAGE>
61
Partnership is reasonably appropriate for Partnership purposes and is necessary
to carry out the provisions of this Agreement.
7.10 Other Business Activities. Except as expressly provided herein,
-------------------------
nothing in this Agreement shall be deemed to restrict in any way the right of
any Partner to manage, conduct, be employed by, operate, participate in or have
an interest in any other business, activity, venture or organization of any
nature or description independently or with others, without accountability to
the Partnership or any other Partner(s); provided, that each Partner shall
--------
conduct its business in a manner so as to avoid Public Utility Status as
described in subsection 10.5 hereof. Each Partner shall be entitled to receive
and hold, without being accountable to the Partnership or to any other Partner,
any fees, compensation, salary, income, dividends, share of profits or other
distribution, gain or income which it may receive from any other business,
activity, venture or organization.
7.11 Special Indemnity. Cogen Linden agrees to indemnify (from its
-----------------
own funds and not the funds of the Partnership) the Partnership for any loss,
liability or expense incurred by the Partnership pursuant to the letter, dated
August 24, 1992, from the Partnership to Chicago Title Insurance Company.
ARTICLE VIII
CALLS FOR AND PAYMENT OF FUNDS
------------------------------
Except as set forth in Articles III, X or XIV hereof, the Capital
Contribution Agreement, the General Partner Credit Agreement and the
Reimbursement Agreement, or as otherwise mutually agreed by the Partners, no
Partner shall make (or be required to make) a capital contribution or loan of
funds to the Partnership.
ARTICLE IX
CONDITIONS PRECEDENT
--------------------
9.1 Conditions to the Contributions on the Initial Capital
------------------------------------------------------
Contribution Date. The obligation of the Limited Partner to make a capital
- -----------------
contribution to the Partnership on the Initial Capital Contribution Date in
respect of the Common Limited Partnership Interest is subject to the
satisfaction immediately prior to or concurrently with the making of such
contribution of the conditions precedent set forth in subsection 2(b) of the
Capital Contribution Agreement.
9.2 Conditions to the Contributions on or Prior to the Second Capital
-----------------------------------------------------------------
Contribution Date. The obligation of the Limited Partner (a) to make additional
- -----------------
capital contributions to the
<PAGE>
62
Partnership in respect of the Common Limited Partnership Interest on or prior to
the Second Capital Contribution Date and (b) to make a capital contribution to
the Partnership in respect of the Preferred Limited Partnership Interest on the
Second Capital Contribution Date is subject to the satisfaction immediately
prior to or concurrently with the making of such contributions of the conditions
precedent set forth in subsection 2(c) of the Capital Contribution Agreement.
ARTICLE X
TRANSFER AND ENCUMBRANCE
------------------------
10.1 Transfer of Partnership Interest: General Provisions. (a) Except
----------------------------------------------------
as security for the Indebtedness incurred pursuant to the Construction Loan
Agreement and the General Partner Credit Agreement, the General Partner may not
sell, assign, transfer, mortgage, pledge or otherwise directly or indirectly (by
merger, consolidation, sale of assets and business or stock, whether by
operation of law or otherwise) dispose of or encumber, or suffer the disposition
or encumbrance of, all or any portion of its interest in the Partnership unless
all of the other Partners consent to such transfer and the terms thereof.
Notwithstanding the foregoing, interests in the General Partner may be sold,
assigned, transferred or otherwise disposed of, so long as (i) Robert C. McNair
or his wife or children shall own and control, directly or indirectly, a
beneficial interest of at least 8.2% in the General Partner for a period of
seven years after the Second Capital Contribution Date and (ii) either (x)
Robert C. McNair or his wife or children or (y) an entity with a net worth of
not less than $100,000,000, shall own and control, directly or indirectly, a
beneficial interest of at least 8.2% of such interest thereafter. The Limited
Partner may sell, assign, transfer, mortgage, pledge or otherwise dispose of the
Preferred Limited Partnership Interest and/or the Common Limited Partnership
Interest; provided, however, that the transferee of any such interest will not
-------- -------
become a substitute limited partner in the Partnership unless the Managing
General Partner, in its sole and absolute discretion, consents to such
substitution.
(b) Notwithstanding any other provision of this Agreement, no Partner
shall transfer any interest in the Partnership, if any of the following would be
true:
(i) such transfer would violate any Permit;
(ii) such transfer would cause the Project to lose its status as a
"qualifying cogeneration facility" under PURPA or any similar statute of
the State of New Jersey;
(iii) such transfer would violate the terms of any agreement binding
upon the Partnership;
<PAGE>
63
(iv) such transfer would violate any Applicable Law, including,
without limitation, applicable Federal or state securities laws or require
any registration under such securities laws;
(v) such transfer would cause the Partnership to be classified
otherwise than as a partnership for Federal income tax purposes;
(vi) the transferee has not agreed in writing to be bound by this
Agreement; or
(vii) such transfer would cause a dissolution of the Partnership under
the Partnership Act.
10.2 Additional Partners. (a) Except upon prior written consent of
-------------------
all the Partners, or as may be permitted by the next two following sentences and
by subsections 10.1 and 14.2 of this Agreement, no new Partners may be admitted
to the Partnership. Immediately prior to the sale of the Limited Partnership
Interests pursuant to subsection 10.5, 11.1 or 14.2(g), the Managing General
Partner shall have the right to cause one of its Affiliates to be admitted as a
limited partner of the Partnership upon terms and conditions mutually acceptable
to the Managing General Partner and the Limited Partner. If, by reason of the
exercise of remedies under any pledge or security agreement to which the General
Partner is a party, the General Partner's General Partnership Interest is
transferred to the pledgee or assignee of the General Partner, or any transferee
of such pledgee or assignee, the assigning General Partner shall cease to be the
General Partner hereunder upon such transfer and such pledgee, assignee or
transferee shall be deemed admitted as a General Partner of the Partnership
effective immediately prior to such transfer and is hereby authorized to
continue the business of the Partnership without dissolution. Any additional
Partner, whether such Partner obtained its interest from Cogen Linden or the
Owner Trustee or otherwise, shall expressly be bound by all the terms and
conditions hereof and shall expressly so acknowledge upon becoming a Partner by
execution of this Agreement or a counterpart hereof.
(b) Notwithstanding anything else in this Agreement to the contrary,
(i) upon the grant of any pledge, hypothecation, security interest, lien or
other encumbrance by a Partner against such Partner's interest in the
Partnership, such Partner shall continue to be a partner of the Partnership,
(ii) any transferee of an interest in the Partnership who satisfies the
requirements necessary to become a substituted or additional partner of the
Partnership (including the requirement that it receive the consent of the
General Partner) shall be admitted as a substitute or additional partner of the
Partnership immediately prior to the withdrawal of the withdrawing Partner, if
such Partner shall be withdrawing, and (iii) the Partnership shall not be
dissolved upon the withdrawal of a general partner of the Partnership if there
is at least one other remaining general partner of the
<PAGE>
64
Partnership who is hereby authorized to and shall continue the business of the
Partnership, but the Partnership shall not be dissolved upon the withdrawal of
the last remaining general partner of the Partnership if within 90 days after
the occurrence of such event, all Partners unanimously agree in writing to
continue the business of the Partnership and to the appointment, effective as of
the date of such event, of one or more additional general partners who is
authorized to and shall continue the business of the partnership.
(c) Any transfer made by any Partner which violates any provision of
this Agreement shall be null and void and of no effect, and any such transferor
Partner shall remain and continue as a partner of the Partnership.
10.3 Revisions to this Agreement Upon Transfer or Encumbrance. If
--------------------------------------------------------
pursuant to the provisions of subsection 10.1, Cogen Linden is permitted to
sell, assign, or otherwise transfer, in whole or in part, any of its interests
in the Partnership, or, if additional Partners are admitted pursuant to
subsection 10.2 or otherwise, then contemporaneously with such sale, assignment,
transfer, or admission, the Capital Accounts of the Partners shall be adjusted
to accurately reflect the interests of each and every Partner.
10.4 Amendment to Certificate of Limited Partnership. If a Person has
-----------------------------------------------
otherwise qualified under this Agreement to become a substitute or new General
Partner, such Person shall become a General Partner upon the filing with the
Secretary of State of the State of Delaware of an amendment to the Certificate
of Limited Partnership in proper form, duly executed by such Person. Any such
admission shall be deemed to have occurred immediately prior to the withdrawal
of any General Partner who is withdrawing from the Partnership in connection
with the admission of a new General Partner.
10.5 Voluntary Withdrawal by Limited Partners. (a) If at any time,
----------------------------------------
any Limited Partner or any Affiliate of any Limited Partner, solely by reason of
its interest in the Partnership or any transaction contemplated by this
Agreement or any other Operative Document and not as a result of any other
interest or activity of such Limited Partner or such Affiliate, shall be deemed
by any Governmental Authority having jurisdiction to be an "electric utility" or
an "electric utility holding company" as such terms are used in PURPA and the
regulations thereunder (18 C.F.R. Part 292), or any wholly or partially owned
direct or indirect subsidiary of any "electric utility" or "electric utility
holding company", as such terms are so used, or any similar entity (including
without limitation a "public utility" as such term is defined in the Federal
Power Act, or a "holding company," a "subsidiary company," an "affiliate" of a
"holding company" or a "subsidiary company" of a "holding company" as such terms
are defined in the Public Utility Holding Company Act of 1935, as amended)
subject to regulation under the Federal Power Act, the Public Utility Holding
Company Act of 1935, as amended,
<PAGE>
65
the Department of Public Utilities Act of 1948, NJSA 48:1-1, et seq., or any
-- ----
other comparable federal, state or local law or regulation (any such
classification being called "Public Utility Status"), then, upon demand made by
---------------------
such Limited Partner to the Managing General Partner, the Partnership shall
forthwith redeem such Limited Partner's right, title and interest in the
Partnership for a redemption price equal to the higher of (i) the Stipulated
Redemption Value of its interest plus any Termination Expense (Benefit) and (ii)
the Fair Market Sales Value of its interest, in each case, as of the date of
redemption.
(b) If at any time, any Limited Partner or any Affiliate of any
Limited Partner, as a result of any interest or activity of such Limited Partner
or such Affiliate (other than its interest in the Partnership or any transaction
contemplated by this Agreement or any other Operative Document), shall be deemed
by any Governmental Authority having jurisdiction to have Public Utility Status,
then, upon demand by the Managing General Partner to such Limited Partner, the
Partnership shall have the right to call such Limited Partner's right, title and
interest in the Partnership for a call price equal to the lesser of (i) the
Stipulated Redemption Value of its interest and (ii) the Fair Market Sales Value
of its interest, in each case, as of the call date.
(c) The redemption price or the call price, as the case may be, shall
be paid with the proceeds of a loan to be made by such Limited Partner to the
Partnership on the proposed purchase date. Such loan will be evidenced by a note
which will mature on the earlier of (i) 15 years after the date thereof and (ii)
twenty-two years and six months after the Second Capital Contribution Date, be
payable in consecutive quarterly equal installments in the aggregate of
principal and interest for the period commencing with the first quarter after
the date of such note, and bear interest at a rate equal to that which the
Limited Partner in its reasonable discretion and after consultation with the
Managing General Partner and its advisors determines is the rate, and have other
terms and conditions which the Limited Partner in its reasonable discretion
determines to be, available from independent third parties for obligations
having a comparable tenor and a comparable structure. The loan will be secured
by a first (second so long as the Construction Loan Agreement or the General
Partner Credit Agreement is in effect) pledge of the interests of the General
Partner in the Partnership pursuant to a pledge agreement in form and substance
reasonably satisfactory to such Limited Partner and by a first (second so long
as the Construction Loan Agreement is in effect) priority lien on the assets of
the Partnership (including, without limitation, the Project) pursuant to a
security agreement and a mortgage, each in form and substance reasonably
satisfactory to such Limited Partner.
(d) In the case of a purchase of a Limited Partnership Interest by
the Partnership pursuant to this Agreement, an amount of the purchase price
equal to the portion of the goodwill of the
<PAGE>
66
Partnership allocable to such Limited Partnership Interest shall be payment for
such portion of the goodwill, and the purchase agreement shall so provide,
unless the Limited Partner agrees otherwise.
ARTICLE XI
OPTIONS TO PURCHASE
-------------------
11.1 Fair Market Sales Value Purchase Options. (a) (i) Unless the
----------------------------------------
Preferred Limited Partner's or the Common Limited Partner's right, title and
interest in the Partnership shall have been previously sold or otherwise
disposed of in accordance with subsection 10.5, or unless a Special Event shall
have occurred and be continuing at the time of the proposed purchase, the
Managing General Partner shall have the option to purchase both of such Limited
Partners' right, title and interest in the Partnership on the twelfth (12th)
anniversary of the Second Capital Contribution Date, for a cash purchase price
equal to the greater of (i) the Fair Market Sales Value of each Limited
Partnership Interest as of such twelfth anniversary or (ii) an amount equal to
the sum of (x) an amount which, together with the amount of Limited Partner
Benefits received with respect to the Preferred Limited Partnership Interest as
of such date (taking into account any gain or loss recognized by the Preferred
Limited Partner on such sale) would equal the Preferred Limited Partner's Return
of and on Equity plus (y) an amount which, together with the amount of Limited
----
Partner Benefits received with respect to the Common Limited Partnership
Interest as of such date (taking into account any gain or loss recognized by the
Common Limited Partner on such sale) would equal the Common Limited Partner's
Third Level Return of and on Equity plus (z) any Premium on the date of sale.
----
(ii) In order to exercise the option provided for in this subsection
11.1(a), the Managing General Partner shall give the Limited Partner a Tentative
Purchase Notice of its interest in exercising any such option at least 360 days
prior to such twelfth anniversary, and shall give the Limited Partner a Purchase
Notice of its intent to exercise any such option at least 30 days prior to such
twelfth anniversary. The Managing General Partner and the Limited Partner
holding the Limited Partnership Interest which is the subject of the option
agree to negotiate in good faith to determine the Fair Market Sales Value of
such Limited Partnership Interest by mutual agreement following receipt of the
Tentative Purchase Notice from the Managing General Partner. If the Managing
General Partner and such Limited Partner shall fail to reach agreement within 30
days after receipt by such Limited Partner of the Tentative Purchase Notice from
the Managing General Partner, the Fair Market Sales Value of such Limited
Partnership Interest proposed to be purchased by the Managing General Partner
shall be determined by the Appraisal Procedure.
<PAGE>
67
(b) (i) Unless the Common Limited Partner's right, title and
interest in the Partnership shall have been previously sold or otherwise
disposed of in accordance with subsection 10.5 or 11.1(a), the Managing General
Partner shall have the option to purchase the Common Limited Partner's right,
title and interest in the Partnership as of the date that the Common Limited
Partner has received an aggregate amount of Limited Partner Benefits with
respect to the Common Limited Partnership Interest equal to the Third Level
Return of and on Equity for a cash purchase rice equal to the Fair Market Sales
Value thereof.
(ii) In order to exercise the option provided for in this subsection
11.1(b), the Managing General Partner shall (x) deliver a written notice to the
Common Limited Partner as soon as practicable (but in any event not later than
10 days after such determination) after it shall have determined that the Common
Limited Partner has received the amount of Limited Partner Benefits described in
paragraph (i) above and (y) give the Common Limited Partner a Tentative Purchase
Notice of its interest in exercising any such option within 30 days after
delivery to the Common Limited Partner of the notice described in clause (x). If
the Common Limited Partner agrees with such determination made by the Managing
General Partner, it shall so notify the Managing General Partner in writing and
both parties shall negotiate in good faith to determine the Fair Market Sales
Value of the Common Limited Partnership Interest by mutual agreement following
receipt of the Tentative Purchase Notice from the Managing General Partner. If
the Managing General Partner and the Common Limited Partner shall fail to reach
agreement within 30 days after receipt by the Common Limited Partner of the
Tentative Purchase Notice from the Managing General Partner, the Fair Market
Sales Value of the Common Limited Partnership Interest shall be determined by
the Appraisal Procedure. The Managing General Partner shall give the Common
Limited Partner a Purchase Notice of its intent to exercise the option provided
for in this subsection 11.1(b) within 30 days after the Fair Market Sales Value
of the Common Limited Partnership Interest is determined, whether by the
Appraisal Procedure or by mutual agreement of the Managing General Partner and
the Common Limited Partner. If the Managing General Partner shall deliver such
Purchase Notice, it will purchase the Common Limited Partnership Interest for a
cash purchase price equal to the Fair Market Sales Value thereof within 120 days
after the date of determination of such Fair Market Sales Value. Any amount
distributed to the Common Limited Partner after it shall have received the
amount of Limited Partner Benefits described in paragraph (i) above shall be
applied against the cash purchase price for the Common Limited Partnership
Interest.
<PAGE>
68
ARTICLE XII
NOTICES
-------
12.1 Notices. Any notice, request, demand or other communication
-------
which any Partner, the Managing General Partner or the Partnership is to give
under this Agreement shall be in writing and shall be sufficient for all
purposes hereof if delivered in person or by registered or certified mail, by
courier service, or by telecopier or telex, in each case addressed as provided
in subsection 12.2. Any such notice, request, demand or other communication
shall be deemed given and made effective on the date received.
12.2 Addresses. For the purposes hereof, the addresses are:
---------
In the case of Cogen Linden or the Partnership:
Cogen Technologies Linden, Ltd.
1600 Smith Street
Suite 5000
Houston, Texas 77002
Attention: Robert C. McNair
Telecopy: (713) 951-7747
In the case of the Owner Trustee, the Preferred Limited Partner or the
Common Limited Partner:
State Street Bank and Trust Company of
Connecticut, National Association
750 Main Street
Hartford, Connecticut 06103
Attention: Corporate Trust Department
Telecopy: (203) 244-1899
Copies to:
General Electric Power Funding Corporation
One River Road
Building Two, Room 741
Schenectady, New York 12345
Attention: Vice President - Investments
Telecopy: (518) 385-3649
and
General Electric Capital Corporation - TIFC
1600 Summer Street
Stamford, Connecticut 06927
Attention: Energy Project Operations
Telecopy: (203) 357-4329
Any party may upon written notice to the others given in accordance with this
Article XII change the address to which
<PAGE>
69
notices, requests, demands or other communications are to be sent or add such
additional addresses as it may reasonably request.
ARTICLE XIII
WITHDRAWAL
----------
Except as otherwise provided in this Agreement, no Partner may
withdraw from the Partnership without the consent of each of the Partners. To
the fullest extent permitted by law, each Partner hereby waives any right or
remedy at law or in equity that it may have to obtain dissolution or to dissolve
the Partnership, except as provided in this Agreement. If the General Partner
shall withdraw, be removed, or an event occurs that causes the General Partner
to cease to be a general partner of the Partnership under the Partnership Act
and this Agreement, the Partnership shall be dissolved and its affairs shall be
wound up unless (i) at such time there is at least one other general partner of
the Partnership, who is hereby authorized to and shall continue the business of
the Partnership, or (ii) if there is no remaining general partner of the
Partnership, within 90 days after the occurrence of such event, all Partners
unanimously agree in writing to continue the business of the Partnership and to
the appointment, effective as of the date of such event, of one or more
additional general partners who is hereby authorized to and shall continue the
business of the Partnership.
ARTICLE XIV
SPECIAL EVENTS AND DISSOLUTION; LIQUIDATION; TERMINATION
--------------------------------------------------------
14.1 Special Events. Prior to the Flip Date, the occurrence of any of
--------------
the following events shall constitute a special event (each, a "Special Event")
--------------
hereunder:
(a) The General Partner shall violate any of the restrictions upon
its rights to transfer its partnership interest set forth in Article X of
this Agreement; or
(b) Any representation or warranty made by the General Partner in the
Capital Contribution Agreement or by the Partnership or any other Partner
in any other Operative Document (other than any Project Document) to which
it is a party, or any representation, warranty or statement in any
certificate, financial statement or other document furnished to any Limited
Partner by or on behalf of the Partnership or the General Partner hereunder
or the Partnership or any Partner under any Operative Document (other than
any Project Document) shall prove to have been false or misleading as of
the time made or deemed made; or
(c) The General Partner or the Partnership shall fail to perform or
observe any of its covenants contained in this
<PAGE>
70
Agreement (other than that referred to in paragraph (a) above) or in any
other Operative Document (other than any Project Document) to which it is a
party and such failure shall continue unremedied for a period of 30 days
after written notice thereof from any Limited Partner to the General
Partner; provided, however, that if such Special Event is susceptible of
-------- -------
cure, such 30 day period shall be extended for such period of time (not to
exceed 60 days) during which the General Partner shall be diligently using
its best efforts to cure such failure; or
(d) (i) The General Partner, with respect to the General Partner
Credit Agreement, or (ii) the Partnership or the General Partner, with
respect to any other Indebtedness (other than the Reimbursement Agreement)
or Guarantee Obligation, the principal amount of which exceeds $500,000 and
a default in respect of which, if uncured, could reasonably be expected to
have a material adverse effect on the business, properties, operations,
condition (financial or otherwise) or prospects of the Partnership or the
General Partner, as the case may be, or could reasonably be expected to
materially adversely affect the ability of the Partnership or the General
Partner to perform its obligations under the Operative Documents to which it
is a party, shall (x) default in any payment of principal of or interest on
any such Indebtedness or Guarantee Obligation beyond the period of grace, if
any, provided in the instrument or agreement under which such Indebtedness
or Guarantee Obligation was created, or (y) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) or
the beneficiary or beneficiaries of such Guarantee Obligation (or a trustee
or agent on behalf of such beneficiary or beneficiaries) to cause, with the
giving of notice if required or the passage of time, or both, such
Indebtedness to become due prior to its stated maturity or such Guarantee
Obligation to become payable; or
(e) (i) Any Participant, other than the Partnership or the General
Partner, shall fail to perform or observe in any material respect any of its
covenants or obligations contained in any of the Project Documents to which
it is a party within the grace period, if any, provided for in such Project
Documents, which failure shall continue unremedied for a period of 30 days
after notice by any Limited Partner to the General Partner or (ii) (x) any
material provision of any Operative Document shall at any time for any
reason cease to be valid and binding or in full force and effect (other than
as a result of any action by any Limited
<PAGE>
71
Partner) or any party thereto (other than a Limited Partner) shall so
assert in writing, (y) any material provision of any Operative Document
shall be declared to be null and void (other than as a result of any action
by any Limited Partner) or (z) any party thereto shall deny that it has any
further liability or obligation under any Operative Document to which it is
a party; provided that it shall not be a Special Event under this paragraph
--------
(e) if, (1) within 30 days after the occurrence of any of the foregoing
events with respect to any Project Document (other than the Site Lease
Agreement, the Power Sale Agreement or the Gas Transportation and Swing
Supply Agreement), the Managing General Partner shall have submitted a plan
to the Preferred Limited Partner to execute and deliver a document in
substitution for such Project Document, which plan shall be reasonably
satisfactory in form and substance to the Preferred Limited Partner, and
(2) within 90 days after the occurrence of any of the foregoing events with
respect to any Project Document (other than the Site Lease Agreement, the
Power Sale Agreement or the Gas Transportation and Swing Supply Agreement),
such Project Document shall have been replaced with another document (x)
which is executed and delivered by parties acceptable to the Preferred
Limited Partner in its reasonable discretion and (y) which has terms and
conditions similar to, and in the reasonable opinion of the Preferred
Limited Partner, at least as favorable to the Project as, the substituted
Project Document; or
(f) The Partnership or the General Partner shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part
of its property, (ii) admit in writing its inability, or be generally
unable, to pay its debts as such debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a voluntary
case under the Federal Bankruptcy Code (as now or hereafter in effect), (v)
file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding up, or composition or
readjustment of debts, (vi) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against such Person
in an involuntary case under the Federal Bankruptcy Code, or (vii) take any
partnership or corporate action for the purpose of effecting any of the
foregoing; or
(g) A proceeding or case shall be commenced without the application or
consent of the Partnership or the General Partner in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution,
winding-up, or the composition or readjustment of debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of
the Partnership or the General Partner under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts or (iii) a
<PAGE>
72
warrant of attachment, execution or similar process against all or a
substantial part of the assets of the Partnership or the General Partner
and such proceeding or case shall continue undismissed, or any order,
judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 or more
days, or any order for relief against such Person shall be entered in an
involuntary case under the Federal Bankruptcy Code (as now or hereafter in
effect); or
(h) A judgment or judgments for the payment of money in excess of
$1,000,000 shall be rendered against the Partnership or the General Partner
and such judgment or judgments shall remain in effect and unstayed and
unbonded for a period of 60 or more consecutive days; or
(i) During the period from and including the Initial Capital
Contribution Date to but excluding the date which is seven years after the
Second Capital Contribution Date, Robert McNair or his wife or children
shall fail to own and control, directly or indirectly, a beneficial
interest of at least 8.2% in the General Partner and thereafter, Robert C.
McNair or his wife or children or an entity with a net worth of at least
$100,000,000 shall fail to own and control, directly or indirectly, a
beneficial interest of at least 8.2% of such interest; or
(j) The Partnership shall abandon the Project or otherwise cease to
diligently pursue the development or construction of the Project for a
period longer than 30 consecutive days; or
(k) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan, or
(iii) a Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate any Single Employer Plan, which Reportable Event
or institution of proceedings is, in the reasonable opinion of the
Preferred Limited Partner, likely to result in the termination of such Plan
for purposes of Title IV of ERISA, or (iv) any Single Employer Plan shall
terminate under Section 4041(c) of ERISA, or (v) the Managing General
Partner or any Commonly Controlled Entity shall, or is, in the reasonable
opinion of the Preferred Limited Partner, likely to incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization of,
a Multiemployer Plan, or (vi) any other event or condition shall occur or
exist with respect to a Plan; and in each case in clauses (i) through (vi)
above, such event or condition, together with all other such events or
conditions, if any, could subject the Managing General
<PAGE>
73
Partner or the Partnership to any tax, penalty or other liabilities in the
aggregate material in relation to the business, operations, property or
financial or other condition of the Managing General Partner or the
Partnership; or
(1) (i) The Partnership shall fail to pay, satisfy or otherwise obtain
a release of any bond or lien for the performance of work or the supply of
materials filed against the Site within 20 days of the Managing General
Partner's becoming aware of the filing thereof unless, if any such Lien
arose in connection with a claim referred to in subsection 7.2(1), the
Managing General Partner shall be diligently contesting the same in
accordance with, and subject to, subsection 7.2(1) or (ii) any right, title
or interest of the Partnership in and to the Site or any beneficial
ownership interest of the General Partner in the Partnership shall be
levied upon, attached or seized pursuant to a court order and such order is
not vacated or stayed within 20 days of entry of such order; or
(m) The dissolution and liquidation of the General Partner without
the prior written consent of the Limited Partner unless (i) an entity
meeting the requirements of subsection 10.1 succeeds to the General
Partner's interest hereunder in accordance with subsection 10.2 or (ii) the
ultimate result of such dissolution and liquidation is the incorporation of
the General Partner and the ownership provisions of subsection 10.1 apply
to such corporation which shall be admitted as a general partner of the
Partnership in accordance with subsection 10.2; or
(n) The resignation or withdrawal of the General Partner from the
Partnership or the resignation of the General Partner as Managing General
Partner, in each case without the prior written consent of the Limited
Partner; or
(o) The Partnership shall cease to have a valid leasehold interest in
the Site or good and marketable title to the Project, in each case, free
and clear of all Liens other than Permitted Liens; or
(p) An Event of Loss described in clause (a) of the definition thereof
shall have occurred; or
(q) (i) The aggregate amount on deposit in the Arrears Account shall
be equal to or greater than 98% of the then applicable monthly distribution
described in subsection 4.3(a), multiplied by three or (ii) a positive
balance in the Arrears Account shall exist as of the end of two consecutive
Quarterly Periods or such a positive balance shall occur as of the end of
more than four Quarterly Periods; provided, that the Managing General
--------
Partner shall have the right to make capital contributions to the
Partnership to eliminate anticipated positive balances in
<PAGE>
74
the Arrears Account as of the end of two consecutive Quarterly Periods and
positive balances in the Arrears Account as of the end of four cumulative
Quarterly Periods, but shall not otherwise have the right to eliminate,
directly or indirectly, any existing or anticipated positive balance in the
Arrears Account; or
(r) At any time, there shall fail to be an adequate supply of water to
the Facility to meet all reasonable requirements for the operation and
maintenance of the Facility; provided that it shall not be a Special Event
--------
under this paragraph (r) if the Managing General Partner complies with the
proviso to subsection 14.1(e) with respect to the Water Supply Commitment
in such a manner as will ensure, in the reasonable opinion of the Preferred
Limited Partner, that there will be such an adequate supply of water to the
Facility; or
(s) At any time, the Partnership shall fail to (i) keep in force the
insurance required by subsection 7.2(f) and Schedule 8 hereto and the Site
Lease Agreement or (ii) comply with and conform to all provisions and
requirements of the insurance policies and the insurers thereunder which
would affect the Partnership's ability to keep in force the insurance
required by subsection 7.2(f) and Schedule 8 hereto and the Site Lease
Agreement or to collect any proceeds therefrom; or
(t) If Exxon shall operate the Facility as set forth in Section
11.6B(ii) of the Steam Supply Agreement, unless such operation is pursuant
to an operating agreement to which the Preferred Limited Partner has given
its prior written consent in accordance with subsection 7.3(a) (i); or
(u) At any time, the Managing General Partner shall fail to follow any
gas purchase plan approved by the Limited Partner pursuant to subsection
7.2(n) hereof; or
(v) Any of Cogen Technologies, Inc., the General Partner or the
Partnership or any of their Affiliates shall enter into any agreement or
other arrangement in connection with the matters described in the Texas
Eastern Letter Agreement with Texas Eastern or any of its Subsidiaries or
Affiliates or any partnership or other venture in which any such party has
an interest without the prior written consent of the Limited Partners and
such agreement or arrangement shall continue for thirty days after the
General Partner shall have received written notice thereof from any Limited
Partner.
The Partners hereby agree that the Preferred Limited Partner may rely on the
provisions of Schedule 10 in determining whether or not a Special Event, or an
event which, with the passage of time or expiration of applicable grace periods,
would become a Special Event, has occurred under subsection 14.1(b) or 14.1(c).
<PAGE>
75
14.2 Certain Remedies Following Special Event.
----------------------------------------
(a) If a Special Event occurs and is continuing, the Preferred Limited Partner
shall have the right, exercisable by notice to the Managing General Partner, to
appoint or become substitute Managing General Partner as provided in subsection
(b) hereof. Any substitute Managing General Partner is authorized to and shall
continue the business of the Partnership and shall be admitted to the
Partnership as a general partner of the Partnership in accordance with
subsection 10.2.
(b) (i) If a Special Event occurs and is continuing, the Preferred
Limited Partner may appoint a substitute Managing General Partner or designate
itself or its nominee as the substitute Managing General Partner, whereupon the
existing Managing General Partner shall cease to serve as such but shall
continue to be a General Partner. In the event the Preferred Limited Partner
appoints a substitute Managing General Partner said substitute Managing General
Partner shall have a 1% interest in the Partnership, and the interest of the
Preferred Limited Partner shall be reduced by the same amount. The interest of
said substitute Managing General Partner shall be a General Partnership Interest
in the Partnership and such substitute Managing General Partner shall succeed to
all the powers, privileges and obligations of a General Partner and of the
Managing General Partner under this Agreement, except to the extent accrued or
attributable to the period prior to the allocation of such interest and except
that the transfer and related provisions of Article X pertaining to the
Preferred Limited Partner shall be applicable to the substitute Managing General
Partner rather than those pertaining to the General Partner. The Managing
General Partner hereby consents to such a partial conversion of the Preferred
Limited Partnership Interest and hereby consents to the admission as a General
Partner of said substitute Managing General Partner so designated by the
Preferred Limited Partner.
(c) If a Special Event occurs and is continuing, in addition to the
other remedies available to the Preferred Limited Partner pursuant to this
subsection 14.2, the Preferred Limited Partner shall receive 98% of all
Distributable Cash, and the Preferred Limited Partner's allocable share of
Operating Profits, Gain and other items of income and gain shall be 98% (in both
cases, subject to reduction to 97% under subsection 14.2(b), and with the
remaining 2% of such items going 1% to the Common Limited Partner and 1% to the
General Partner), until the earlier of (i) the date of receipt by the Preferred
Limited Partner of its Limited Partner's Return of and on Equity together with
any Termination Expense (Benefit) and (ii) the date on which such Special Event
has ceased to exist, provided, that, at such time, the Arrears Account does not
--------
have a positive balance.
(d) If a Special Event occurs and is continuing, in addition to the
other remedies available to the Preferred Limited Partner pursuant to this
subsection 14.2, the Preferred Limited Partner may elect by written notice to
the General Partner that
<PAGE>
76
all powers of the General Partner (including the Managing General Partner)
hereunder with respect to any matter shall thereupon vest in the Preferred
Limited Partner.
(e) Upon the occurrence of a Special Event that may be cured, the
Preferred Limited Partner shall be entitled to, but shall have no obligation to,
cure such Special Event and all costs and expenses incurred by the Preferred
Limited Partner in connection therewith shall be in the form of a demand loan to
the Partnership.
(f) If a Special Event occurs and is continuing, the Preferred Limited
Partner may appoint, in the name and on behalf of the Managing General Partner
and the Partnership, a project manager to construct, equip, maintain, manage,
control, operate and repair the Project. The reasonable fees of any such project
manager shall be an operating expense of the Partnership.
(g) (i) If a Special Event occurs and is continuing and the Preferred
Limited Partner shall have exercised any of its remedies pursuant to this
subsection 14.2, the General Partner or its nominee shall have the right to
purchase the Preferred Limited Partner's right, title and interest in the
Partnership for a cash purchase price equal to the greater of (A) the Fair
Market Sales Value of such interest as of such purchase date and (B) an amount
which, together with the amount of all Limited Partner Benefits received by the
Preferred Limited Partner with respect to the Preferred Limited Partnership
Interest as of the proposed purchase date (taking into account any gain or loss
recognized by the Preferred Limited Partner on such sale), would equal the sum
of (1) the Capital Contributions of the Preferred Limited Partner, (2) a return
on the unrefunded amount of such Capital Contributions at the Minimum Rate for
the period from and including the Initial Capital Contribution Date to but
excluding the date of occurrence of such Special Event, (3) a return on the
unrefunded amount of such Capital Contributions at the Minimum Rate, plus 1%,
for the period from and including the date of occurrence of such Special Event
to but excluding the date of purchase plus (4) any Termination Expense
(Benefit). The calculations set forth in clause (B) (1), (2) and (3) above shall
deem each receipt of Limited Partner Benefits to be applied first to the return
of the Capital Contributions of the Preferred Limited Partner and the balance,
if any, to the accrued return on the unrefunded amount of such Capital
Contributions at the applicable rate set forth in clauses (B) (2) and (3) above.
(ii) If the General Partner or its nominee shall elect to purchase the
Preferred Limited Partnership Interest pursuant to paragraph (i), it shall be
required to purchase the Common Limited Partner's right, title and interest in
the Partnership for a cash purchase price equal to the Fair Market Sales Value
of such interest as of such purchase date.
(iii) In order to exercise the option provided in paragraph (i)
above and to effect the purchase required in
<PAGE>
77
paragraph (ii) above, the General Partner or its nominee shall give each Limited
Partner the Tentative Purchase Notice to such effect within 10 days of the
General Partner's receipt of notice of the exercise by the Preferred Limited
Partner of any of its remedies pursuant to subsection 14.2. The General Partner
and each Limited Partner agree to negotiate in good faith to determine the Fair
Market Sales Value of the Preferred Limited Partnership Interest and the Common
Limited Partnership Interest by mutual agreement following receipt of the
Tentative Purchase Notice from the General Partner. If the General Partner and
the Limited Partner shall fail to reach agreement with respect to the Preferred
Limited Partnership Interest or the Common Limited Partnership Interest within 5
Business Days after receipt by the Limited Partner of the Tentative Purchase
Notice from the General Partner, the Fair Market Sales Value of such Limited
Partnership Interest shall be determined by the Appraisal Procedure. If the
General Partner or its nominee intends to exercise such purchase option, it
shall give the Purchase Notice within 5 Business Days of the earlier to occur of
(a) the General Partner and the Limited Partner agreeing to the Fair Market
Sales Value and (b) the completion of the Appraisal Procedure. If the General
Partner or its nominee shall deliver such Purchase Notice, it shall complete the
purchase of the Preferred Limited Partnership Interest and the Common Limited
Partnership Interest within 180 days of the date of the Tentative Purchase
Notice.
(iv) To the extent that the Fair Market Sales Value of the Preferred
Limited Partnership Interest exceeds the amount set forth in clause (B) of
paragraph (i) above, such excess shall be paid with the proceeds of a loan to be
made by the Preferred Limited Partner to the Partnership on the proposed
purchase date. Such loan will be evidenced by a note which will mature on the
earlier of (x) 15 years after the date thereof and (y) twenty-two years and six
months after the Second Capital Contribution Date, be payable in consecutive
quarterly equal installments in the aggregate of principal and interest for the
period commencing with the first quarter after the date of such note, and bear
interest at a rate equal to that which the Preferred Limited Partner in its
reasonable discretion and after consultation with the Managing General Partner
and its advisors determines is the rate, and have other terms and conditions
which the Preferred Limited Partner in its reasonable discretion determines to
be, available from independent third parties for obligations having a comparable
tenor and a comparable structure. The loan will be secured by a pledge of the
interests of the General Partner in the Partnership pursuant to a first (second
so long as the Construction Loan Agreement, the General Partner Credit Agreement
or any agreement pursuant to which the General Partner obtains financing to
purchase the Limited Partnership Interests under this subsection 14.2(g) is in
effect) pledge agreement in form and substance reasonably satisfactory to the
Preferred Limited Partner.
(h) The rights of the Limited Partner hereunder are not the exclusive
remedies upon the occurrence of a Special Event
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78
but are in addition to any other remedies which may at the time be available
hereunder, at law or in equity.
(i) In the event that a Special Event occurs and is continuing, the
Preferred Limited Partner's right to exercise remedies pursuant to this
subsection 14.2 shall not be delayed or deferred by the election by the General
Partner to exercise its purchase option pursuant to subsection 14.2(g); provided
--------
that neither the Limited Partner nor any substitute Managing General Partner
appointed pursuant to subsection 14.2(b) shall sell or otherwise dispose of all
or substantially all of the assets of the Project until the expiration or
termination of the General Partner's right to exercise such purchase option.
14.3 Events of Dissolution. The Partnership shall be dissolved and its
---------------------
affairs shall be wound up in the event that:
(a) the Partners agree in writing to terminate the Partnership;
(b) the sale, transfer or other irrevocable disposition of all or
substantially all of the property of the Partnership;
(c) the Partnership is terminated in accordance with the terms of this
Agreement; or
(d) dissolution is otherwise required by law (except as (S) 17-402 of
the Partnership Act is modified by the provisions of this Agreement) or by
a decree of judicial dissolution.
Notwithstanding the preceding provisions of this subsection 14.3, upon
dissolution of the Partnership as a result of the withdrawal of the last
remaining general partner of the Partnership, the business of the Partnership
shall not be terminated and its affairs wound up if, within 90 days after such
event, all remaining Partners unanimously elect in writing to continue the
business of the Partnership and shall designate a substitute Managing General
Partner and/or General Partner(s), as the case may be, in the manner set forth
in subsection 14.2(b) and in accordance with subsection 10.2, in which event the
further provisions of said subsection 14.2(b) shall be fully applicable, except
the Managing General Partner shall not continue to be a general partner of the
Partnership. In the event that the Partners so agree to continue the Partnership
with a substitute Managing General Partner and/or General Partner, as the case
may be, the substituted Managing General Partner and/or the General Partner is
hereby authorized to and shall continue the business of the Partnership under
the terms of this Agreement.
14.4 Procedure in Dissolution and Liquidation. (a) Winding Up. Upon
----------------------------------------- ----------
dissolution of the Partnership pursuant to subsection 14.3 hereof, the
Partnership immediately shall
<PAGE>
79
commence to wind up and liquidate the affairs and business of the Partnership in
an orderly manner.
(b) Management Rights During Winding Up. During the period of the
-----------------------------------
winding up of the affairs of the Partnership, the rights and obligations of the
Partners set forth herein with respect to the management of the Partnership
shall continue. For purposes of winding up, and subject to subsection 14.2
hereof, the Managing General Partner shall act as liquidator to wind up the
Partnership and shall make all decisions relating to the conduct of any business
or operations during the winding up period and to the sale or other disposition
of the Partnership assets with the advice of the Limited Partner, except that if
the dissolution results from the occurrence of a Special Event, the Preferred
Limited Partner shall act as liquidator and make all such decisions.
(c) Distributions in Liquidation. The assets of the Partnership shall
----------------------------
be applied or distributed in liquidation in the following order:
(i) First, to the payment and discharge of all of the Partnership's
debts and liabilities, including the establishment of any reasonably
necessary reserves;
(ii) Second, to the Partners in accordance with the positive balances
in their respective Capital Accounts as determined after taking into
account all adjustments to Capital Accounts for the year during which the
liquidation occurs.
(d) Non-Cash Assets. Every reasonable effort shall be made to dispose
---------------
of the interest of the Partnership in the assets of the Partnership, so that the
distribution may be made to the Partnership in cash. If at the time of the
Liquidation of the Partnership, the Partnership owns any assets in the form of
notes, deeds of trust or other non-cash assets, such assets, if any, shall be
distributed in kind to the Partners, in lieu of cash, in accordance with
subsection 14.4(c), in proportion to their right to receive the assets of the
Partnership on an equitable basis reflecting the net fair market value of the
assets so distributed.
14.5 Disposition of Documents and Records. All documents and records
------------------------------------
of the Partnership, including, without limitation, all financial records,
vouchers, cancelled checks and bank statements, shall be delivered to the
Managing General Partner upon termination of the Partnership. Copies thereof
shall be prepared, by microfiche process if requested, and made available to
each Partner as requested for any purpose reasonably related to the interest of
such Partner as a partner in the Partnership and at such Partner's cost and
expense. Unless otherwise approved by the Partners, the Managing General Partner
shall retain such documents and records for a period of not less than seven
years and shall make such documents and records
<PAGE>
80
available for any purpose reasonably related to the interest of a Partner as a
partner in the Partnership during normal business hours to any other Partner for
inspection and copying at such other Partner's cost and expense; provided,
--------
however, that if there is an audit or threat of audit, such documents and
- -------
records shall be retained until the audit is completed and any tax liability
finally determined. Said documents and records shall be available for
inspection, examination and copying by the Managing General Partner upon
reasonable notice.
14.6 Termination. Upon the completion of the liquidation of the
-----------
Partnership and the distribution of all Partnership funds, the Partnership shall
terminate. The Managing General Partner shall execute and file a Certificate of
Cancellation of the Certificate of Limited Partnership as well as any and all
other documents required to effect the dissolution and termination of the
Partnership.
ARTICLE XV
RIGHTS AND OBLIGATIONS OF LIMITED PARTNER
-----------------------------------------
15.1 Management of the Partnership. Except as provided in Article XIV
-----------------------------
and the Recognition Agreements, a Limited Partner in its capacity as such shall
not (a) take part in the management or control of the business of the
Partnership or transact any business in the name of the Partnership, (b) have
the power or authority to bind the Partnership or to sign any agreement or
document in the name of the Partnership, or (c) have any power or authority with
respect to the Partnership except insofar as the consent of such Limited Partner
shall be expressly required. Notwithstanding anything herein to the contrary,
after the Flip Date, the rights specified in clauses (a), (b) and (c) above
shall not be applicable to, or exercisable by, the Preferred Limited Partner and
the Preferred Limited Partner shall cease to be a Limited Partner unless it is
the Common Limited Partner.
15.2 Limitation on Liability of Limited Partners. Except as otherwise
-------------------------------------------
provided by law, the liability of a Limited Partner shall be limited to its
Capital Contribution as and when it is payable under the provisions of the
Capital Contribution Agreement. A Limited Partner, in its capacity as such,
shall have no other liability to contribute money to, or in respect of the
liabilities or obligations of, the Partnership, nor shall any Limited Partner be
personally liable for any obligations of the Partnership. Except as provided in
subsection 10.5, Article XIV and the General Partner Credit Agreement and the
Reimbursement Agreement, no Limited Partner shall be obligated to make loans to
the Partnership.
15.3 Limitation on Liability of Owner Trustee. The parties hereto
----------------------------------------
agree that, except as hereinafter set forth, any claim or liability under this
Agreement asserted against the
<PAGE>
81
Owner Trustee by any of them shall be limited to satisfaction out of, and
enforcement against, the Trust Estate (as defined in the Trust Agreement).
Notwithstanding anything to the contrary contained herein or in any other
document, certificate or instrument executed by the Owner Trustee pursuant
hereto or thereto, each of the parties hereto hereby acknowledges and agrees
that neither the Owner Trustee, Linden Owner Partnership nor any officer,
employee, partner, servant, controlling Person, manager, agent, authorized
representative or Affiliate of the Owner Trustee or Linden Owner Partnership
(collectively, the "Non-Recourse Persons") shall have any liability to all or
--------------------
any of them (such liability, including such as may arise by operation of law,
being hereby expressly waived) for the performance of any of the obligations of
the Owner Trustee contained herein or therein or shall otherwise be liable or
responsible with respect thereto, except as hereinafter set forth. If any claim
of any party hereto against the Owner Trustee or alleged liability to any party
hereto of the Owner Trustee shall be asserted under this Agreement, each party
hereto agrees that, except as hereinafter set forth, they shall not have the
right to proceed directly or indirectly against the Non-Recourse Persons or
against their respective properties and assets (other than the Trust Estate) for
the satisfaction of any such claim or liability (except to the extent
enforceable out of the Trust Estate) in respect of any such claim or liability.
Notwithstanding any of the foregoing, it is expressly understood and agreed,
however, that nothing contained in this subsection 15.3 shall in any manner or
any way (a) affect or diminish any obligation, covenant or agreement of any Non-
Recourse Person made expressly in its individual capacity under any certificate
executed by such Non-Recourse Person on its own behalf or any right or benefit
of any party hereto under any such certificate or (b) affect or diminish any
rights of any Person against any other Person arising from misappropriation or
misapplication of any funds or for such other Person's fraud, gross negligence
or willful misconduct. The foregoing acknowledgements, agreements and waivers
shall survive the termination of this Agreement and shall be enforceable by any
Non-Recourse Person.
ARTICLE XVI
MISCELLANEOUS
-------------
16.1 Further Assurances. Each Partner shall execute and deliver such
------------------
other certificates, agreements and documents, and take such other actions as may
be reasonably requested by the Managing General Partner or any Limited Partner
in connection with the formation of the Partnership and the achievement of
its purposes and the placement of any debt and equity relating to the Project
authorized pursuant to this Agreement (whether by or on behalf of the
Partnership).
16.2 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended only with the written consent of all the
<PAGE>
82
Partners. The observance of any term of this Agreement may be waived only if
such waiver is in writing signed by the Partner waiving such term.
16.3 Successors and Assigns. Subject to the provisions of Article X,
----------------------
the terms and provisions hereof shall be binding on and inure to the benefit of
and be enforceable by the successors and assigns of the parties hereto, whether
so expressed or not.
16.4 Indemnification. To the fullest extent permitted by law, the
----------------
Partnership agrees to pay, indemnify and hold each Partner and its Affiliates,
directors, officers, successors and assigns harmless from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at any
time be imposed on, incurred by or asserted against any such Person in any way
relating to or arising out of this Agreement, the other Basic Documents, the
other Operative Documents or any documents contemplated by or referred to herein
or therein or the transactions contemplated hereby or thereby, or as a result of
such Partner's acting as a partner of the Partnership hereunder, (all of the
foregoing, collectively, the "indemnified liabilities", provided, that, with
----------------------- --------
respect to the Managing General Partner Group, "indemnified liabilities" shall
not include the liabilities set forth in subsection 7.5 for which the Managing
General Partner Group is liable), provided, that the Partnership shall have no
--------
obligation hereunder to any such Person with respect to indemnified liabilities
arising from (i) the gross negligence, fraud or willful misconduct of any such
Person, (ii) legal proceedings commenced against any such Person by any security
holder or creditor other than in its capacity as a security holder or creditor
of the Partnership arising out of and based upon rights afforded any such
security holder or creditor solely in its capacity as such security holder or
creditor, or (iii) legal proceedings commenced against any such Person by any
assignee of such Person's interest herein. The agreements in this subsection
shall survive the making by each Partner of its initial capital contributions to
the Partnership and the termination of the Operative Documents.
16.5 Incorporation By Reference. The provisions of the Capital
--------------------------
Contribution Agreement are hereby incorporated by reference herein with the same
effect as if such provisions were fully set forth herein.
16.6 Severability. If any term or provision of this Agreement or the
------------
application thereof to any circumstance shall be held invalid or unenforceable,
to any extent, by a court of competent jurisdiction, the remainder of this
Agreement, other than that portion determined to be invalid or unenforceable,
shall not be affected thereby, and each valid provision hereof shall be enforced
to the fullest extent permitted by law.
<PAGE>
83
16.7 Headings and Table of Contents. The headings in and the table
------------------------------
of contents of this Agreement are for purposes of reference only and shall not
limit or otherwise affect the meaning hereof.
16.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute on instrument.
16.9 Submission to Jurisdiction; Waivers. (A) Each Partner hereby
-----------------------------------
irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any other Operative Document, or
for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the States of New York
and Delaware, the courts of the United States of America for the Southern
District of New York and for the District of Delaware, and appellate courts
from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that any
such action or proceeding was brought in any inconvenient court and agrees
not to plead or claim the same;
(iii) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Partner at its address set forth in subsection 12.2 or any such other
address of which the other Partners shall have been notified pursuant
thereto; and
(iv) agrees that nothing herein shall affect the right to effect the
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction.
(B) Each Partner hereby irrevocably and unconditionally waives trial
by jury in any legal action or proceeding referred to in paragraph (A) above.
16.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE.
16.11 Entire Agreement. This Agreement sets forth the entire
----------------
agreement of the parties hereto with respect to its subject matter, and
supersedes all previous understandings, written or oral, with respect thereto.
<PAGE>
84
16.12 Arbitration of Gas Purchase Plan Disputes. In the event that
-----------------------------------------
the Preferred Limited Partner does not approve any gas purchase plan submitted
to the Preferred Limited Partner pursuant to subsection 7.2(n) hereof by the
date which is 30 days after the date of such submission, the dispute shall be
referred to an arbitration panel comprised of three persons having knowledge and
experience in connection with gas purchase arrangements. Such panel shall (i) be
selected within 60 days of the date of submission of such gas purchase plan to
the Preferred Limited Partner, (ii) be comprised of (x) one member selected by
the Preferred Limited Partner, (y) one member selected by the Managing General
Partner and (z) one member jointly selected by the members selected pursuant to
clauses (x) and (y) of this clause (ii) and (iii) conduct any arbitration
proceeding in accordance with procedures established by the American Arbitration
Association. The decision of such panel shall be issued within 60 days of the
selection of its members and such decision shall be binding on the Partners.
<PAGE>
85
The Initial Limited Partner joins in this Agreement for the sole
purpose of evidencing his receipt of the greater of the return of his Capital
Contribution to the Partnership or his capital account balance and his
withdrawal as the Initial Limited Partner. The Initial Limited Partner, having
so withdrawn, shall have no continuing obligation or liability with respect to
the Partnership or this Agreement.
INITIAL LIMITED PARTNER:
/s/ Robert C. McNair
----------------------------------------
Robert C. McNair
<PAGE>
IN WITNESS WHEREOF, this Amended and Restated Agreement of Limited
Partnership has been executed as of the date and year first above written.
GENERAL PARTNER:
COGEN TECHNOLOGIES LINDEN, LTD.
By: Cogen Technologies, Inc.,
its general partner
By [SIGNATURE ILLEGIBLE]
-------------------------------------------
Title:
PREFERRED LIMITED PARTNER:
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, not in its individual capacity
but as Owner Trustee
By [SIGNATURE ILLEGIBLE]
-------------------------------------------
Title: Assistant Vice President
COMMON LIMITED PARTNER:
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, not in its individual capacity
but as Owner Trustee
By [SIGNATURE ILLEGIBLE]
-------------------------------------------
Title: Assistant Vice President
<PAGE>
EXHIBIT 10.12
FIRST AMENDMENT TO
PARTNERSHIP AGREEMENT
---------------------
FIRST AMENDMENT, dated as of April 30, 1993 (the "Amendment"), to the
Amended and Restated Agreement of Limited Partnership of Cogen Technologies
Linden Venture, L.P. (the "Partnership"), dated as of September 15, 1992 (the
"Partnership Agreement"), between Cogen Technologies Linden, Ltd., a Texas
limited partnership (the "General partner"), and State Street Bank and Trust
Company of Connecticut, National Association (not in its individual capacity but
solely as trustee) (the "Limited Partner").
W I T N E S S E T H :
WHEREAS, the General Partner and the Limited Partner desire to enter
into certain amendments to the Partnership Agreement;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in
the Partnership.Agreement shall have such defined meanings when used herein.
2. Amendment to Section 1.1 of the Partnership Agreement (Certain
Defined Terms). Section 1.1 of the Partnership Agreement is hereby amended as
follows:
(a) by deleting the definition of "Flip Date" in its entirety and
substituting, in lieu thereof, the following new definition:
"'Flip Date' shall mean the earlier of (i) the last day of the
Quarterly Period during which the Preferred Limited Partner has received an
aggregate amount of Limited Partner Benefits with respect to the Preferred
Limited Partnership Interest equal to the Preferred Limited Partner's
Return of and on Equity and (ii) the date on which the equity distribution
set forth under the heading "Total Monthly Distribution Percentage"
opposite the number 270 under the heading "Distribution Number" on Schedule
7 is made to the Limited Partner in accordance with the terms hereof."
<PAGE>
2
(b) by deleting the words "quarter" and "quarterly" each time that they
appear in the definition of "Arrears Account" and inserting, in lieu thereof,
the words "month" and "monthly", respectively.
(c) by inserting the following new definition in alphabetical order:
"'Transfer Date' shall mean any Business Day selected by the Managing
General Partner between the first day and the fifth day of each calendar month.
3. Amendments to Section 4.3 of the Partnership Agreement (Distributions
After the Second Capital Contribution Date and Prior to the Flip Date). Section
4.3 of the Partnership Agreement is hereby amended as follows:
(a) by deleting the words "Distributable Cash for each month after the
Second Capital Contribution Date and prior to the Flip Date shall be distributed
within 15 days after the end of such month as follows:" appearing at the
beginning of Section 4.3 and inserting, in lieu thereof, the words
"Distributable Cash after the Second Capital Contribution Date and on and prior
to the Flip Date shall be distributed on each Transfer Date as follows:"
(b) by deleting the words "an aggregate amount in such month equal to
the amount calculated with respect to such month in Schedules 5 and 7 hereto" in
paragraph (a) thereof and substituting, in lieu thereof, the words "an aggregate
amount on such Transfer Date equal to the amount calculated with respect to such
Transfer Date in Schedules 5 and 7 hereto."
(c) by deleting the words "an aggregate amount in such month equal to
200% of the amount calculated with respect to such month in Schedules 5 and 7
hereto" in paragraph (b) thereof, and substituting, in lieu thereof, the words
"an aggregate amount on such Transfer Date equal to 200% of the amount
calculated with respect to such Transfer Date in Schedules 5 and 7 hereto".
4. Amendment to Section 4.4 of the Partnership Agreement (Distributions
Subsequent to the Flip Date). Section 4.4 of the Partnership Agreement is
amended by adding the words "received after the equity distribution set forth
under the heading 'Totally Monthly Distribution Percentage' opposite the number
270 under heading 'Distribution Number' on Schedule 7 is made to the Limited
Partner in accordance with the terms hereof" after the words "Distributable
Cash" appearing in such section.
<PAGE>
3
5. Amendment to Section 10.5 of the Partnership Agreement (Voluntary
Withdrawal by Limited Partner). Section 10.5(c) of the Partnership Agreement is
hereby amended by substituting the word "seven" for the word "six" in clause
(ii) of the second sentence thereof.
6. Amendment to Section 14.2(g)(iv) of the Partnership Agreement
(Certain Remedies Following Special Event). Section 14.2(g)(iv) of the
Partnership Agreement is hereby amended by substituting the word "seven" for the
word "six" in clause (y) of the second sentence thereof.
7. Amendments to Schedules. The Schedules to the Partnership Agreement are
hereby amended as follows:
(a) by deleting Schedule 5 in its entirety and inserting, in lieu thereof,
a new Schedule 5 attached hereto as Exhibit A;
(b) by deleting Schedule 7 in its entirety and inserting, in lieu thereof,
a new Schedule 7 attached hereto as Exhibit B; and
(c) by deleting the words "22-1/2 year" from paragraph 3 of Section A of
Schedule 9 and substituting, in lieu thereof, the words "22 year and 7 month".
8. Full Force and Effect. Except as expressly amended and modified by this
Amendment, the Partnership Agreement shall continue to be, and shall remain, in
full force and effect in accordance with its terms.
9. No Other Amendments. This Amendment shall be effective solely to the
extent set forth herein, and is not and shall not be construed (i) to be an
amendment of any other term or condition of the Partnership Agreement or (ii)
to prejudice any other right or rights which the Limited Partner or the General
Partner may now have or may have in the future under or in connection with the
Partnership Agreement.
10. Counterparts. This Amendment may be executed by the parties hereto in
any number of separate counterparts, all of which counterparts, taken together,
shall be deemed to constitute one and the same instrument.
11. Conditions Precedent. This Amendment shall become effective as of
the date first above written upon receipt by the Limited Partner of (i)
counterparts of this Amendment duly executed by the General Partner and the
Limited Partner, (ii) counterparts of the First Amendment dated the date hereof
to the General Partner Credit Agreement, together with a copy of Endorsement No.
1 to the Working Capital Note referred to therein, in each case executed by the
Lender and the General
<PAGE>
4
Partner and (iii) counterparts of the First Amendment to the Security Deposit
Agreement dated the date hereof, executed by Partnership, the Limited Partner,
the General Partner, the Lender, the Escrow Agent and the Security Agent.
12. Governing Law. This Amendment and the rights and obligations of
the parties hereunder shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Delaware.
<PAGE>
5
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
COGEN TECHNOLOGIES LINDEN, LTD., as General Partner
By: Cogen Technologies, Inc.,
its general partner
By: /s/ LAWRENCE THOMAS
------------------------------------------
Title: Lawrence Thomas
Vice President
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION (not in its individual capacity,
but solely as trustee), as the Preferred Limited
Partner and the Common Limited Partner
By:
---------------------------------------------
Title:
<PAGE>
6
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
COGEN TECHNOLOGIES LINDEN, LTD., as General Partner
By: Cogen Technologies, Inc., its general partner
By:
-------------------------------------------
Title:
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION (not in its individual capacity,
but solely as trustee), as the Preferred Limited
Partner and the Common Limited Partner
By:
--------------------------------------------
Title: Assistant Vice President
<PAGE>
EXHIBIT 10.13
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY
NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT UPON
DELIVERY, TO THE PARTNERSHIP OF AN OPINION OF COUNSEL SATISFACTORY TO THE
GENERAL PARTNER OF THE PARTNERSHIP THAT REGISTRATION IS NOT REQUIRED FOR SUCH
TRANSFER OR THE SUBMISSION TO THE GENERAL PARTNER OF THE PARTNERSHIP OF SUCH
OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE GENERAL PARTNER TO THE EFFECT THAT
ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATION
PROMULGATED THEREUNDER. THE SALE AND TRANSFER OF THESE INTERESTS IS ALSO SUBJECT
TO CERTAIN RESTRICTIONS WHICH ARE SET FORTH IN THIS AGREEMENT.
AGREEMENT OF LIMITED PARTNERSHIP
OF
COGEN TECHNOLOGIES LINDEN, LTD.
THIS AGREEMENT is made effective as of the 28th day of June, 1989, by
and among Cogen Technologies, Inc., a Texas corporation, as the General Partner,
and Cogen Technologies Limited Partners Joint Venture, a Texas general
partnership, as the Limited Partner.
DEFINITIONS
The following definitions shall be applicable to the terms set forth
below as used in this Agreement:
"Affiliate" means any corporation, partnership, trust or other entity
controlling, controlled by or under direct or indirect common control with the
General Partner or in which the
<PAGE>
General Partner holds ten percent (10%) or more of the outstanding voting or
equity interests. However, the General Partner and the Limited Partner shall not
be deemed Affiliates.
"Additional Capital Contributions" means the Agreed Value of any
property and the amount of cash contributed to the Partnership other than
pursuant to Section 8.1.
"Agreed Value" of the Power Purchase Agreement contributed to the
Partnership by the General Partner as part of the Initial Capital Contributions
means the aggregate amount spent or incurred by the General Partner in
connection with the Power Purchase Agreement prior to its contribution to the
Partnership net of the Power Purchase Contract Indebtedness assumed by the
Partnership and, in the case of any other contributions or distributions of
property, "Agreed Value" means the fair market value of such property net of any
indebtedness or other liability either assumed or to which such property is
subject, as such fair market value is determined by the General Partner using
such reasonable method of valuation as it may adopt.
"Agreement" means the Agreement of Limited Partnership of Cogen
Technologies Linden, Ltd. as the same may be amended or modified from time to
time in accordance with Article XX hereof.
"Built-In Gain" with respect to any Partnership property means (i) the
excess of the Agreed Value of any Contributed Property over its adjusted basis
for federal income tax purposes as of the time of contribution and (ii) in the
case of any adjustment to the Carrying Value of any Partnership property subject
to depreciation, cost recovery or amortization pursuant to Section 8.4 as a
result of a contribution of cash for a Partnership Interest, the Unrealized Gain
with respect to such property.
"Built-In Loss" with respect to any Partnership property means (i) the
excess of its adjusted basis for federal income tax purposes of any contributed
property over its agreed value as of the time of contribution and (ii) in the
case of any adjustment to the Carrying Value of any Partnership property subject
to depreciation, cost recovery or amortization pursuant to Section 8.4 as a
result of a contribution of cash for a Partnership Interest, the Unrealized Loss
with respect to such property.
"Capital Account" means the account established for each Partner
pursuant to Section 8.3.
2
<PAGE>
"Capital Contributions" means the Initial Capital Contributions and
the Additional Capital Contributions.
"Carrying Value" with respect to any Capital Contribution means the
Agreed Value of such property reduced as of the time of determination by all
book depreciation, cost recovery and amortization deductions charged to the
capital accounts with respect to such property and an appropriate amount to
reflect any sales, retirements or other dispositions of assets included in such
property and, with respect to any other Partnership property, the adjusted basis
of such property for federal income tax purposes as of the time of
determination. The Carrying Values shall be further adjusted as provided in
Section 8.4.
"General Partner Partnership Interest" means the Partnership Interest
owned by the General Partner described in Section 8.1.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect on the effective date hereof and, to the extent applicable, as
subsequently amended.
"Contributed Property" means any Capital Contribution of property other
than cash.
"Distributable Cash" means, at the time of determination, all
Partnership cash derived from the conduct of the Partnership's business, other
than (i) Capital Contributions, together with interest earned thereon pending
utilization thereof, (ii) financing proceeds, (iii) reserves for working capital
and (iv) other amounts that the General Partner reasonably determines to be
necessary for the proper operation of the Partnership's business and its winding
up and liquidation.
"Facility" means the cogeneration facility more fully defined in
Article III hereof.
"General Partner" means Cogen Technologies, Inc., a Texas corporation,
or its successor or assign.
"Initial Capital Contributions" means the Agreed Value of the Power
Purchase Agreement and the amount of cash, if any, to be contributed as provided
in Section 8.1 hereof.
"Limited Partner" means Cogen Technologies Limited Partners Joint
Venture, a Texas general partnership, or its successor or assign.
3
<PAGE>
"Management Agreement" means that certain agreement between the
Partnership Manager and the Partnership dated June , 1989.
"Minimum Gain" with respect to any fiscal year of the Partnership
means the minimum gain of the Partnership computed in accordance with the
principles of Treasury Regulations Section 1.704-1T(b)(4)(iv)(c) or any
successor provision.
"Nonrecourse Deductions" has the meaning specified in Treasury
Regulations Section 1.704-lT(b)(4)(iv)(b) or any successor provision. The amount
of Nonrecourse Deductions for a fiscal year equals the net increase, if any, in
the amount of the Partnership's Minimum Gain during the fiscal year, as
determined under such Treasury Regulations.
"Nonrecourse Liability" or "Nonrecourse Debt" means those Partnership
liabilities (or portion thereof) for which no Partner bears the economic risk of
loss, in accordance with Treasury Regulations Sections 1.704-1T(b)(4)(iv)(k) and
1.752-1T(d)(3) or any successor provision(s).
"Partners" means the General Partner and the Limited Partner.
"Partnership" means Cogen Technologies Linden, Ltd., the limited
partnership entered into and formed hereunder pursuant to the Partnership Act.
"Partnership Act" means Article 6132 a-1, Vernon's Texas Civil Statutes
Annotated, known as the Texas Revised Limited Partnership Act, as amended from
time to time.
"Partnership Interest" as to any Partner means the entire ownership
interest and rights of that Partner in the Partnership, including, without
limitation, its right to a distributive share of the profits and losses of the
Partnership, its right to a distributive share of the assets of the Partnership
in accordance with the provisions hereof, and in the case of a General Partner,
its right to participate in the management of the affairs of the Partnership.
"Partnership Manager" means Cogen Technologies Management, Inc., a
Texas corporation.
"Power Purchase Agreement" means that certain Power Purchase Agreement
dated April 14, 1989, by and between the General Partner and Consolidated Edison
Company of New York, Inc., for the sale of electricity to Consolidated Edison
Company of New York, Inc.
4
<PAGE>
"Power Purchase Agreement Indebtedness" means all amounts owed by the
General Partner to Cogen Technologies NJ, Inc. for advances in connection with
the Power Purchase Agreement together with all costs incurred by the General
Partner in connection with the Power Purchase Agreement but unpaid as of the
date hereof.
"Prime Rate" means the interest rate as defined in Section 9.4 hereof.
"PURPA" shall mean the Public Utilities Regulatory Policies Act of
1978, as heretofore and hereafter amended, and the regulations now and hereafter
promulgated by the Federal Energy Regulatory Commission or such successor
governmental agency as may be charged with rule making authority thereunder,
which regulations are currently set forth at 18 C.F.R. (S)292.
"Sharing Ratio" means the percentages described in Section 8.1.
"Qualifying Cogeneration Facility" means a Qualifying Cogeneration
Facility as defined in PURPA.
"Unrealized Gain" attributable to a Partnership property means, as of
the date of determination, the excess of the f air market value of such property
as of such date of determination over the Carrying Value of such property as of
such date of determination.
"Unrealized Loss" attributable to a Partnership property means, as of
the date of such determination, the excess of the Carrying Value of such
property as of such date of determination over the fair market value of such
property as of such date of determination.
ARTICLE I
Formation of Limited Partnership
The parties hereto enter into and form a limited partnership pursuant
to the Partnership Act. The rights and liabilities of the Partners shall be as
provided in the Partnership Act, except as herein otherwise expressly provided.
The Partnership Interests of any Partner shall be personal property for all
purposes. Immediately following the execution hereof, the General Partner shall
execute and cause to be filed with the Secretary of State of the State of Texas
a certificate containing the information required by the Partnership Act. On the
request of the General Partner, each Partner shall execute, acknowledge, swear
to, and deliver all certificates and other
5
<PAGE>
instruments conforming with this Agreement that are necessary to organize,
qualify, continue, or terminate the Partnership as a limited partnership under
the laws of the State of Texas and to qualify the Partnership to do business in
the States of New York and New Jersey and such other states where such
qualification is necessary or desirable.
ARTICLE II
Name
The name of the Partnership shall be, and the business of the
Partnership shall be conducted under the name of, Cogen Technologies Linden,
Ltd. or such other name or names that comply with applicable law as the
Partnership Manager may designate from time to time. The Partnership Manager
shall take any action required to comply with the Partnership Act, assumed name
act, fictitious name act, or similar statute in effect in each jurisdiction or
political subdivision in which the Partnership proposes to do business and the
Partners agree to execute any document requested by the Partnership Manager in
connection with any such action.
ARTICLE III
Purpose
The purposes of the Partnership are to design, finance, construct, own
and operate a cogeneration facility in or near Linden, New Jersey for the
generation and sale of electricity and the production and sale of steam (the
"Facility"), to engage in all activities related or incident thereto, and to
engage in any other business activity that now or hereafter may be necessary,
incidental, proper, advisable or convenient to accomplish the foregoing purposes
(including, without limitation, obtaining financing therefor) and that is not
forbidden by the laws of the jurisdiction in which the Partnership engages in
such business.
ARTICLE IV
Names and Addresses of Partners and
Principal Office of Partnership
The names and mailing addresses of the Partners are as set forth on the
signature pages hereof. The location of the principal office of the Partnership
where the books and records of the Partnership shall be kept shall be Suite
5000, 1600 Smith Street Building, 1600 Smith Street, Houston, Texas 77002. The
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Partnership Manager may in its discretion change the location of the principal
office of the Partnership. The, Partnership Manager shall provide the Partners
with prompt written notice of any change in the Partnership's principal place of
business.
ARTICLE V
Registered Agent; Registered Office;.
Additional Offices
The General Partner shall serve as the Registered Agent of the
Partnership as required under the Partnership Act and the location of the
Registered Office of the Partnership shall be Suite 5000, 1600 Smith Street
Building, 1600 Smith Street, Houston, Texas 77002. The Partnership Manager may
change the Registered Agent or the Registered Office of the Partnership and may
establish such additional offices of the Partnership as the Partnership Manager
may from time to time determine. The Partnership Manager shall provide the
Partners with written notice of any change in the Partnership's principal
office, Registered Agent or Registered Office within 30 days after such change.
ARTICLE VI
Term
The term of the Partnership shall be from the date of the filing of
the certificate of limited partnership in the office of the Secretary of State
of the State of Texas as required under the Partnership Act until December 31,
2039, unless extended or sooner liquidated or dissolved in accordance with this
Agreement. The Partnership shall conduct no business until the certificate of
limited partnership shall have been filed with the Secretary of State of the
State of Texas.
ARTICLE VII
Limited Partner
In the event the Partnership Manager determines that funds in addition
to those acquired pursuant to Section 8.1 are necessary to carry out the
purposes of the Partnership and the General Partner and the Limited Partner do
not agree to contribute such funds in their respective Sharing Ratios, the
General Partner is authorized to offer and sell additional Partnership Interests
and admit any purchasers thereof additional limited partners. In such event,
the dilution of the then Partners shall be pro rata in accordance with their
respective Sharing Ratios prior to the issuance of such
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additional Partnership Interests and this Partnership Agreement shall be amended
to reflect the revised ownership and Sharing Ratio of each Partner and otherwise
to reflect the relative rights and obligations of the parties.
ARTICLE VIII
Capital Contributions
Section 8.1. Upon execution of this Agreement, each Partner will make
the following contributions into the Partnership.
Cash Sharing
Partner Contribution Ratio
- ------- ------------ -------
General Partner $ 819.45 81.945%
Limited Partner 180.55 18.055%
--------- ------
Total $1,000.00 100%
========= ======
The General Partner shall also assign the Power Purchase Agreement to the
Partnership and the Partnership shall assume the Power Purchase Agreement
Indebtedness. The Partners recognize that the Power Purchase Agreement has been
submitted to the State of New York Public Service Commission for approval, but
as of the date hereof such approval has not been obtained.
Section 8.2. The liability of the Limited Partner to the Partnership
shall be limited to the amount of its Capital Contribution and the Limited
Partner shall not have any further personal liability to contribute money to, or
in respect of, the liabilities or the obligations of the Partnership unless it
agrees in writing to make additional Capital Contributions, nor shall the
Limited Partner be personally liable for any obligations of the Partnership,
except as may be provided in the Partnership Act. No Partner shall be entitled
to the return of any part of its Capital Contribution or to be paid interest in
respect of either its capital account or any Capital Contribution made by such
Partner. No unrepaid Capital Contribution shall be deemed or considered to be a
liability of the Partnership or any Partner. No Partner shall be required to
contribute or lend any cash or property to the Partnership to enable the
Partnership to return any Partner's Capital Contributions to the Partner.
Section 8.3. A capital account ("Capital Account") shall be established
for each Partner and shall be maintained in such a manner as to correspond with
the capital of the Partners as reported on the federal income tax returns of the
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Partnership. A Partner's Capital Account shall be credited with the amounts of
cash and Agreed Value of property contributed to the Partnership by such Partner
and shall be credited or charged. as the case may be, with such Partner's
distributive share of Partnership items of book income, gain. loss, and
deduction for each fiscal year of the Partnership determined pursuant to Article
X below. Each Partner's Capital Account shall be charged with the amount of cash
or Agreed Value of property distributed to him. The respective Capital Accounts
of the Partners shall not bear interest.
Section 8.4. If any additional Partnership Interests are to be issued
in consideration for a contribution of property or cash or if any Partnership
property is to be distributed in liquidation of the Partnership or a
Partnership interest, the capital accounts of the Partners (and the amounts at
which all Partnership properties are carried on its books and records) shall,
immediately prior to such issuance or distribution, as the case may be, be
adjusted (consistent with the provisions of Section 704(b) of the Code and the
Treasury Regulations promulgated thereunder) upward or downward to reflect any
Unrealized Gain or Unrealized Loss attributable to all Partnership properties
(as if such Unrealized Gain or Unrealized Loss had been recognized upon actual
sale of such properties upon a liquidation of the Partnership immediately prior
to such issuance).
ARTICLE IX
Distributions
Section 9.1. Except as otherwise provided herein, Distributable Cash
shall be distributed from time to time at the sole discretion of the General
Partner among the Partners pro rata in accordance with their Sharing Ratios. It
is the intention of the Partners that the Partnership will not accumulate funds
in excess of the amounts that the General Partner reasonably believes to be
necessary for the conduct of the Partnership's business, including appropriate
reserves, and that to the extent possible, without impairinq the cash needs of
the Partnership, to distribute sufficient funds (in the Sharing Ratios) for the
Partners to pay income taxes on their allocable share of Partnership Income.
Section 9.2. If any Partner does not withdraw the whole or any part of
his share of any cash distribution made pursuant to Section 9.1, such Partner
shall not be entitled to receive any interest thereon without the express
written consent of the other Partner.
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Section 9.3. Unless otherwise agreed in writing by a transferor and
transferee of a Partnership Interest herein, Distributable Cash distributable
with respect to any Partnership interest which may have been transferred during
any year shall be distributed to the holder of such Partnership Interest who was
recognized as the owner on the date of such distribution, without regard to the
results of Partnership operations during the year.
Section 9.4. Notwithstanding the foregoing, if any Partner advances any
funds or makes any other payment to or on behalf of the Partnership, not
required pursuant to the provisions hereof, to cover operating or capital
expenses of the Partnership which cannot be paid out of the Partnership's
operating revenues, such advance or payment shall be deemed a loan to the
Partnership by such Partner, bearing interest from the date such advance or
payment was made until such loan is repaid at a floating rate per annum equal to
the lesser of (i) two percent (2%) over the interest rate publicly quoted by
Texas Commerce Bank National Association from time to time as its prime
commercial rate, with adjustments in such varying rate to be made on the same
date as any change in the aforesaid rate (herein called "Prime Rate") or (ii)
the maximum rate permitted under applicable law. Notwithstanding Sections 9.1
and 9.2 above, all distributions of Distributable Cash shall first be
distributed to the Partners making such loans until all such loans have been
repaid to such Partners, together with interest thereon as above provided, and,
thereafter, the balance of such distributions, if any, shall be made in
accordance with the terms of Sections 9.1 or 9.2 above. If distributions are
insufficient to repay and return all such loans as provided above, the funds
available from time to time shall first be applied to repay and retire the
oldest loan first and, if any funds thereafter remain available, such funds
shall be applied in a similar manner to remaining loans in accordance with the
order of the dates on which they were made; however, as to loans made on the
same date, each such loan shall be repaid pro rata in the proportion that such
loan bears to the total loans made on said date.
ARTICLE X
Allocations of Income, Gain,
Lose, Deduction and Credit
Section 10.1. Except as otherwise provided herein or unless another
allocation is required by the Code, Treasury Regulations, published revenue
rulings or judicial decisions, all items of Partnership book income, gain, loss,
deduction and credit shall be allocated among the Partners pro rata in
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accordance with their Sharing Ratios in effect for the period during which such
items accrue. For purposes of computing the amount of each item of book income,
gain, deduction or loss, the determination, recognition and classification of
such item shall be the same as its determination, recognition and classification
for federal income tax purposes, provided that:
(a) Any deductions amortization attributable be determined as if the
adjusted basis of such property were equal to the Carrying Value of such
property. Upon an adjustment to the Carrying Value of any Partnership property
subject to depreciation, cost recovery or amortization pursuant to Section 8.4,
any further deductions for such depreciation, cost recovery or amortization
attributable to such property shall be determined as if the adjusted basis of
such property were equal to the Carrying adjustment to the property subject to
amortization pursuant deductions for such amortization attributable to such
property shall determined as if the adjusted basis of such property were equal
to the Carrying Value of such property immediately following such adjustment.
(b) Any income, gain or loss attributable to the taxable disposition of any
Partnership property shall be determined by the Partnership as if the adjusted
basis of such property as of such date of disposition were equal in amount to
the Carrying Value of such property as of such date.
(c) All fees and other expenses incurred by the Partnership to promote the
sale of a Partnership Interest that can neither be deducted nor amortized under
Section 709 of the Code shall be treated as an item of deduction.
(d) Computation of all items of income, gain, loss and deduction shall be
made without regard to any election under Section 754 of the Code which may be
made by the Partnership and, as to those items described in the Section
705(a)(1)(B) or Section 705(a)(2)(B) of the Code, without regard to the fact
that such items are not includable in gross income or are neither currently
deductible nor capitalizable for federal income tax purposes.
Section 10.2. Upon the sale or other taxable disposition of all, or
substantially all, of the Partnership's assets, the gain or loss resulting
therefrom shall be allocated as provided in the second sentence of Section 18.3
in the event the balance in the capital accounts of the Partners are not in
proportion to their Sharing Ratios prior to such sale or disposition.
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Section 10.3.
(a) Notwithstanding anything to the contrary set forth herein, no
allocation of loss or deduction shall be made to the Limited Partner to the
extent that it is determined that such allocation would cause the Limited
Partner's Capital Account to have a deficit balance in excess of the sum of (i)
the Limited Partner's share of the Partnership's Minimum Gain, including
Minimum Gain attributable to any Partner Nonrecourse Debt owed or attributable
to such Limited Partner, and (ii) any amounts which the Limited Partner is
required to restore to the Partnership upon liquidation of its Partnership
Interest (or which are treated as such amounts pursuant to Treasury Regulation
Section 1.704-1(b)(2)(ii)(c) or any successor provision), after taking into
account the adjustments described in Treasury Regulations Section 1.704-
1(b)(2)(ii)(d)(4), (5) and (6) or any successor provisions. Any allocations
disallowed by reason of this Section 10.3 (a) shall be allocated to the General
Partner. If the Limited Partner unexpectedly receives an adjustment, allocation
or distribution described in Treasury Regulations Section 1.704-
1(b)(2)(ii)(d)(4), (5) or (6) or any successor provisions which causes the
negative Capital Account balances of any such Limited Partner at the end of any
fiscal year to exceed the sum of (i) such Limited Partner's share of the
Partnership's Minimum Gain, including Minimum Gain attributable to any Partner
Nonrecourse Debt owed or attributable to such Limited Partner, and (ii) any
amounts which the Limited Partner is required to restore to the Partnership upon
liquidation of its Partnership Interest (or which are treated as such amounts
pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(c) or any successor
provision), after taking into account the adjustments described in Treasury
Regulations Section 1.704-l(b)(2)(ii)(d)(4), (5) and (6) or any successor
provisions, then items of Partnership income and gain shall be specially
allocated to the Limited Partner in an amount and manner sufficient to eliminate
the resulting Capital Account deficit as quickly as possible.
(b) If there is a not decrease in Minimum Gain during a fiscal year, each
Partner will be allocated items of Partnership income and gain for such fiscal
year (and, if necessary, for subsequent fiscal years) in proportion to, and to
the extent of, the greater of (i) the portion of such Partner's share of the net
decrease in the Partnership's Minimum Gain during such fiscal year that is
allocable to the disposition of Partnership property subject to one or more
Nonrecourse Liabilities of the
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Partnership; or (ii) the deficit balance in such Partner's Capital Account
at.the end of such fiscal year (determined before any allocation of Partnership
income, gain, loss, deduction or Code Section 705(a)(2)(B) expenditure for such
year and excluding from each such deficit Capital Account balance any amount
that such Partner is obligated to restore under Treasury Regulations Section
1.704-1(b)(2)(ii)(c) or any successor provision, as well as each Partner's
share of the Partnership's Minimum Gain and the amount of any Partner
Nonrecourse Debt owed or attributable to such Partner).
(c) Any special allocations or reallocations pursuant to Section 10-3(a)
and (b) shall be taken into account in computing subsequent allocations of
income, gain, loss and deduction pursuant to this Article 10 so that, to the
maximum extent possible, the aggregate amount of such items allocated to each
Partner over the term of the Partnership shall be equal to the amounts that
would have been allocated to each Partner but for the provisions of Sections
10.3(a) and (b).
(d) Notwithstanding the allocations set forth in Sections 10.3(a), (b) and
(c), Nonrecourse Deductions attributable to a Partner Nonrecourse Debt shall be
allocated to the Partners who bear the economic risk of loss in accordance with
Treasury Regulations Section 1.704-1T(b)(4)(iv)(h) or any successor provision.
In the event there is a not decrease during a fiscal year in the Minimum Gain
attributable to Partner Nonrecourse Debt, any Partner with a share of the
Minimum Gain attributable to such debt at the beginning of the fiscal year shall
be allocated items of Partnership income and gain for such fiscal year in such
amounts and in such manner as required under Treasury Regulations Section 1.704-
1T(b)(4)(iv)(h)(4) or any successor provision.
Section 10.4
(a) The Partnership shall, except to the extent such item is subject to
allocation pursuant to subsection (b) below, allocate each item of income, gain,
loss, deduction and credit, an determined for federal and other income tax
purposes, in the same manner as such item was allocated for book purposes; and
(b) The Partnership, for federal and other income tax purposes shall, in
the case of Contributed Properties, allocate items of income, gain, loss,
depreciation and cost recovery deductions attributable to those properties with
a
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Built-In Gain or Built-In Loss pursuant to Section 704(C) of the Code. Similar
allocations shall be made in the event that the Carrying Value of Partnership
properties subject to depreciation, cost recovery or amortization are adjusted
pursuant to Section 8.4 upon the issuance of Partnership Interests for cash. If
an existing Partner acquires additional Partnership Interests, such allocations
shall apply only to the extent of his or its additional Interests. No allocation
under Section 704(c) of the Code shall be charged or credited to a Partner's
capital account.
Section 10.5. Income, gain, loss, deduction or credit attributable to
any Partnership Interest which has been transferred shall be allocated between
the transferor and the transferee allocated equally among the days of the
Partnership's fiscal year without regard to Partnership operations during such
days.
Section 10.6. The General Partner may rely upon, and shall have no
liability to the Limited Partner or the Partnership if it does rely upon, the
written opinion of tax counsel or accountants retained by the Partnership from
time to time with respect to all matters (including disputes with respect
thereto) relating to computations and determinations required to be made under
this Article X or other provisions of this Agreement.
Section 10.7.
(a) The General Partner is designated tax matters partner ("TMP") as
defined in Section 6231(a)(7) of the Code. The TMP and the Limited Partner shall
use their best efforts to comply with responsibilities outlined in this Section
10.7 and in sections 6222 through 6232 of the Code (including any Treasury
regulations promulgated thereunder) and in doing so shall incur no liability to
any other Partner.
(b) The TMP shall not bind the Limited Partner to a settlement agreement
in tax audits without obtaining the written concurrence of such Partner. Any
Partner who enters into a settlement agreement with the Secretary of the
Treasury with respect to any partnership items, as defined by Section 6231(a)(3)
of the Code shall notify the other Partner of such settlement agreement and its
terms within 90 days from the date of settlement.
(c) If the Limited Partner intends to file a notice of inconsistent
treatment under Section 6222(b) of the Code, such Partner shall, prior to the
filing of such
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notice, notify the TMP of such intent and the manner in which the Limited
Partner's intended treatment of a partnership item is (or may be) inconsistent
with the treatment of that item by the Partnership.
(d) No Partner other than the TMP shall file a request pursuant to Section
6227 of the Code for an administrative adjustment of partnership items for any
Partnership taxable year.
(e) No Partner other than the TMP shall file a petition under Code sections
6226, 6228 or other Code sections with respect to any partnership item, or other
tax matters involving the Partnership. In the case where the TMP files such
petition, it shall determine the forum in which such petition will be filed.
ARTICLE XI
Books of Account, Records and Reports
Section 11.1. Proper and complete records and books of account
(including those required by the Partnership Act) shall be kept by the
Partnership Manager in which shall be entered fully and accurately all
transactions and other matters relative to the Partnership's business as are
usually entered into records and books of account maintained by persons engaged
in businesses of like character. The Partnership books and records shall be
maintained in accordance with accounting principles described herein, and shall
be kept on the accrual basis. The books and records shall at all times be made
available at the principal office of the Partnership and shall be open to the
reasonable inspection and examination of the Partners or their duly authorized
representatives during the business hours of the Partnership Manager.
Section 11.2. As soon is practicable but in no event later than seventy-
five (75) days after the end of each calendar year, the Partnership Manager
shall send each person who was a holder of a Partnership Interest at any time
during the calendar year then ended (including any assignee permitted under
Article XV1 below, whether or not a substituted Limited Partner) all Partnership
tax information as shall be necessary for the preparation by such holder of his
federal income tax return. Further, on request by either Partner, the
Partnership Manager will furnish such Partner copies of all federal, state and
local income tax returns or information returns, if any, which the Partnership
is required to file.
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Section 11.3. As soon as practicable but in no event later than 120
days of the close of each fiscal year, the Partnership Manager shall cause to be
delivered to the Partners as of the last day of that fiscal year an annual
report containing a balance sheet as of the end of its fiscal year and
statements of income, Partners' capital and cash flows for the year then ended,
all of which shall be prepared in accordance with generally accepted accounting
principles.
Section 11.4. In addition to the other rights specifically set forth
herein, the Limited Partner shall have access to all information to which such
Partner is entitled to have access pursuant to the Partnership Act subject to
the conditions and circumstances therein stated.
ARTICLE XII
Fiscal Year
The fiscal year of the Partnership shall end on the thirty-first (31st)
day of December in each year.
ARTICLE XIII
Partnership Funds
The funds of the Partnership shall be deposited in such bank account or
accounts, or invested in such interest-bearing or non-interest-bearing
accounts, as shall be designated by the Partnership Manager. All withdrawals
from any such bank accounts shall be made by the Partnership Manager or other
agent or agents duly authorized by the General Partner. Partnership funds shall
not be commingled with those of any other person (including the General Partner
or any of its Affiliates) or used as compensating balances on behalf of any
other person.
ARTICLE XIV
Status of Limited Partners
Section 14.1. No Limited Partner shall have any personal liability
whatever, whether to the Partnership, to any of the Partners or to the creditors
of the Partnership, for the debts of the Partnership or any of its losses beyond
the amount agreed to be contributed by him to the capital of the Partnership as
set forth in Section 8.1 except to the extent
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required by the Partnership Act. No Limited Partner shall be obligated to
restore any deficit in its Capital Account upon the liquidation of the
Partnership or its Partnership Interest.
Section 14.2. The dissolution, bankruptcy, mental incompetency or legal
disability of the Limited Partner shall not cause a dissolution of the
Partnership, but the rights of such Limited Partner to share in the profits and
losses of the Partnership, and to receive distributions of Partnership funds,
shall on the happening of such an event, devolve upon such Limited Partner's
legal representatives or successors in interest, as the case may be, subject to
the terms and conditions of this Agreement, and the Partnership shall continue
as a limited partnership. Each Limited Partner's estate or other successor in
interest shall be liable for all the obligations of such Limited Partner. In no
event, however, shall such estate, legal representative or other successor in
interest become a substituted Limited Partner as such term is used in the
Partnership Act, except in accordance with Article XVI hereof.
ARTICLE XV
Management
Section 15.1. The overall management and control of the business and
affairs of the Partnership shall be vested in the Partnership Manager, except
that the authority to determine the following matters may not be carried out by
the Partnership Manager without the concurrence of the General Partner:
(a) any transaction (other than those contemplated herein) between the
Partnership and the Partnership Manager or any Affiliate of the Partnership
Manager;
(b) any arrangement or program relating to the creation of indebtedness of
the Partnership for borrowed money other than trade payables incurred in the
ordinary course of the Partnership's business;
(c) all matters relating to distributions of Distributable Cash by the
Partnership;
(d) any guarantee of the payment of any money or debt of another person or
entity, or guarantee of the performance of any other obligation of another
person or entity other than those given in the ordinary course of business;
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(e) the settlement of any lawsuit, administrative proceeding, or other
legal claim against the Venture for an amount in excess of $50,000 other than
the initiation of collection proceedings;
(f) the grant of any general power of attorney or other unlimited authority
to act on behalf or in the name of the Partnership; and
(g) the initiation, waiving, release, or abandonment of any rights or
claims against any person or entity potentially liable to the Partnership for an
amount in excess of $50,000;
and except further that the authority to determine the following matters may not
be carried out by the Partnership Manager without the concurrence of the General
Partner and the Limited Partner:
(a) alteration of the purpose of the Partnership set forth in Article III
hereof;
(b) any sale, assignment, license or transfer, of all or substantially all
of the assets of the Partnership;
(c) any amendment to the Management Agreement increasing the compensation
payable thereunder; and
(d) at such time as Robert C. McNair is no longer active in the day to day
management and affairs of the Partnership Manager and the General Partner, any
transaction or transactions between the Partnership and the Partnership Manager
or any Affiliate of the Partnership Manager involving the payment of amounts
aggregating in excess of $50,000 during any 12-month period.
Section 15.2. Except for the fees payable to the Partnership Manager
pursuant to the Management Agreement, as the same may be amended from time to
time, the Partnership Manager shall receive no compensation for its services
hereunder but shall be reimbursed for any reasonable costs, expenses, fees or
other disbursements paid or incurred by it for or on behalf of the Partnership.
The Partnership Manager may pay with funds of the Partnership or incur for and
on behalf of the Partnership, costs, expenses, fees and other disbursements as
it in its discretion deems necessary for the ongoing operations of the
Partnership's business, activities and affairs.
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Section 15.3. The Partnership Manager may employ for and and on behalf
of the Partnership such employees, managers, agents, independent contractors and
others acting for the Partnership as it deems necessary to carry out the
operations of the Partnership.
Section 15.4. It is expressly agreed and understood that the Partnership
Manager is not a partner in the Partnership and is merely serving as an
independent contractor pursuant to the Management Agreement.
Section 15.5. Neither the Partnership Manager, General Partner nor any
owner, officer or director of the Partnership Manager or the General Partner,
shall be liable, responsible or accountable in damages or otherwise to the
Partnership or any Partner for any action taken or failure to act (even if such
action or failure to act constituted the negligence of a person) on behalf of
the Partnership within the scope of the authority conferred on the person
described in this Article XV by this Agreement or by law unless such act or
omission was performed or omitted fraudulently or in bad faith or constituted
gross negligence.
Section 15.6.
(a) To the fullest extent permitted by law, the Partnership Manager, their
Affiliates, their respective officers, directors, employees and agents or any
person performing a similar function (individually, an "Indemnitee") shall be
indemnified and held harmless by the Partnership from and against any and all
judgments, penalties, settlements and reasonable expenses actually incurred by
any Indemnitee who was, is, or is threatened to be made a named defendant or
respondent in any and all claims, demands, actions, suits or proceedings, civil,
criminal, administrative or investigative, in which the Indemnitee may be
involved, or threatened to be involved, as a party or otherwise, by reason of
its status as (x) the Partnership Manager, General Partner or an Affiliate
thereof, or (y) an officer, director, employee or agent of the Partnership
Manager, General Partner or an Affiliate thereof, regardless of whether the
Indemnitee continues to be the Partnership Manager, General Partner or an
Affiliate or an officer, director, employee or agent of the Partnership Manager,
General Partner or an Affiliate thereof at the time any such liability or
expense is paid or incurred, if the Indemnitee acted in good faith and in a
manner it reasonably believed to be in, or not opposed to, the best interests of
the Partnership, and, with respect to any criminal proceeding, had no reasonable
cause to believe
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its conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere, or
its equivalent, shall not, of itself, create a presumption that the Indemnitee
acted in a manner contrary to that specified above.
(b) Any indemnification under Section 15-6(a) above, unless ordered by a
court, shall be made by the Partnership only as approved in the specific case
and only upon a determination as required by Section 11.06 of the Partnership
Act.
(c) To the fullest extent permitted by law, expenses incurred by an
Indemnitee in defending any claim, demand, action, suit or proceeding subject
to this Section 15.6 shall, from time to time, be advanced by the Partnership
prior to the final disposition of such claim, demand, action, suit or proceeding
(i) a written affirmation by the Indemnitee of its good faith belief that it
has met the standard of conduct necessary indemnification and (ii) upon receipt
by the Partnership of any undertaking by or on behalf of the Indemnitee to repay
such amount if it shall be determined that such Person is not entitled to be
indemnified as authorized in this Section 15-6.
(d) To the extent commercially reasonable, the Partnership shall purchase
and maintain insurance on behalf of the Partnership Manager, General Partner and
such other persons as the Partnership Manager shall determine against any
liability that may be asserted against or expense that may be incurred by such
person in connection with the Partnership's activities, regardless of whether
the Partnership would have the power to indemnify such Person against such
liability under the provisions of this Partnership Agreement.
(e) The indemnification provided in this Section 15.6 is for the benefit of
the Indemnitees and shall not be deemed to create any right to indemnification
for any other persons.
Section 15.7. It is further understood and agreed that the business
interests and activities of the Partners and Affiliates of the Partners may be
of any nature or description, including, but not limited to, the ownership,
operation or management of cogeneration facilities similar to the Facility, and
may be engaged in by such Affiliates independently or with others. Neither the
Partnership nor any Partner shall have any right, by virtue of this Agreement or
the partnership
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relationship created hereby, in or to the business activities of such Affiliates
or to the income or proceeds derived therefrom, and the pursuit of such business
activities, even if competitive with the business of the Partnership, shall not
be deemed wrongful or improper: Any Affiliate of a Partner shall have the right
to take for its own account or to recommend to others any investment opportunity
without being required to offer the same to the other Partners of the
Partnership.
Section 15.8. The Limited Partner shall have no authority or power in
its capacity as such to act for or on behalf of the Partnership or any other
Partner, to do any act that would be binding on the Partnership or any other
Partner or to incur any expenditure on or behalf of or with respect to the
Partnership. The Limited Partner shall not have the right to withdraw from the
Partnership.
ARTICLE XVI
Transfer of Interests by Partners
Section 16.1. No Partner shall have the right to, transfer its interest
in the Partnership, or any portion thereof, and to have the transferee admitted
as a substituted Partner in respect of such Partnership interest without
complying with the provisions of this Article XVI and, in the case of the
Limited Partner, the consent of the General Partner and in the case of the
General Partner, the consent of the Limited Partner. Any attempted transfer or
assignment of any interest in the Partnership in violation of the provisions of
this Article XVI shall be void and of no force and effect. Notwithstanding the
foregoing, nothing herein shall prohibit the Cogen Technologies Limited Partners
Joint Venture, the original Limited Partner, from transferring its interest in
the Partnership to its partners, pro rata in accordance with their interests,
upon the dissolution and liquidation of Cogen Technologies Limited Partners
Joint Venture.
Section 16.2. No transfer shall be made of any Partnership Interest if
such transfer would result in the Facility ceasing to qualify as a Qualifying
Cogeneration Facility. Moreover, there shall be no transfers of any equity
interest in a Partner (or any Affiliate of a Partner) if such transfers would
result in the Facility ceasing to qualify as a Qualifying Cogeneration Facility.
Section 16.3. Any Partner who desires to transfer his Partnership
Interest shall arrange for any permitted transferee to be bound by the
provisions of this Agreement, as it may then be amended, by having such
transferee execute two counterparts
21
<PAGE>
of an instrument of assignment satisfactory in form and substance to the other
Partner and by delivering the same to the other Partner together with any such
other information that may be required by counsel to the Partnership to
determine whether the proposed transfer violates applicable federal or state
securities or other laws or regulations or would cause the Facility to cease to
qualify as a Qualifying Cogeneration Facility. If and when the consent of the
Partners to such assignment and the substitution of such transferee hereof is
secured and the other requirements of this Article XVI are satisfied, the
transferee shall become a substituted Partner as to the Partnership interest
thus transferred effective as of the first day of the calendar mouth during
which the General Partner actually receives the aforesaid instrument of
assignment executed by both the transferor and transferee. The transferee shall
be required to pay any and all reasonable filing and recording fees, legal fees,
accounting fees, and other charges and fees incurred by the Partnership and its
counsel as a result of such transfer.
Section 16.4. All Partners acknowledge that the Partnership interests
have not been registered under (i) the Securities Act of 1933, as amended (the
"1933 Act"), in reliance on the exemptions afforded by Section 4(2) of the 1933
Act, or (ii) applicable state securities laws in reliance on exemptions under
such laws. Therefore, to preserve said exemptions and notwithstanding anything
contained herein to the contrary, the Partners hereby agree that interests of
the Partners shall be nontransferable and nonassignable, except in compliance
with the registration provisions of the 1933 Act and the Partnership Act, or an
exemption or exemptions therefrom, and any attempted or purported transfer or
assignment in violation of the foregoing shall be void and of no effect.
Accordingly, as an additional condition precedent to any assignment or other
transfer of any interest in the Partnership, the General Partner may require an
opinion of counsel satisfactory to the General Partner that such assignment or
transfer will be made in compliance with the registration provisions of the 1933
Act and applicable state securities laws or exemption(s) therefrom, and such
transferor or assignor shall be responsible for paying said counsel's fee for
the opinion. The foregoing shall not limit the restrictive legend set forth at
the beginning of this Agreement.
Section 16.5. Nothing in this Article XVI shall be deemed to prohibit a
Partner from pledging or hypothecatinq its Partnership Interest or any part
thereof in connection with any bona fide financing of such Partner. However, in
the event of a foreclosure of any such pledge or hypothecation, the person who
shall acquire the Partnership Interest incident to such
22
<PAGE>
foreclosure shall not become a substituted Partner hereunder without the written
consent of the other Partners. If the foreclosure occurs with respect to all the
interest of the General Partner and the Limited Partner does not elect, within
ninety (90) days after the foreclosure, to allow the assignee of the General
Partnership interest acquired incident to such foreclosure, to become a
substituted general partner, then such failure shall be deemed to be the
affirmative vote of the Limited Partner pursuant to Section 7.02(a)(4) of the
Partnership Act to terminate effective as of such 90th day the General Partner's
status as the General Partner of the Partnership, and in such event the
resulting event of withdrawal of the General Partner shall not be in
contravention of this Agreement.
ARTICLE XVII
Dissolution of the Partnership
Section 17.1. The happening of any one of the following events shall
work an immediate dissolution of the Partnership:
(a) An event of withdrawal of the General Partner as defined in Section
4.02(a) of the Partnership Act except that an event described in Subdivisions
(4), (5) and (9) of Section 4.02(a) shall not be an event of withdrawal;
(b) The receipt by the Partnership of the final payment due on the sales
price of all or substantially all the assets of the Partnership or the
Partnership's business following the Partnership's sale thereof;
(c) The agreement by the Partners to dissolve; and
(d) The expiration of the term of the Partnership as provided in Article VI
of this Agreement, unless all Partners agree to extend the term of the
Partnership past the date set forth in Article VI.
Any withdrawal of the General Partner under Section 6.02 of the Partnership Act
shall be effective on the date specified in a written notice of withdrawal
given by the General Partner for the Limited Partner; provided, however, that
the effective date shall be not less than 60 days following the date of delivery
of such notice.
Section 17.2. On the dissolution or bankruptcy of the General Partner,
it and its successors shall thereafter have only the interest of an assignee of
an interest in the
23
<PAGE>
Partnership and shall receive distributions to which it is entitled. For
purposes of this Agreement, the "bankruptcy" of a Partner shall be deemed to
have occurred upon the happening of any event described in Subdivisions (4) and
(5) of Section 4.02 of the Partnership Act.
Section 17.3. Upon an event of dissolution described in paragraph (a) in
Section 17.1, the Partnership shall be liquidated unless the Limited Partner
shall elect in writing to reconstitute and continue the Partnership and a
successor general partner is appointed. In such event the General Partner shall
become a limited partner upon the date that the successor general partner is
admitted to the Partnership, the Certificate of Limited Partnership filed in
Texas and any other jurisdiction shall be amended to reflect such event and the
Partnership and the successor General Partner shall indemnify and hold harmless
the prior General Partner for any claims, costs or losses it might subsequently
incur as a result of previously serving as a general partner of the Partnership.
Unless an election to reconstitute and continue the Partnership is made within
90 days of the event of dissolution, the Partnership shall conduct only
activities necessary to wind up its affairs.
ARTICLE XVIII
Winding Up and Termination of the Partnership
Section 18.1. If the Partnership is dissolved for any reason and is not
reconstituted and continued pursuant to Section 17.3 hereof, a liquidator (the
"Liquidator") shall commence to wind up the affairs of the Partnership and to
liquidate and sell its assets. The General Partner shall serve as the Liquidator
unless the dissolution occurred as a result of an event of withdrawal of the
General Partner, in which case the Limited Partner shall serve as the
Liquidator. The Liquidator shall have full right and discretion to determine the
time, manner and terms of sale or sales of Partnership property pursuant to such
liquidation having due regard to the activity and condition of the relevant
market and general financial and economic conditions. The Liquidator appointed
in the manner provided herein shall have and may exercise, without further
authorization or consent of any of the parties hereto or their legal
representatives or successors in interest, all of the powers conferred upon the
Partnership Manager and the General Partner under the terms of this Agreement
(but subject to all of the applicable limitations, contractual and otherwise,
upon the exercise of such powers) to the extent necessary or desirable in the
good faith judgment of the Liquidator to carry out the duties and functions of
the
24
<PAGE>
Liquidator hereunder for and during such period of time, not to exceed two (2)
years after the date of dissolution of the Partnership, as shall be reasonably
required in the good faith judgment of the Liquidator to complete the
liquidation and dissolution of the Partnership as provided for herein,
including, without limitation, the following specific powers:
(a) The power to continue to manage and operate any business of the
Partnership during the period of such liquidation or dissolution proceedings,
excluding, however, the power to make and enter into contracts which may extend
beyond the period of liquidation.
(b) The power to make sales and incident thereto to make deeds, bills of
sale, assignments and transfers of assets and properties of the Partnership;
provided, that the Liquidator may not impose personal liability upon any of the
Partners under any such instrument.
(c) The power to borrow funds as may, in the good faith judgment of the
Liquidator, be reasonably required to pay debts and obligations of the
Partnership or operating expenses, and to execute and/or grant deeds of trust,
mortgages, security agreements, pledges and collateral assignments upon and
encumbering any of the Partnership properties as security for repayment of such
loans or as security for payment of any other indebtedness of the Partnership;
provided, that the Liquidator shall not have the power to create any personal
obligation on any of the Partners to repay such loans or indebtedness other than
out of available proceeds of foreclosure or sale of the properties or assets
as to which a lien or liens are granted as security for payment thereof.
(d) The power to settle, release, compromise or adjust any claims asserted
to be owing by or to the Partnership, and the right to file, prosecute or
defend lawsuits and legal proceedings in connection with any such matters.
Section 18.2. After making payment or provision for payment of all debts
and liabilities of the Partnership and all expenses of liquidation, the
Liquidator may set up, for a period not to exceed the aforesaid two (2) years,
such cash reserves as the Liquidator may deem reasonably necessary for any
contingent or unforeseen liabilities or obligations of the Partnership. Upon the
satisfaction or other discharge of such contingency, the amount of the reserves
not retired, if any, will be distributed in accordance with this Article.
25
<PAGE>
Section. 18.3. Upon the winding up and termination of the business and
of affairs of the Partnership, its assets (other than cash) shall be sold, its
liabilities and obligations to creditors and all expenses incurred in its
liquidation shall be paid. If the balances in the Partners' respective capital
accounts are not in proportion to their Sharing Ratios, the items of Partnership
income, gain or loss or deduction resulting from the sale of the Partnership
assets pursuant to this Article XVIII shall first be allocated, to the extent
possible, among such of the Partners in such shares as will bring the positive
balances in the Partners' Capital Accounts into proportion with their Sharing
Ratios. All remaining items of Partnership income, gain, loss or deduction shall
be credited or charged to the Capital Accounts of the Partners pro rata in
accordance with their Sharing Ratios. Thereafter, the net proceeds from such
sales (after deducting all selling costs and expenses in connection therewith),
together with (at the expiration of the two (2) year period referred to therein)
the balance and reserve account referred to in Section 18.2 above, shall be
distributed among the Partners in accordance with their respective positive
balances in their Capital Accounts.
Section 18.4. Within a reasonable time following the completion of the
liquidation of the Partnership's properties, the Liquidator shall supply to each
of the Partners a statement prepared by the Partnership's accountants which
shall set forth the assets and the liabilities of the Partnership as of the date
of complete liquidation, each Partner's pro rata portion of distributions
pursuant to Section 18.3, and the amount retained as reserves by the Liquidator
pursuant to Section 18.2.
Section 18.5. Each holder of an interest in the Partnership shall look
solely to the assets of the Partnership for all distributions with respect to
the Partnership and his Capital Contribution thereto (including the return
thereof) and share of profits or losses thereof, and shall have no recourse
therefor (upon dissolution or otherwise) against the Partnership, the General
Partner (other than for any deficit balance in the Capital Account of the
General Partner) or the Liquidator. No holder of an interest in the Partnership
shall have any right to demand or receive property other than cash upon
dissolution and termination of the Partnership. All Partnership property shall
be sold upon liquidation of the Partnership unless all of the Partners consent
to a distribution in kind to the Partners.
Section 18.6. Upon the completion of the liquidation of the Partnership
and the distribution of all Partnership funds, the Partnership shall terminate
and the Liquidator shall (and is hereby given the power and authority to)
execute,
26
<PAGE>
acknowledge, swear to and record all documents required to effectuate the
dissolution and termination of the Partnership.
ARTICLE XIX
Notices
To be effective, all notices and demands under this Agreement must be in
writing and must be given (i) by depositing same in the United States mail,
postage prepaid, certified or registered, return receipt requested, (ii) by
prepaid telegram, or (iii) by delivering same in person and receiving a signed
receipt therefor. For purposes of notice, the addresses of the Partners or their
respective assigns shall be as set forth on the signature pages hereof. Notices
mailed in accordance with the foregoing shall be deemed to have been given and
made upon receipt; provided, however, that any notice to the General Partner
shall be effective only if and when received by the General Partner. Any
Partner or his assignee may designate a different address to which notices or
demands shall thereafter be directed by written notice given in the manner
hereinabove required and directed to the Partnership at its principal office as
hereinabove set forth.
ARTICLE XX
Amendment of Limited Partnership Agreement
This Agreement may be modified or amended at any time by a writing
signed by the General Partner and by the Limited Partner.
ARTICLE XXI
Power of Attorney
Each of the Partners and any permitted assignee or transferee of his
interest hereunder, does hereby irrevocably constitute and appoint the General
Partner, his true and lawful attorney in fact and agent, to execute,
acknowledge, verify, swear to, deliver, record and file, in such Partner's or
assignee's name, place and stead, all instruments, documents and certificates
which may from time to time be required by the laws of the United States of
America, the State of Texas, or any political subdivision or agency thereof, to
effectuate, implement and continue the valid existence of the Partnership,
including, without limitation, the power and authority to execute, verify, swear
to, acknowledge, deliver, record and file (i) all certificates and other
instruments (including counterparts of this Agreement and amendments thereto)
which
27
<PAGE>
the General Partner deems appropriate to form, qualify or continue the
Partnership as a limited partnership in the State of Texas, qualified to do
business in the States of New York and New Jersey, (ii) all instruments which
the General Partner deems appropriate to reflect any amendment to this
Agreement, or modification of the Partnership, made in accordance with the terms
of this Agreement, (iii) all conveyances and other instruments which the General
Partner deems appropriate to reflect the dissolution and termination of the
Partnership pursuant to the terms of this Agreement, including any writing
required by the Partnership Act, (iv) all instruments relating to the admission
of any additional or substituted Limited Partner and (v) a certificate of
assumed name and such other certificates and instruments as may be necessary
under the fictitious or assumed name statutes from time to time in effect in the
State of Texas and all other jurisdictions in which the Partnership conducts or
plans to conduct business. Said agent and attorney in fact shall not, however,
have the right, power or authority to amend or modify this Agreement when acting
in such capacities, except to the extent authorized herein. The power of
attorney granted herein shall be deemed to be coupled with an interest, shall be
irrevocable, shall survive the death, dissolution, bankruptcy, incompetency or
legal disability of the Limited Partner and shall extend to such Limited
Partner's heirs, successors and assigns; and may be exercised by said agent and
attorney in fact for the Limited Partner by listing all (or any) of the Limited
Partners required to execute any such instrument, and executing such instrument
acting as attorney in fact for all (or any one) of them or in such other manner,
including by facsimile signature, as said agent and attorney in fact may deem
appropriate. Each Partner hereby agrees to be bound by any representations made
by the General Partner acting in good faith pursuant to such power of attorney,
and each Partner hereby waives any and all defenses which may be available to
contest, negate or disaffirm any action of the General Partner taken in good
faith under such power of attorney.
ARTICLE XXII
Representations, Warranties and Covenants
The General Partner and the Limited Partner each hereby respectively
represent and warrant to the others that (i) it is duly organized, validly
existing and in good standing under the jurisdiction of its organization, with
full power and authority to enter into and perform its obligations under this
Agreement; (ii) it has validly executed this Agreement, and upon delivery, this
Agreement shall be a binding obligation of such party, enforceable against such
party in accordance with
28
<PAGE>
its terms; (iii) its entry into this Agreement and the performance of its
obligations hereunder will not require the approval of any governmental body or
regulatory authority and will not violate, conflict with or cause a default
under, any of its organizational documents, any contractual covenant or
restriction by which such party is bound, or any applicable law, regulation,
rule, ordinance, order, judgment or decree, (iv) neither the admission of said
party as a Partner in the Partnership nor the performance of this Agreement or
the transactions contemplated herein will cause the Facility to fail to meet
the qualifying cogeneration facility requirements under PURPA or to lose its
status as a Qualifying Cogeneration Facility, and (v) during the term of the
Partnership, such Parties shall not willingly or knowingly take or permit any
action which would cause the Facility to fail to meet such requirements or to
lose such status.
ARTICLE XXIII
Miscellaneous
Section 23.1. The Partners agree that the Partnership properties are not
and will not be suitable for partition. Accordingly, each of the Partners hereby
irrevocably waives any and all rights that he may have to maintain any action
for partition of any of the Partnership property.
Section 23.2. This Agreement and the additional documents and agreements
referred to herein constitute the entire agreement among the parties. It
supersedes any prior agreement or understandings among them, and it may not be
modified or amended in any manner other than as set forth herein.
Section 23.3. This Agreement and the rights of the parties hereunder
shall be governed by and interpreted in accordance with the laws of the State of
Texas, and the parties hereto agree that the courts of Harris County shall be
the proper venue.
Section 23.4. Except as herein otherwise specifically provided, this
Agreement shall be binding upon and inure to the benefit of the parties and
their legal representatives, heirs, administrators, executors, successors and
assigns.
Section 23.5. Wherever from the context it appears appropriate, each
term stated in either the singular or the plural shall include the singular and
the plural, and pronouns stated in the masculine, the feminine or the neuter
gender shall include the masculine, feminine and neuter. The term
29
<PAGE>
"person" means any individual, corporation, partnership, trust or other entity.
Section 23.6. Captions contained in this Agreement are inserted only as
a matter of convenience and in no way define, limit or extend the scope or
intent of this Agreement or any provision hereof.
Section 23.7. If any provision of this Agreement, or the application of
such provision to any person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to persons or
circumstances other than those to which it is hold invalid, shall not be
affected thereby.
Section 23.8. This Agreement may be executed in several counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument. It shall not be necessary for all Partners to execute
the same counterpart hereof.
Section 23.9. Each party hereto agrees to execute, with acknowledgment
or affidavit, if required, any and all documents and writings which may be
necessary or expedient in connection with the creation of the Partnership and
the achievement of its purposes, specifically including all such agreements,
certificates, tax statements, tax returns and other documents as may be required
of the Partnership or its Partners by the laws of the United States of America,
the State of Texas or any political subdivision or agency thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and in the year first above written.
Address: GENERAL PARTNER:
Suite 5000 COGEN TECHNOLOGIES, INC.
1600 Smith Street Building
1600 Smith Street By /s/ Robert C. McNair
Houston, Texas 77002 --------------------------------
Robert C. McNair, President
30
<PAGE>
Address: COGEN TECHNOLOGIES LIMITED
PARTNERS JOINT VENTURE
Number One Riverway
Suite 1320 By /s/ Charles Buck
Houston, Texas 77056 ---------------------------
Charles Buck
By /s/ Robert A. Hansen
---------------------------
Robert A. Hansen
By EVERGREEN ENERGY
By /s/ Velva G. Levine
---------------------------
Velva G. Levine, President
By The 1989 Energy Trust
By /s/ Jack R. Sowell
----------------------------
Jack R. Sowell, Trustee
(and not in his individual capacity)
By /s/ C. Donald Van Wart
---------------------------
C. Donald Van Wart
By: Hansfam Three, a Trust
By /s/ John P. Hansen
---------------------------
John P. Hansen, Trustee
(and not in his individual capacity)
31
<PAGE>
FIRST AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
COGEN TECHNOLOGIES LINDEN, LTD.
THIS AMENDMENT AGREEMENT is made as of the 14th day of February, 1990,
by and among Cogen Technologies, Inc., a Texas corporation, as the General
Partner and Cogen Technologies Limited Partners Joint Venture, a Texas general
partnership as the Limited Partner.
WHEREAS, the parties hereto entered into that certain Agreement of
Limited Partnership of Cogen Technologies Linden, Ltd. as of the 30th day of
June, 1989;
WHEREAS, the parties hereto have determined to amend Article III and
Section 16.2 of the Agreement as provided herein.
NOW, THEREFORE, it is agreed as follows:
1. Article III is hereby amended in its entirety to read as follows:
ARTICLE III
Purpose
The purposes of the Partnership are to design, finance,
construct, own and operate a cogeneration facility in or
near Linden, New Jersey for the generation and sale of
electricity and the production and sale of steam (the
"Facility"), to engage in all activities related or incident
thereto, and to engage in any other activity (including,
borrowing or lending money) that is not forbidden by the
laws of the jurisdictions in which the Partnership engages
in business.
2. The following provision is added as a final sentence to Section
16.2 of the Agreement:
No Partner or any Affiliate thereof shall request (nor
permit such a request by any party to whom such Partner or
Affiliate is contemplating transferring a Partnership
Interest or an equity interest in such Partner or any
Affiliate) any order or
<PAGE>
ruling from the Federal Energy Regulatory Commission, as to
whether any action would potentially cause the Facility to
lose its status as a Qualifying Cogeneration Facility,
unless such request shall first have been reviewed and
approved by the General Partner.
3. This Amendment Agreement may be executed in several counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument. It shall not be necessary for all parties to execute
the same counterpart hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Agreement as of the day and in the year first above written.
COGEN TECHNOLOGIES, INC.
By: [SIGNATURE ILLEGIBLE]
---------------------------------------
Vice President
COGEN TECHNOLOGIES LIMITED
PARTNERS JOINT VENTURE
By: /s/ Pauline E. BucK
---------------------------------------
Pauline E. Buck, as Trustee of the
Charles N. Buck Family Trust under the
Will of Charles N. Buck
By: /s/ Robert A. Hansen
---------------------------------------
Robert A. Hansen
By: EVERGREEN ENERGY
By: /s/ Velva G. Levine
----------------------------------
Its: Partner
------------------------------
-2-
<PAGE>
By: The 1989 Energy Trust
By: /s/ Jack R. Sowell
-----------------------------------
Jack R. Sowell, trustee and not
his individual capacity)
By: /s/ C. Donald Van Wart
--------------------------------------
C. Donald Van Wart
By: Hansfam Three, a Trust
By: /s/ John P. Hansen
---------------------------------
John P. Hansen, Trustee (and not
in his individual capacity)
-3-
<PAGE>
SECOND AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
COGEN TECHNOLOGIES LINDEN, LTD.
THIS AMENDMENT AGREEMENT is made as of the 31st day of July, 1990, by
and among Cogen Technologies, Inc., a Texas corporation, as the General Partner
and Cogen Technologies Limited Partners Joint Venture, a Texas general
partnership as the Limited Partner.
WHEREAS the parties hereto entered into that certain Agreement of
Limited Partnership of Cogen Technologies Linden, Ltd. (the "Agreement") as of
the 30th day of June, 1989;
WHEREAS, the parties hereto amended the Agreement as of the 14th day
of February, 1990; and
WHEREAS, the parties hereto have determined to amend Article VI of the
Agreement as provided herein.
NOW, THEREFORE, it is agreed as follows:
1. Article VI is hereby amended in its entirety to read as follows:
ARTICLE VI
Term
The term of the Partnership shall be from the date of
the filing of the certificate of limited partnership in
the Office of the Secretary of State of the State of Texas
as required under the Partnership Act until December 31,
2075, unless extended or sooner liquidated or dissolved in
accordance with this Agreement. The Partnership shall
conduct no business until the certificate of limited
partnership shall have been filed with the Secretary of
State of the State of Texas.
2. This Amendment Agreement may be executed in several counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument. It shall not be necessary for all parties to execute
the same counterpart hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Agreement as of the day and in the year first above written.
COGEN TECHNOLOGIES, INC.
By: [SIGNATURE ILLEGIBLE]
---------------------------------
Its: President
---------------------------
COGEN TECHNOLOGIES LIMITED
PARTNERS JOINT VENTURE
By: /s/ Pauline E. Buck
---------------------------------
Pauline E. Buck, as Trustee
of the Charles N. Buck
Family Trust under the Will
of Charles N. Buck
By: /s/ Robert A. Hansen
---------------------------------
Robert A. Hansen
By: EVERGREEN ENERGY
By: /s/ Velva G Levine
---------------------------------
Its: Partner
----------------------------
By: The 1989 Energy Trust
By: /s/ Jack R. Sowell, Trustee
----------------------------
Jack R. Sowell, Trustee
(and not in his individual
capacity)
By: /s/ C. Donald Van Wart
---------------------------------
C. Donald Van Wart
-2-
<PAGE>
By: Hansfam Three. a Trust
By: /s/ John P. Hansen
---------------------------------
John P. Hansen, Trustee
(and not in his individual
capacity)
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Agreement as of the day and in the year first above written.
COGEN TECHNOLOGIES, INC.
By: [SIGNATURE ILLEGIBLE]
---------------------------------
Its: President
----------------------------
COGEN TECHNOLOGIES LIMITED
PARTNERS JOINT VENTURE
By: _________________________________
Pauline E. Buck, as Trustee
of the Charles N. Buck
Family Trust under the Will
of Charles N. Buck
By: /s/ Robert A. Hansen
---------------------------------
Robert A. Hansen
By: EVERGREEN ENERGY
By: _________________________________
Its: ____________________________
By: The 1989 Energy Trust
By: _____________________________
Jack R. Sowell, Trustee
(and not in his individual
capacity)
By: _________________________________
C. Donald Van Wart
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Agreement as of the day and in the year first above written.
COGEN TECHNOLOGIES, INC.
By: [SIGNATURE ILLEGIBLE]
---------------------------------
Its: Present
----------------------------
COGEN TECHNOLOGIES LIMITED
PARTNERS JOINT VENTURE
By: _________________________________
Pauline E. Buck, as Trustee
of the Charles N. Buck
Family Trust under the Will
of Charles N. Buck
By: _________________________________
Robert A. Hansen
By: EVERGREEN ENERGY
By: _________________________________
Its: ____________________________
By: The 1989 Energy Trust
By: ____________________________
Jack R. Sowell, Trustee
(and not in his individual
capacity)
By: /s/ C. Donald Van Wart
---------------------------------
C. Donald Van Wart
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Agreement as of the day and in the year first above written.
COGEN TECHNOLOGIES, INC.
By: [SIGNATURE ILLEGIBLE]
---------------------------------
Its: ____________________________
COGEN TECHNOLOGIES LIMITED
PARTNERS JOINT VENTURE
By: _________________________________
Pauline E. Buck, as Trustee
of the Charles N. Buck
Family Trust under the
Will of Charles N. Buck
By: _________________________________
Robert A.Hansen
By: EVERGREEN ENERGY
By: _________________________________
Its: ____________________________
By: The 1989 Energy Trust
By: /s/ Jack R. Sowell, Trustee
-----------------------------
Jack R. Sowell, Trustee
(and not in his individual
capacity)
By: _________________________________
C. Donald Van Wart
-2-
<PAGE>
By: Hansfam Three. a Trust
By: /s/ John P. Hansen
---------------------------------
John P. Hansen, Trustee
(and not in his individual
capacity)
-3-
<PAGE>
EXHIBIT 10.30
POWER PURCHASE
AND
INTERCONNECTION AGREEMENT
BETWEEN
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
AND
CAMDEN COGEN, LIMITED PARTNERSHIP
<PAGE>
TABLE OF CONTENTS
PAGE
RECITALS....................................................... 1
ARTICLE I DEFINITIONS.................................................... 4
ARTICLE II GENERAL CONDITIONS OF DELIVERY AND ACCEPTANCE
OF ELECTRIC ENERGY AND CAPACITY................................ 12
Section A Warranty of Qualifying Facility
Status............................................... 13
Section B Repeal of PURPA...................................... 13
Section C Verification and Nomination
of Capacity.......................................... 14
Section D Exceptions to Obligations to Accept
Net Electrical Power Output.......................... 16
Section E Obligation to Provide Reactive
Power................................................ 19
Section F Condition Precedent.................................. 19
ARTICLE III TERM........................................................... 21
ARTICLE IV PURCHASE PRICE AND PAYMENT CONDITIONS.......................... 21
Section A Monthly Energy Charge................................ 22
Section B Monthly Capacity Charge.............................. 25
Section C Monthly Service charge............................... 28
Section D PSE&G Right of First Refusal......................... 28
Section E Excessive Rate....................................... 29
Section F Replacement Energy and Capacity
Costs................................................ 31
Section G Abandonment Cancellation or
Failure to Complete.................................. 35
Section H Security Provision................................... 36
ARTICLE V PHASE-IN PERIOD................................................ 45
i
<PAGE>
ARTICLE VI BILLING AND PAYMENT........................................... 46
ARTICLE VII INTERCONNECTION............................................... 48
Section A Design, Construction and
Installation of Interconnection..................... 48
Section B Interconnection Costs............................... 51
Section C Credit for Interconnection Costs.................... 56
Section D Cancellation Costs.................................. 58
ARTICLE VIII OPERATIONS COORDINATION....................................... 60
ARTICLE IX NET ELECTRICAL POWER OUTPUT SPECIFICATIONS.................... 63
ARTICLE X METERING/RECORDS.............................................. 64
ARTICLE XI USE OF THE PUBLIC SERVICE SYSTEM.............................. 73
ARTICLE XII EASEMENTS..................................................... 73
ARTICLE XIII PERMITS/APPROVALS............................................. 75
ARTICLE XIV DEDICATION OF FACILITIES...................................... 77
ARTICLE XV REARRANGEMENT................................................. 77
ARTICLE XVI COGENERATION FACILITY/SUBSTATION FACILITY..................... 79
ARTICLE XVII LIABILITY..................................................... 87
ARTICLE XVIII FORCE MAJEURE................................................. 88
ARTICLE XIX PROTECTIVE DEVICES............................................ 90
ARTICLE XX INDEMNIFICATION............................................... 91
ARTICLE XXI INSURANCE..................................................... 93
ARTICLE XXII WARRANTIES.................................................... 96
ARTICLE XXIII EVENTS OF TERMINATION......................................... 96
ARTICLE XXIV EVENTS OF DEFAULT AND BREACH OF CONTRACT......................100
ii
<PAGE>
Section A Default by SELLER...............................100
Section B Default by PSE&G................................103
Section C Remedies........................................105
ARTICLE XXV ARBITRATION...............................................106
ARTICLE XXVI SPECIFIC PERFORMANCE......................................110
ARTICLE XXVII ENTIRE AGREEMENT..........................................111
ARTICLE XXVIII ASSIGNMENT/TRANSFER.......................................111
ARTICLE XXIX CURE BY FINANCIER.........................................113
ARTICLE XXX FINANCIER SECURITY AGREEMENTS.............................116
ARTICLE XXXI DETERMINATION OF PSE&G COSTS..............................118
ARTICLE XXXII STANDARD FOR PERFORMANCE..................................118
ARTICLE XXXIII STANDBY ELECTRIC SERVICE..................................119
ARTICLE XXXIV SUCCESSORS AMD ASSIGNS....................................120
ARTICLE XXXV CHOICE OF LAW.............................................121
ARTICLE XXXVI CAPTIONS..................................................121
ARTICLE XXXVII COUNTERPARTS..............................................121
ARTICLE XXXVIII MISCELLANEOUS.............................................122
ARTICLE XXXIX RESERVATIONS..............................................122
ARTICLE XL SURVIVAL OF OBLIGATIONS...................................123
ARTICLE XLI NOTICES...................................................123
iii
<PAGE>
CAMDEN COGEN
POWER PURCHASE
AND
INTERCONNECTION AGREEMENT
This AGREEMENT made and entered as of the 15th day of April, 1988 by and
between PUBLIC SERVICE ELECTRIC AND GAS COMPANY, a New Jersey corporation
(PSE&G) and CAMDEN COGEN, L. P., a partnership (SELLER) initially consisting of
subsidiaries of the GENERAL ELECTRIC POWER FUNDING CORPORATION.
RECITALS
WHEREAS, SELLER proposes to finance, design, construct, own and operate a
grid connected COGENERATION FACILITY which is to be located within the electric
service territory of PSE&G at the property of CAMPBELL SOUP COMPANY (CAMPBELL)
at the, City of Camden, County of Camden, State of New Jersey;
WHEREAS, SELLER intends to sell exclusively to PSE&G electric energy and
capacity produced by the COGENERATION FACILITY, net of energy and capacity
consumed by in-plant loads, and PSE&G, in recognition of its obligation under
the Public Utility Regulatory Policies Act Of 1978 (16 U.S.C. Section 796 et
seq.) (PURPA) as
<PAGE>
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implemented by the Federal Energy Regulatory Commission (FERC or Commission) and
the State of New Jersey Board of Public Utilities (NJBPU), will purchase
pursuant to the terms and conditions set forth herein one hundred percent (100%)
of such NET ELECTRICAL POWER OUTPUT from the COGENERATION FACILITY;
WHEREAS, SELLER will obtain pursuant to the rules and regulations of the
FERC, set forth at 18 C.F.R. 292.207(a), a certification that the COGENERATION
FACILITY is a qualifying facility in accordance with 18 C.F.R. Section 292.203;
WHEREAS, SELLER intends to construct and shall maintain the COGENERATION
FACILITY in compliance with the regulations of the FERC applicable to qualifying
facility status during the term of this AGREEMENT;
WHEREAS, SELLER has advised PSE&G that the NET ELECTRICAL POWER OUTPUT of
the COGENERATION FACILITY will be approximately one hundred (100) megawatts on
an average annual basis;
WHEREAS, SELLER anticipates that it will commence pre-operational testing
of PROJECT equipment and facilities within 20 MONTHS of SELLER's issuance of the
RELEASE NOTICE to PSE&G;
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WHEREAS, SELLER anticipates that the DATE OF INITIAL OPERATION for the
PROJECT will occur within 22 MONTHS of SELLER's issuance of the RELEASE NOTICE
to PSE&G;
WHEREAS, SELLER anticipates that the DATE OF COMMERCIAL OPERATION for the
PROJECT will occur within 25 MONTHS of SELLER's issuance of the RELEASE NOTICE
to PSE&G;
WHEREAS, SELLER intends to enter into an agreement with CAMPBELL pursuant
to which CAMPBELL will agree to purchase and SELLER will agree to sell to
CAMPBELL thermal energy;
WHEREAS, PSE&G is a public utility as defined in N.J.S.A. 48:2-13 and, as
such, is required by applicable statutes and regulations to furnish safe,
adequate and proper service to its retail and sale-for-resale customers and
further, to have and maintain its property, plant and equipment in such
condition as to enable it to do so;
WHEREAS, SELLER has requested PSE&G to design, construct, install, operate
and maintain the INTERCONNECTION so as to interconnect the PROJECT with the
electric transmission facilities of PSE&G emanating from PSE&G's Gloucester
Switching Station.
<PAGE>
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WHEREAS, PSE&G is a member of the Pennsylvania-New Jersey-Maryland
Interconnection (PJM);
WHEREAS, PJM is a fully coordinated power pool which, pursuant to an
agreement executed by and among its members, affords to the member utilities for
the benefit of their customers reliable electric service at the lowest possible
cost;
WHEREAS, PSE&G has conducted engineering studies and has determined that it
is feasible to design, construct, install, operate and maintain the
INTERCONNECTION and to receive NET ELECTRICAL CAPACITY and associated NET
ELECTRICAL ENERGY produced by the COGENERATION FACILITY and delivered to the
RECEIPT POINT, over the term of this AGREEMENT; and
NOW, THEREFORE, in consideration of the recitals and mutual covenants
contained herein, the Parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms when used herein with capitalization shall have the
following meanings, unless a different meaning shall be expressly stated:
<PAGE>
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AGREEMENT means this Power Purchase and Interconnection Agreement between
SELLER and PSE&G.
CANCELLATION COSTS means the actual costs and/or liabilities PSE&G incurs
in connection with: (i) cancellation of supplier and/or contractor
orders/agreements entered into to install and construct the INTERCONNECTION;
and, (ii) completion of specific unfinished portions of the INTERCONNECTION
and/or removal of INTERCONNECTION FACILITIES which have been installed to the
extent such completion or removal is required to maintain the integrity, safety
or reliability of the PSE&G transmission network.
COGENERATION FACILITY means the waste heat boilers, gas and steam turbines,
generators, fuel oil storage and all appurtenant structures and equipment to be
constructed, installed, owned/leased, operated and maintained by SELLER at
CAMPBELL, for the purpose of generating steam and electricity and other forms of
useful thermal energy output and having an installed name plate rating of 153.2
megawatts.
COMMERCIAL OPERATION means the production of electric power and energy by
all the electric generation units at the COGENERATION FACILITY and the supply of
such electric power and energy to PSE&G at the RECEIPT POINT after the DATE OF
COMMERCIAL OPERATION.
<PAGE>
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CREDIT means the escrow account to be established by SELLER with the ESCROW
AGENT or an Irrevocable Letter of Credit to be established by SELLER with ISSUER
for and issued to PSE&G, as beneficiary, pursuant to and in accordance with the
provisions of ARTICLE VII of this AGREEMENT.
DATE OF COMMERCIAL OPERATION means the date the Parties hereto designate by
mutual agreement not to be unreasonably withheld as the date on which all
electric generation units at the COGENERATION FACILITY have been completed,
satisfactorily tested and inspected and are available for and capable of: (i)
production of electrical capacity and energy; and (ii) the delivery thereof to
PSE&G at the RECEIPT POINT.
DATE OF INITIAL OPERATION means the date on which SELLER synchronizes, for
the first time, any electric generation unit at the COGENERATION FACILITY with
the PUBLIC SERVICE SYSTEM.
FINANCIER means any individual(s) or entity(ies) and any representative(s)
or trustee(s) for any such individual(s) or entity(ies)):(i) lending money to
SELLER for: (a) the construction or term financing of the PROJECT; (b) the
establishment and/or maintenance of working capital requirements; and/or (c) the
refinance or take-out of any
<PAGE>
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such loan(s); and/or (ii) participating as an equity investor in the PROJECT;
and/or (iii) any lessor under a lease finance arrangement.
INITIAL OPERATION means the production of electric capacity and energy
after the DATE OF INITIAL OPERATION and prior to the DATE OF COMMERCIAL
OPERATION by any electric generation unit(s) at the COGENERATION FACILITY and
the supply of such electric capacity and energy to PSE&G at the RECEIPT POINT.
INTERCONNECTION means the 69,000-volt circuit reinforcements, extensions
and associated terminal facility reinforcements to the PUBLIC SERVICE SYSTEM to
be designed, constructed, and installed by PSE&G to interconnect the PROJECT
with and to the PUBLIC SERVICE SYSTEM for the purpose of enabling PSE&G to
receive the NET ELECTRICAL POWER OUTPUT from the COGENERATION FACILITY pursuant
to the terms and conditions of this AGREEMENT. The Proposed Plan for the
INTERCONNECTION is set forth in Exhibit 1.
ISSUER means commercial bank or other entity issuing the CREDIT.
LOAN AGREEMENT means any agreement between SELLER and one or more
FINANCIERS pursuant to which SELLER arranges
<PAGE>
-8-
for and obtains debt financing to construct and/or operate the PROJECT.
MONTH means the calendar month commencing at 12:00.01 a.m. Eastern Time on
the first day of the calendar month and concluding at midnight Eastern Time on
the final day of the same calendar month.
NET ELECTRICAL CAPACITY means the average monthly amount of electrical
capacity in kilowatts produced by any electric generation unit(s) at the
COGENERATION FACILITY during ON PEAK PERIODS and delivered to PSE&G at the
RECEIPT POINT.
NET ELECTRICAL ENERGY means the amount of electrical energy in kilowatt
hours produced by any electric generation unit(s) at the COGENERATION FACILITY
and delivered to PSE&G at the RECEIPT POINT.
NET ELECTRICAL POWER OUTPUT means the amount of NET ELECTRICAL ENERGY and
NET ELECTRICAL CAPACITY delivered to PSE&G at the RECEIPT POINT which is that
electric energy and capacity generated by the COGENERATION FACILITY less
electric energy and capacity consumed by the COGENERATION FACILITY'S in-plant
load.
<PAGE>
-9-
OFF PEAK PERIOD means all other hours of a week exclusive of the ON PEAK
PERIOD.
ON PEAK PERIOD means, as specified in PSE&G's Purchased Electric Power
Tariff, the period from 7:00 a.m. to 9:00 P.M. (Eastern Time) Monday through
Friday, or as otherwise designated in PSE&G's Purchased Electric Power Tariff
then in effect.
PAYMENT SCHEDULE means the statement reflecting the amount of money PSE&G
estimates it will expend and SELLER will pay each MONTH during procurement
and/or construction to pay the costs associated with the design, construction
and installation of the INTERCONNECTION and other interconnection tasks, the
costs for which are denominated in this AGREEMENT as costs associated with the
design, construction and installation of the INTERCONNECTION.
PROJECT means the COGENERATION FACILITY, SUBSTATION FACILITY and associated
facilities and equipment to be constructed, owned/leased, operated and
maintained by SELLER at CAMPBELL for the purpose of producing, among other
things, electric power.
PUBLIC SERVICE SYSTEM means the electric power generation, transmission,
subtransmission and distribution
<PAGE>
-10-
facilities owned, operated and maintained by PSE&G, which will include, after
construction and installation, the circuit reinforcements, extensions and
associated terminal facility reinforcements required to complete the
INTERCONNECTION.
RECEIPT POINT, also referred to as POINT OF INTERCONNECTION, means the
point of physical connection of the PROJECT to the PSE&G 69kV subtransmission
system located at the point at which the PSE&G 69kV subtransmission system meets
with and connects to the SUBSTATION FACILITY. The RECEIPT POINT is identified in
the Proposed Plan for the INTERCONNECTION (hereinafter sometimes referred to as
Exhibit 1).
RELEASE NOTICE means the written notice SELLER gives to PSE&G authorizing
PSE&G to commence the tasks associated with the design, construction and
installation of the INTERCONNECTION.
REQUIRED PERMIT means any permit, license or approval from any regulatory
or governmental body which is required to be obtained by PSE&G to install,
construct, own, operate and/or maintain the INTERCONNECTION.
SUBSTATION FACILITY means the new 69kV substation to be designed,
constructed, installed, owned, operated and
<PAGE>
-11-
maintained by SELLER at the PROJECT which is required to connect the
COGENERATION FACILITY with the PUBLIC SERVICE SYSTEM so as to enable SELLER to
supply to PSE&G at the RECEIPT POINT, in a safe and reliable manner the NET
ELECTRICAL POWER OUTPUT.
SUMMER SEASON means the period of time from June 1 to September 30
inclusive of any year.
SYSTEM EMERGENCY means the existence of a physical or operational condition
and/or the occurrence of an event on the PUBLIC SERVICE SYSTEM (or PJM System)
which in PSE&G's sole judgment is: (i) imminently likely to endanger life or
property; or (ii) impairs and/or imminently will impair: (a) PSE&G's ability to
discharge its statutory obligation(s) to provide safe, adequate and proper
service to its retail and sale-for-resale customers; and/or (b) the safety
and/or reliability of the PUBLIC SERVICE SYSTEM (or PJM System).
WINTER SEASON means the consecutive period of time from December 1 to the
last day in February inclusive.
<PAGE>
-12-
ARTICLE II
GENERAL CONDITIONS OF DELIVERY AND
ACCEPTANCE OF ELECTRIC ENERGY AND CAPACITY
Except as otherwise provided herein, SELLER agrees to deliver and PSE&G
agrees to accept during the term of this AGREEMENT the NET ELECTRICAL POWER
OUTPUT from the COGENERATION FACILITY.
SECTION A
WARRANTY OF QUALIFYING FACILITY STATUS
SELLER warrants that at the date of first power deliveries from SELLER's
COGENERATION FACILITY and subject to Section B of this ARTICLE, during the term
of this AGREEMENT, the COGENERATION FACILITY shall meet the requirements for a
Qualifying Facility as established by the FERC's Rules and Regulations set forth
in Title 18, Code of Federal Regulations, Part 292, Subpart B, Section 292 et
seq. Subject to Section B of this ARTICLE, SELLER's obligation to supply and
PSE&G's obligation to accept NET ELECTRICAL POWER OUTPUT shall be conditioned
on SELLER's obtaining the requisite Qualifying Facility status as set forth in
PURPA and the Rules and Regulations of the FERC implementing same and
maintaining those conditions during the term of this AGREEMENT as applicable to
the COGENERATION FACILITY with respect to Qualifying Facility status.
<PAGE>
-13-
SECTION D
REPEAL OF PURPA
In the event that (i) PURPA is for any reason no longer in effect, or (ii)
the COGENERATION FACILITY ceases to qualify as a Qualifying Facility under PURPA
for any reason not within the control of SELLER, including but not limited to a
reduction or cessation in thermal energy use at CAMPBELL, the rights and
obligations of SELLER and PSE&G under this AGREEMENT will continue so long as
the NJBPU does not take any action which would prevent PSE&G from full and
timely recovery from its customers of all costs and charges paid to SELLER for
capacity and energy delivered to PSE&G, and so long as the continued operation
of the COGENERATION FACILITY and the continued purchase of the NET ELECTRICAL
POWER OUTPUT by PSE&G at the rates set forth herein does not violate any
federal, state or local law, ordinance or regulation or subject SELLER or its
owners to regulation under the Public Utility Holding Company Act of 1935
(PUHCA) where such regulation is unreasonably burdensome. If the continued
operation of the COGENERATION FACILITY as a result of the occurrence of the
events specified in (i) or (ii) above would violate any such law, ordinance or
regulation or would subject SELLER or its owners to regulation under PUHCA where
such regulation is unreasonably burdensome, the Parties shall negotiate in good
faith to attempt to reach an agreement on a power sale contract, lease or other
arrangement which will provide for the continued purchase of
<PAGE>
-14-
the NET ELECTRICAL POWER OUTPUT by PSE&G under terms which provide the same
economic benefit to the Parties as is provided under this AGREEMENT. If the
NJBPU no longer permits such full and timely recovery or the existing recovery
mechanism for such costs is changed, modified, and/or eliminated; and if an
event specified in (i) or (ii) above has occurred, the Parties shall negotiate
in good faith to attempt to reach an agreement on a power sale contract, lease
or other arrangement which will provide for the continued purchase of the NET
ELECTRICAL POWER OUTPUT by PSE&G at a rate which provides substantially similar
economic benefits to the Parties as is provided under this Agreement and which
the NJBPU will permit PSE&G to recover from its ratepayers. If, after such
negotiations, the Parties are unable to reach such an agreement, either Party
may exercise any other remedy provided under the AGREEMENT.
SECTION C
VERIFICATION AND NOMINATION OF CAPACITY
In order to establish SELLER's obligation to deliver NET ELECTRICAL
CAPACITY to PSE&G and PSE&G's obligation to pay for such NET ELECTRICAL CAPACITY
in accordance with the terms and conditions of this AGREEMENT, SELLER has
nominated the following nominal net seasonal capacity levels, specific to the
reference ambient temperature indicated:
SUMMER SEASON 117 MW /at/ 72 /degrees/ F
WINTER SEASON 124 MW /at/ 33 /degrees/ F
<PAGE>
-15-
The parties agree that NET ELECTRICAL CAPACITY delivered is a function of
ambient temperature and that nominated values are to be adjusted to actual
prevailing average ambient temperature conditions for purposes of determining
whether any excess capacity has been delivered pursuant to ARTICLE IV B 1.
SELLER shall be entitled to an initial renomination of the SUMMER SEASON
and WINTER SEASON nominal net season capacity based upon performance, test or
demonstrated results from actual operations prior to ninety (90) days after the
DATE OF COMMERCIAL OPERATION. These renominated values shall be in effect until
a future renomination is made in accordance with this Section C, for all
purposes of this AGREEMENT.
SELLER shall be entitled to renominate the value(s) of the SUMMER SEASON
and/or WINTER SEASON net seasonal capacity levels every three years, starting
from the date of the initial renomination or the DATE OF COMMERCIAL OPERATION if
no initial renomination is made, for the balance of the term of this AGREEMENT.
In no event however shall any renominated capacity value lie outside a range of
plus or minus 10% of the SUMMER SEASON and/or WINTER SEASON net seasonal
capacity values determined for the initial renomination or the values set forth
in this section if no initial renomination is made.
<PAGE>
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Each subsequent renomination after the initial renomination shall be based
on the COGENERATION FACILITY's projected performance based on actual or test
results during expected ambient conditions in the SUMMER SEASON and/or WINTER
SEASON. SELLER agrees to provide PSE&G with all data reasonably necessary for
PSE&G to confirm the renominated value(s).
SECTION D
EXCEPTIONS TO OBLIGATION TO ACCEPT
NET ELECTRICAL POWER OUTPUT
Notwithstanding the above, and in addition to the provisions of ARTICLE
XVIII of this AGREEMENT, PSE&G shall be excused from accepting all or a portion
of SELLER's NET ELECTRICAL POWER OUTPUT if:
(1) The COGENERATION FACILITY fails to comply with the Interconnection,
Protection and Safety Requirements and Standards for Customer-Owned
Generating Facilities as set forth in Exhibit 2.
(2) PSE&G is unable to back down its own generation sufficiently to accept
the NET ELECTRICAL POWER OUTPUT from the COGENERATION FACILITY without
jeopardizing the integrity of the PUBLIC SERVICE SYSTEM (or the PJX
System).
(3) Transmission facilities are loaded to their published ratings and
continued or increased power output from the COGENERATION FACILITY
would adversely affect the reliability of the PUBLIC SERVICE SYSTEM
(or the PJM System).
<PAGE>
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(4) During any light load period within the meaning of 18 C.F.R. Section
292.304(f) which, due to operational circumstances, purchases from the
COGENERATION FACILITY will result in costs greater than those which
PSE&G would incur if it did not make such purchases but instead
generated an equivalent amount of energy itself. PSE&G will use its
best efforts to treat SELLER equally with all other non-utility
generation on the PUBLIC SERVICE SYSTEM in accordance with
established procedures. PSE&G shall give notice to SELLER in time for
SELLER to cease the delivery of NET ELECTRICAL POWER OUTPUT which
shall be no less than two (2) hours.
(5) During any SYSTEM EMERGENCY if such purchases would contribute to such
SYSTEM EMERGENCY.
(6) PSE&G intentionally interrupts acceptance of the COGENERATION
FACILITY'S NET ELECTRICAL POWER OUTPUT to conduct planned
maintenance of the interconnection or adjacent transmission, and/or
subtransmission facilities.
All cases of PSE&G's refusal to purchase from SELLER shall be subject
subsequently to verification by the NJBPU, if requested by SELLER. Where
practicable, PSE&G shall give SELLER advance notice of any interruption,
curtailment or reduction effected pursuant to this ARTICLE, the circumstances
requiring or necessitating the
<PAGE>
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interruption, curtailment or reduction of PSE&G's acceptance of the COGENERATION
FACILITY'S NET ELECTRICAL POWER OUTPUT and, if able, the reasons therefor, and
the extent and duration thereof. In the event PSE&G is unable, for any reason,
to give SELLER advance notice of such an interruption, curtailment or reduction
of such acceptance of the COGENERATION FACILITY'S NET ELECTRICAL POWER OUTPUT,
PSE&G shall, as soon thereafter as practicable, contact SELLER to confirm such
interruption, curtailment or reduction, explaining the circumstances requiring
or necessitating the interruption, curtailment or reduction, and, if able,
furnish the reasons therefor and the extent and duration thereof. At SELLER's
request, PSE&G shall provide written notice to SELLER explaining the
circumstances requiring or necessitating any interruption, curtailment or
reduction of service effective pursuant to this ARTICLE. PSE&G will resume the
acceptance of the COGENERATION FACILITY'S NET ELECTRICAL POWER OUTPUT when the
reason for the interruption, curtailment or reduction no longer exists.
In the event acceptance of the COGENERATION FACILITY'S NET ELECTRICAL POWER
OUTPUT is interrupted, curtailed or reduced by PSE&G for any reason specified in
this ARTICLE, PSE&G agrees to use its best efforts (consistent with PSE&G's
existing obligations to restore service to its retail and wholesale customers)
to correct any condition and to restore acceptance of such power.
<PAGE>
-19-
SELLER expressly agrees that PSE&G is not liable for damages of any kind to
SELLER or any third party, all as more fully set forth in ARTICLE XVII and
ARTICLE XX of this AGREEMENT, due to PSE&G's failure to accept the COGENERATION
FACILITY'S NET ELECTRICAL POWER OUTPUT for any of the reasons expressed above.
SECTION E
OBLIGATION TO PROVIDE REACTIVE POWER
PSE&G may request, and, when requested, SELLER shall use best efforts to
provide reactive power, leading or lagging, from the COGENERATION FACILITY up to
the operating limits of the COGENERATION FACILITY to the extent that it does not
require a reduction in NET ELECTRICAL POWER OUTPUT and further, in the event of
a SYSTEM EMERGENCY, PSE&G may request SELLER to provide reactive power, leading
or lagging, from the COGENERATION FACILITY and, if PSE&G makes such a request,
SELLER shall use its best efforts to provide same up to the operating limits of
the COGENERATION FACILITY, whether or not same requires a reduction in NET
ELECTRICAL POWER OUTPUT.
SECTION F
CONDITIONS PRECEDENT
The following shall be conditions precedent to the effectiveness of this
AGREEMENT: (i) A subsequent finding by the NJBPU in an Order that this
AGREEMENT, as presently constituted, is reasonable and prudent throughout the
term of this AGREEMENT and that PSE&G will be able to flow
<PAGE>
-20-
through to and/or fully and timely recover from its ratepayers through the
Levelized Energy Adjustment Clause or its successor all purchased power costs
incurred by PSE&G pursuant to this AGREEMENT, which approval by the NJBPU shall
be under terms and conditions reasonably acceptable to both PSE&G and SELLER;
(ii) Execution of a Thermal Energy Sale Contract between SELLER and CAMPBELL,
and delivery of a copy of such Contract to PSE&G which shall be subject to
PSE&G's review and approval. PSE&G's review and approval shall be made solely
for the purpose of ensuring that such Contract is reasonably compatible with the
terms and conditions of this AGREEMENT. PSE&G's review and approval shall not be
unreasonably withheld or delayed, and (iii) recertification by the FERC that the
COGENERATION FACILITY is a Qualifying Facility in accordance with 18 C.F.R.
Section 292.203.
After the foregoing conditions have been satisfied, the Parties shall,
within thirty (30) days, affirm in writing, executed by both Parties, that the
conditions precedent have been satisfied. In the event said conditions precedent
are not satisfied, this AGREEMENT shall be void.
<PAGE>
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ARTICLE III
TERM
Subject to the condition precedent set forth in ARTICLE II above, this
AGREEMENT shall enter into effect as of the date first above written and shall
continue in effect for an initial term ending twenty (20) years from the DATE OF
COMMERCIAL OPERATION. Upon the expiration of the initial term, this AGREEMENT
may be renewed for two (2) successive five (5) year renewal terms subject to
mutual agreement of the parties provided written notice of intent to renew is
given by either PSE&G or SELLER to the other no less than three (3) years prior
to the expiration of the then pending term.
At the expiration of the initial term or a renewal term, if applicable,
this AGREEMENT and each party's obligation(s) hereunder shall automatically
terminate as of the effective date thereof; provided, however, expiration of
this AGREEMENT shall not relieve either party from any obligation arising under
this AGREEMENT to pay any monies due to the other party which monetary
obligation was incurred prior to the date of expiration of this AGREEMENT.
ARTICLE IV
PURCHASE PRICE AND PAYMENT CONDITIONS
During the period of INITIAL OPERATION, PSE&G agrees to pay SELLER a
Monthly Energy Charge determined in accordance with Section A of this ARTICLE.
<PAGE>
-22-
Thereafter, PSE&G agrees to pay SELLER during years one (1) through twenty
(20) of this AGREEMENT, a Monthly Energy Charge and a Monthly Capacity Charge as
defined below for all NET ELECTRICAL POWER OUTPUT delivered in accordance with
Sections A and B of this ARTICLE IV.
SECTION A
MONTHLY ENERGY CHARGE
The Monthly Energy Charge shall be the total of the kilowatthours delivered
by SELLER to PSE&G during any MONTH times SELLER's Adjusted Base Rate. The
Adjusted Base Rate is composed of the sum of a Fixed Component, a Fuel Component
and a GNP Deflator Component, as follows:
(1) The Fixed Component is equal to two (2) cents/kWh, and is unchanged
for the initial twenty (20) year term of this AGREEMENT.
(2) The Fuel Component starts at one and seventy three hundredths (1.73)
cents/kWh on January 1, 1988 and shall remain in effect for the month
of January 1988. On the first day of each subsequent MONTH the Fuel
Component in effect for the previous MONTH is multiplied by an
Escalation Factor as determined below and that Fuel Component will
remain in effect for that MONTH. The Escalation Factor shall be
determined as follows:
(a) For any MONTH during which gas for the COGENERATION FACILITY is
purchased from PSE&G at Rate Schedule CIG or its successor rate
<PAGE>
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(CIG), the Escalation Factor shall be a fraction, the numerator of
which is the CIG rate for the MONTH during which energy is being
delivered and the denominator of which is the CIG rate for the
prior MONTH.
(b) For any MONTH during which fuel for the COGENERATION FACILITY is
purchased from SELLER or others, the Escalation Factor shall be a
fraction, the numerator of which is the average cost of gas
applicable to the CIG rate for the MONTH during which energy is
being delivered and the denominator of which is the average cost
of gas applicable to the CIG rate for the prior MONTH.
During any MONTH in which the COGENERATION FACILITY uses CIG gas
for a minimum of ten (10) days, the Escalation Factor shall be
determined as set forth in Subparagraph (a) above. For any MONTH
in which the COGENERATION FACILITY does not use CIG gas for a
minimum of ten (10) days, the Escalation Factor shall be
determined as set forth in subparagraph (b) above.
(3) The GNP Deflator Component on January 1, 1988 shall be ninety three
hundredths (.93) cent/kWh, which shall remain in effect for the twelve
months of the year 1988. On January 1, 1989 and on
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January 1 of each year thereafter the GNP Deflator Component in effect
for the previous year is multiplied times an escalation factor as
determined below. The escalation factor shall be determined using the
annual Implicit Price Deflator for Gross National Product (GNP) in the
Survey of Current Business published by the United States Department
of Commerce/Bureau of Economic Analysis as follows:
(a) Multiply the current GNP Deflator Component by the fraction of
which the numerator is the GNP Deflator (preliminary) for the
calendar year prior to the current year and the denominator which
is the GNP Deflator (final) for the second calendar year prior to
the current year.
(b) When the GNP Deflator (final) is published, re-calculate the
current GNP Deflator Component by using the fraction of which the
numerator is the GNP Deflator (final) for the calendar year prior
to the current year and the denominator which is the GNP Deflator
(final) for the second calendar year prior to the current year.
(c) The total energy payment for months in which the GNP Deflator
(Preliminary) was used shall be recalculated and the appropriate
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adjustment shall be made during the next Billing Period.
SECTION B
MONTHLY CAPACITY CHARGE
The Monthly Capacity Charge shall be the number of kilowatthours delivered
by SELLER's COGENERATION FACILITY during PSE&G's ON PEAK PERIOD during that
month divided by the hours in such ON PEAK PERIOD during a given month times a
capacity credit equal to $8.57/kW-month effective on January 1, 1988 and
escalated at 5% on January 1 of each year thereafter for the term of this
AGREEMENT.
1. Payment of the Monthly Capacity Charge shall be made in accordance with
the following:
(a) During the months of June, July, August and September, PSE&G shall pay
SELLER a level of capacity not to exceed the level established for the SUMMER
SEASON in Section C of ARTICLE II.
(b) During the months of December, January and February PSE&G shall pay
SELLER a level of capacity not to exceed the level established for the WINTER
SEASON in Section C of ARTICLE II.
2. At the end of each SUMMER SEASON, PSE&G shall determine whether capacity in
excess of the then current nominated capacity by SELLER in Section C of
ARTICLE II has been delivered. The total capacity delivered in such season
shall be determined by dividing the total number of kWh's actually delivered
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by SELLER's COGENERATION FACILITY during the ON PEAK PERIOD of each month of the
SUMMER SEASON by the total of all ON PEAK hours during such SUMMER SEASON. The
excess capacity shall be the amount by which the total capacity exceeds that
nominated by SELLER in Section C of ARTICLE II, as adjusted for the actual
average prevailing ambient temperature.
If PSE&G has paid for such excess capacity, PSE&G shall be entitled to and
SELLER shall refund a portion of the Capacity Charges paid pursuant to this
paragraph, such refund to be equal to four times the product of: (a) the excess
capacity determined in this Section B 2 of ARTICLE IV, and (b) the Monthly
Capacity Charge determined pursuant to this ARTICLE IV Section B. Any such
refund shall be credited against and an adjustment made on the September
Statement of Payment to SELLER.
3. At the end of each three (3) month period beginning on December 1 and
ending on February 28, PSE&G shall determine whether capacity in excess of
the then current nominated capacity has been delivered. For purposes of this
Section B 3, the WINTER SEASON nominated capacity prevailing shall be used.
The total capacity shall be determined by dividing the total number of kWh's
actually delivered by SELLER's COGENERATION FACILITY during the ON PEAK
PERIOD of each month of the aforesaid three (3) month period by the
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total of all ON PEAK hours during such three (3) month period. The excess
capacity shall be the amount by which the total capacity exceeds the then-
current WINTER SEASON capacity nominated by SELLER pursuant to Section C of
ARTICLE II, as adjusted for the actual average prevailing ambient temperature.
If PSE&G has paid for such excess capacity, PSE&G shall be entitled to and
SELLER shall refund any excess Capacity Charges for said three (3) month period,
such refund to be equal to three times the product of: (a) the three (3) month
excess capacity and (b) the Monthly Capacity Charge pursuant to this ARTICLE IV
Section B. Any such refund shall be credited against and an adjustment made on
the February Statement of Payment to SELLER.
For purposes of this ARTICLE IV Sections B 2 and 3, it is agreed and
understood that the capacity nominated shall be value adjusted to the average
ambient temperature which actually prevailed during the ON PEAK periods of the
applicable season. Such adjustments shall be made by SELLER using established
correlations and/or vendor-based performance curves or data depicting capacity
output of the COGENERATION FACILITY as a function of ambient temperature. SELLER
shall provide PSE&G with all the information and calculations used to make such
adjustments if so requested by PSE&G.
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Prevailing average ambient temperature for purposes of adjusting the
applicable nominated capacity shall be determined from available meteorological
data for the Philadelphia area.
SECTION C
MONTHLY SERVICE CHARGE
PSE&G shall charge SELLER a Monthly Service Charge for metering and
administrative expenses, as set forth under the service charge portion of the
applicable Purchased Electric Power ("PEP") tariff then on file with the NJBPU.
SECTION D
PSE&G RIGHT OF FIRST REFUSAL
SELLER will not offer for sale any power output from the COGENERATION
FACILITY in excess of the COGENERATION FACILITY'S NET ELECTRICAL POWER OUTPUT
without first offering the power output to PSE&G. If PSE&G declines to purchase
the offered power output, SELLER may offer it to third parties; provided,
however, that in no event may a sale of such power output be made: (1) to any
customer served by PSE&G or which PSE&G is authorized to serve except other
investor owned electric utilities (IOU's), or (2) on terms and conditions more
favorable than those offered to PSE&G.
In the event PSE&G declines to purchase such power output, PSE&G will
transmit such power output consistent with PSE&G's then current transmission
service policy for qualifying facilities to an IOU purchaser provided that:
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(1) such sale to an IOU purchaser is consistent with the provisions of this
Section; (2) the transmission of such power output shall be made only after (i)
a determination by PSE&G that the provision of such transmission service is
consistent with PSE&G's obligation to render safe, adequate and proper service
to its customer at minimum cost, and (ii) PSE&G's primary obligations to
customers, the PJIM interconnection and the Kid-Atlantic Area Coordination Group
are fulfilled, and (3) PSE&G and SELLER enter into an agreement for the
interconnection and transmission of such power output under terms and conditions
as well as a transmission service rate that are mutually acceptable to the
Parties hereto.
SECTION E
EXCESSIVE RATE
Each party, having entered into this AGREEMENT in good faith, hereby waives
all rights on its part now or hereafter to undertake any proceeding for the sole
purpose of having the purchase rate, as calculated in this ARTICLE IV of this
AGREEMENT, set aside as being unjust and unreasonable or of impairing or
disallowing the full and timely recovery of any payment made by PSE&G under this
AGREEMENT. Each party recognizes, however, that subsequent to execution and
approval of this AGREEMENT, if any legislative or judicial body or governmental
agency having jurisdiction impairs or disallows the full and timely recovery of
any payments made by PSE&G under this AGREEMENT
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for ratemaking purposes, then the parties shall, within thirty (30) days
thereafter, execute an amendment to this AGREEMENT implementing the appropriate
purchase rate, which is that rate, which the NJBPU or any successor will permit
PSE&G to recover on a full and timely basis from its ratepayers. Such a revised
purchase rate shall be effective as of the effective date of the legislative,
judicial or governmental agency pronouncement requiring such a revised purchase
rate. Such amendment and such revised rate shall be null and void ab initio in
the event that any such legislative, judicial or governmental agency
pronouncement is not upheld on appeal, and PSE&G shall, within thirty (30) days
thereafter, pay to SELLER the amount by which the payments which would have been
made under the contract in the absence of such amendment exceed the amount paid
under such amendment.
It is expressly agreed and understood that a prospective change in the
amount or the calculation of PSE&G's avoided cost within the meaning of PURPA
for purposes of purchases from future facilities shall not give rise to a
revision of the purchase price under this AGREEMENT unless any legislative or
judicial body or governmental agency having jurisdiction disallows payments made
by PSE&G hereunder for ratemaking purposes in accordance with the provision of
this Section F.
PSE&G agrees to give notice to SELLER of any challenge to the validity of
the AGREEMENT or to the full
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and timely recovery of the purchased energy costs from its ratepayers in any
regulatory or judicial proceeding, so as to permit SELLER to intervene in such
proceeding provided that the failure of PSE&G to give notice shall not be deemed
a breach of this AGREEMENT so long as such failure was due to good faith error
or omission; PSE&G further agrees to refrain from objecting or in any way
opposing any application by SELLER to intervene before any regulatory body or
judicial forum, or otherwise fully participate before such body or forum, in
which the validity or consequences of the AGREEMENT is subject to challenge.
SELLER and PSE&G further agree to use their best efforts to defend the AGREEMENT
before such regulatory body or judicial forum.
SECTION F
REPLACEMENT ENERGY AND CAPACITY COSTS
SELLER shall generate and sell NET ELECTRICAL POWER OUTPUT to PSE&G
throughout the term of this AGREEMENT and in accordance with the terms and
conditions thereof.
Effective on January 1 of each year following the first full year of
COMMERCIAL OPERATION if SELLER fails to generate and sell NET ELECTRICAL POWER
OUTPUT to PSE&G, and if this AGREEMENT has not been terminated pursuant to
ARTICLE XXIV, SELLER shall pay PSE&G Replacement Energy Costs and/or Replacement
Capacity Costs as provided below:
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1. Replacement Energy costs
SELLER shall generate and sell a total amount of NET ELECTRICAL ENERGY to
PSE&G at a level for all ON PEAK hours during the SUMMER SEASON and WINTER
SEASON which shall not be less than 85% of the NET ELECTRICAL CAPACITY
shown in Section C of ARTICLE II for such season, adjusted for the average
ambient temperature, multiplied by all ON PEAK hours during such season
(Average Generation). If the actual amount of NET ELECTRICAL ENERGY
delivered by SELLER to PSE&G during all ON PEAK hours, for either the
SUMMER SEASON or WINTER SEASON including any credits calculated pursuant to
Subparagraph 3 of this Section G (Actual Generation) is less than the
Average Generation, then SELLER shall pay PSE&G Replacement Energy Costs
equal to the number of Kilowatthours by which the Average Generation
exceeds the Actual Generation, multiplied by PSE&G's Cost of Replacement
Energy. The Cost of Replacement Energy during the SUMMER SEASON or WINTER
SEASON shall be the amount by which the projected average PJM Billing Rate
for all hours as shown on Exhibit 3 during such year exceeds the Adjusted
Base Rate in effect during such season.
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2. Replacement Capacity costs
SELLER shall provide NET ELECTRICAL CAPACITY to PSE&G at an average level
for all ON PEAK hours during the SUMMER SEASON and WINTER SEASON which
shall not be less than 85% of the NET ELECTRICAL CAPACITY then nominated
pursuant to Section C of ARTICLE II for each season adjusted to the average
ambient temperature (Average Capacity). If the actual amount of NET
ELECTRICAL CAPACITY provided by SELLER to PSE&G during all ON PEAK hours
during such season, including any credits calculated pursuant to
Subparagraph 3 of this Section G (Actual Capacity) is less than the Average
Capacity, then the capacity charge paid to SELLER for such season shall be
multiplied times the ratio of the Actual Capacity divided by the Average
Capacity. The difference between the reduced capacity charge determined
above and the actual capacity charge paid to SELLER shall be refunded to
PSE&G.
3. Performance Waiver Provision
In the event SELLER shall incur (i) an event of Force Majeure in accordance
with ARTICLE XVIII, or (ii) a curtailment in accordance with ARTICLE II,
Section D(2), (3), (4), (5) or (6), then a credit towards SELLER's Actual
Generation (Generation
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Credit) during either the SUMMER SEASON or WINTER SEASON shall be
calculated as follows:
GC /equals/ AG x (Nu /divided by/ Nt) x (He /divided by/ Ht)
Where GC /equals/ Generation Credit Per Affected Generator
AG /equals/ Average Generation
Nu /equals/ Nameplate Rating of Affected Generator
Nt /equals/ Total Nameplate Rating of all Generators
He /equals/ Lost On-Peak Hours
Ht /equals/ Total On-Peak Hours
In addition, should SELLER incur an event described in (i), (ii), as set
forth above, then a credit towards SELLER's Actual Capacity (Capacity Credit)
shall be calculated as follows:
CC /equals/ AC x (Nu /divided by/ Nt) x (He /divided by/ Ht)
Where CC /equals/ Capacity Credit per Affected Generator
AC /equals/ Average Capacity
4. Payment of Replacement Energy and Capacity Costs
Within sixty (60) days subsequent to the close of each season, PSE&G shall
submit to SELLER a Replacement Energy Cost and Replacement Capacity Cost
Statement ("Statement"), setting forth the
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amount of any payment to be made by SELLER to PSE&G pursuant to this
ARTICLE IV, Section G. SELLER shall make payment to PSE&G within thirty
(30) days of the date of the Statement.
This ARTICLE IV, Section G sets forth the methodology for calculating
Replacement Energy Costs and Replacement Capacity Costs to be paid to PSE&G in
the event SELLER fails to fulfill certain performance obligations and if this
AGREEMENT has not been terminated pursuant to ARTICLE XXIV. The inclusion of
such provision is not intended to create any express or implied right in SELLER
to terminate this AGREEMENT. Termination of this AGREEMENT by SELLER, except as
provided for in ARTICLE XXIII or in the exercise of its rights under ARTICLE
XXIV following a determination that PSE&G has breached this AGREEMENT, shall
constitute a breach of this AGREEMENT.
SECTION A
ABANDONMENT, CANCELLATION OR FAILURE TO COMPLETE
If SELLER abandons, cancels or fails to complete the PROJECT before the
DATE OF COMMERCIAL OPERATION and this AGREEMENT is therefore terminated in
accordance with the provisions of ARTICLE XXIII, and if SELLER has not provided
written notice of such abandonment, cancellation or failure within eighteen (18)
months of the date of NJBPU Order approving this agreement, it is acknowledged
and agreed that PSE&G will suffer damages which, as the result of PSE&G's
dependence upon the delivery of the COGENERATION FACILITY'S
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energy and capacity hereunder, PSE&G would be unable to mitigate fully. PSE&G
and SELLER agree that the amount of actual damages suffered by PSE&G under the
foregoing circumstances would be difficult or impossible to measure. Therefore,
PSE&G and SELLER agree that if the COGENERATION FACILITY shall fail to commence
COMMERCIAL OPERATION on or before the DATE OF COMMERCIAL OPERATION, as the same
may be extended, pursuant to ARTICLE XXIII of this AGREEMENT, SELLER shall pay
PSE&G a one-time liquidated damage amount equal to $721,556.
SECTION H
SECURITY PROVISION
1. A Payment Tracking Account, a projection of which is made a part of this
AGREEMENT as Exhibit 3, shall be established on the DATE OF COMMERCIAL OPERATION
to define the cumulative difference between the projected payments for
electricity to be made by PSE&G to SELLER under this AGREEMENT and the projected
payments which would have been made if such payments were based on the PJM
Billing Rate for energy and the PJM Capacity Deficiency Rate for capacity
(hereinafter referred to as the PJM Price), as shown in Exhibit 3. The Payment
Tracking Account shall not be funded, and any balance in the Payment Tracking
Account shall accrue interest at a rate equal to the Prime Rate of The Chase
Manhattan Bank, N.A., New York, New York, on January 1st of each year but in no
event shall the interest rate applied to this account exceed 13%.
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2. For each twelve (12) month period ("Period") after the DATE OF
COMMERCIAL OPERATION, the Payment Tracking Account shall be calculated by PSE&G
pursuant to Exhibit 3 as follows:
(a) The difference (the "Difference Value") between the Projected Contract
Payment (Rate A) and the total PJM rate (Rate B) shown in column
headed Rate A - Rate B, is fixed, for the term of the contract, as
shown for each year.
(b) The Energy column is shown for illustrative purposes only, and the
actual energy delivered for each Period will be used to calculate the
annual amount to be included in the Tracking Account.
(c) The interest rate shown in the Cumulative column is shown for
illustrative purposes only. The interest rate to be applied annually
to the balance in the Cumulative column is specified in ARTICLE IV,
Section I, Paragraph 1 of this AGREEMENT.
(d) The Cumulative amount in the tracking account at the end of the first
Period will be determined by multiplying the Difference Value
(cents/kWh) for year one (1) by the Energy (kWh) actually delivered
during the Period.
(e) The Cumulative amount for each subsequent Period will be the algebraic
sum of the (i) Cumulative amount in the Tracking Account at the start
of
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each Period; (ii) interest rate multiplied by the Cumulative amount in
the Tracking Account from (i) above; (iii) Difference Value for that
year from (a), multiplied by the Energy actually delivered during such
Period minus (iv) all replacement energy payments during such Period.
3. The Payment Tracking Account shall be closed at the end of the Period
in which the account equals zero or has a credit balance to SELLER. If the
Payment Tracking Account has not been closed by the end of the initial twenty
(20) year term of this AGREEMENT, SELLER shall at PSE&G's option either: (1) pay
any credit balance due to PSE&G and the Payment Tracking Account shall thereupon
be closed; or (2) continue the operation of the facility under terms that will
reduce the balance due to PSE&G to zero over a maximum period of five (5) years;
provided, however, that if this AGREEMENT is terminated prior to the end of the
twenty year term specified in ARTICLE III following a breach of this AGREEMENT
by SELLER, SELLER shall pay any balance in the Payment Tracking Account to PSE&G
over the remaining years of the initial term of this AGREEMENT or over a five
(5) year period, whichever is shorter, including interest that will accumulate
as long as a balance exists in the Payment Tracking Account. The Payment
Tracking Account shall be deemed closed at such time as SELLER has repaid all
such monies to PSE&G.
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Notwithstanding the foregoing, if this AGREEMENT is terminated prior to the
end of the twenty year term specified in ARTICLE III following a breach by PSE&G
resulting in termination of the AGREEMENT, SELLER shall pay PSE&G the amount, if
any, by which any balance in the Payment Tracking Account exceeds the damages
found to be due to SELLER as a result of such default. SELLER shall not be
required to make any such payments following a default by PSE&G until there has
been a final determination of the amount of damages due to SELLER (the
"Determination Date"). Following the Determination Date, any amount due to PSE&G
shall be paid ratably during the period of time between the Determination Date
and the date on which, based on circumstances in existence as of such date, the
Payment Tracking Account would have terminated if PSE&G had not defaulted. The
unpaid portion of such an amount due PSE&G shall bear interest at the rate
specified in Paragraph 1 of this Section 1.
4. To secure the obligation of SELLER described in this Section, SELLER
shall provide security in accordance with the terms of this paragraph.
(a) Definitions. When used in this paragraph, the following terms shall
have the respective meanings set forth below (such definition to be applicable
to both the singular and plural forms of the terms defined):
(1) Fair Market Value - The Fair Market Value of the COGENERATION
FACILITY determined pursuant to Subparagraph (c).
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(2) First Lien - A lien or other security interest in the COGENERATION
FACILITY created in connection with the financing or refinancing
of the COGENERATION FACILITY and secured by the COGENERATION
FACILITY.
(3) Second Lien Value - At any time, the Second Lien Value shall be
the Fair Market Value of the COGENERATION FACILITY less the
outstanding principal amount of any obligation secured by a First
Lien.
(b) Grant of Lien.
(1) In order to secure the repayment obligation of SELLER under this
ARTICLE IV, SELLER hereby grants PSE&G a Second Lien on the
COGENERATION FACILITY, which Lien is and shall remain superior to
all liens and other claims against the COGENERATION FACILITY,
other than First Liens. If the Payment Tracking Account is closed
pursuant to Paragraph 3 before the termination date of this
AGREEMENT, the Second Lien shall terminate on the date that the
Payment Tracking account is closed.
(2) In the event of the termination of the AGREEMENT, if SELLER fails
to pay any amount which is due to PSE&G pursuant to this Section,
PSE&G shall in addition to any other
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remedies it may have under this AGREEMENT, have the right to
either:
(A) Cause the COGENERATION FACILITY to be sold to an unrelated
purchaser, subject to the provisions of any First Lien, in which
case PSE&G shall retain the net proceeds of the sale up to the
amount of such unpaid amount, and any net proceeds of the sale in
excess of such unpaid amount shall be paid to SELLER; or
(B) Assume operation of the COGENERATION FACILITY, in which case
PSE&G shall retain the net revenue from such operation up to the
amount of such unpaid amount, and any net revenue from the
operation of the COGENERATION FACILITY in excess of such unpaid
amount shall be paid to SELLER.
(3) During the period of PSE&G's operation and maintenance of the
COGENERATION FACILITY pursuant to this Section, PSE&G shall (i)
operate and maintain the COGENERATION FACILITY in accordance with
prudent utility practices; (ii) exercise the same standard of care
in the operation and maintenance of the COGENERATION FACILITY
which it exercises in the operation and maintenance of its own
generating facilities, and (iii) perform all
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of SELLER's obligations under any permit or legal regulation or
requirement pertaining to the COGENERATION FACILITY, and any other
agreement pertaining to the COGENERATION FACILITY, including but
not limited to any thermal energy sale agreement between SELLER
and CAMPBELL.
Notwithstanding the foregoing, PSE&G and/or its agent shall
have no responsibility whatsoever for any obligations of SELLER
which were incurred prior to such exercise of its rights.
Possession and/or operation of the COGENERATION FACILITY shall not
constitute an assumption by PSE&G or such agent of SELLER's
existing or future liabilities and obligations of any kind; and
any undertaking by PSE&G to comply with such obligations is
intended only as a condition of keeping agreements and permits
between SELLER and third parties in force, but not as any
agreement to be legally responsible therefor or for any
consequences arising from noncompliance therewith.
(c) Valuation.
(1) PSE&G or its agent shall have the right to conduct an
appraisal of the fair market value of the COGENERATION
FACILITY. SELLER shall
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provide all data reasonably required to perform such an
appraisal. The cost of any such appraisal shall be paid by
PSE&G.
(2) The Second Lien Value
In order to evaluate the need for additional security in each
twelve (12) month period ("Period") after the DATE OF COMMERCIAL OPERATION, the
Reference Cumulative Balance column in the Payment Tracking Account shall be
calculated by PSE&G pursuant to Exhibit 3 as follows:
(a) The difference (the "Difference Value") between the
Projected Contract Payment. (Rate A) and the total PJM rate
(Rate B) shown in column headed Rate A - Rate B, is fixed, for
the term of the contract, as shown for each year.
(b) The calculated Energy delivered for Periods one (1) through
three (3) will be calculated using nominated capacity and a
capacity factor of the greater of .85 or the actual capacity
factor achieved during each Period; for Periods four (4)
through twenty (20) the energy delivered will be calculated
using the greater of .85 or the average of the actual capacity
factors achieved during Periods one through three (3). The
results of these calculations will be used to determine the
annual amount to be included in the Tracking Account.
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(c) The interest rate shown in the Reference Cumulative column is shown
for illustrative purposes only. The interest rate to be applied
annually to the balance in the Reference Cumulative column is
specified in ARTICLE IV, Section I, Paragraph 1 of this AGREEMENT.
(d) The Reference Cumulative amount in the tracking account at the end of
the first Period will be determined by multiplying the Difference
Value (cents/kWh) for year one (1) by the calculated Energy (kWh)
during the Period.
(e) The Reference Cumulative amount for each subsequent Period will be the
algebraic sum of the (i) Reference Cumulative amount in the Tracking
Account at the start of each Period; (ii) interest rate multiplied by
the Reference Cumulative amount in the Tracking Account from (i)
above; and (iii) Difference Value for that year from (a), multiplied
by the Calculated Energy delivered during such Period.
If the actual amount in the Cumulative column for any Period exceeds the
balance in the Reference Cumulative column by more than ten percent (10%) for
such Period, PSE&G may, at its sole option, require SELLER to provide and
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maintain a letter of credit satisfactory to PSE&G which shall insure payment of
the amount by which the Projected Repayment Obligation exceeds one hundred
percent (100%) of the Reference Cumulative Repayment obligation.
ARTICLE V
PHASE-IN PERIOD
SELLER plans to commence pre-operation testing of certain PROJECT equipment
and facilities within 20 months of start of PROJECT construction. SELLER shall
notify PSE&G in writing of any change in its current projection for the
commencement of pre-operation testing.
Upon completion of pre-operation testing of PROJECT equipment and
facilities, SELLER plans to commence phasing in and conducting test operations
of its electric generation units. SELLER anticipates that the phasing-in and
test operations of such units will take approximately 4 MONTHS (hereinafter
referred to as the "Phase-In Period"). The Phase-In Period will commence on the
DATE OF INITIAL OPERATION and, except as otherwise provided in this ARTICLE V,
will terminate upon mutual agreement of both PSE&G and SELLER not to be
unreasonably withheld.
SELLER anticipates that during the Phase-In Period electric power will be
produced at the COGENERATION FACILITY and supplied to PSE&G at the RECEIPT
POINT. PSE&G shall purchase the electric power produced at the energy rate
specified in Section A of ARTICLE IV above. After
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completion of the INTERCONNECTION and completion of the inspection process
specified in ARTICLE XVI, PSE&G shall be obligated to receive at the RECEIPT
POINT the electric power and energy produced at the COGENERATION FACILITY and
supplied to the RECEIPT POINT.
Upon termination of the Phase-In Period, the DATE OF COMMERCIAL OPERATION
shall be deemed to have occurred for the purposes of determining the start of
the term of the AGREEMENT and payment of charges specified in Section A and
Section B of ARTICLE IV.
ARTICLE VI
BILLING AND PAYMENT
After the date of INITIAL OPERATION, PSE&G shall read its recording
meter(s) at the COGENERATION FACILITY monthly to determine the amount of payment
to be made to SELLER for any MONTH in accordance with the provisions of ARTICLE
IV and shall thereafter prepare and present to SELLER, on or before the last day
of the subsequent MONTH, a statement and payment for electrical power delivered
to PSE&G during the MONTH. Such statement shall indicate the total
kilowatthours; delivered during the MONTH for both the ON PEAK PERIOD and the
OFF PEAK PERIOD, the Monthly Energy Charge, the Monthly Capacity Charge and the
Monthly Service Charge as set forth in ARTICLE IV.
If the payment is not received by the due date specified above, PSE&G shall
pay to SELLER an interest
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charge on unpaid amounts which shall accrue daily from the due date until the
date upon which payment is made at the then current late payment charge for
commercial customers prescribed in PSE&G's Standard Terms and Conditions as may
be amended from time to time.
In the event SELLER disputes any statement, SELLER shall present the
dispute in writing and submit supporting documentation to PSE&G within a thirty
(30) day period from receipt of such statement. Upon receipt of notice of the
dispute and supporting documentation, PSE&G shall have thirty (30) days from
receipt of such notice to resolve any dispute with SELLER. In the event the
dispute is not resolved within the thirty (30) day period, either party may
submit the matter to arbitration for resolution in accordance with ARTICLE XXV.
The disputed amount of any statement disputed by SELLER, in accordance with the
provisions of this ARTICLE, which is ultimately determined to be due and owing
by PSE&G to SELLER, from the date originally due shall; until payment, accrue
interest at the then current late payment charge for commercial customers
prescribed in PSE&G's Standard Terms and Conditions as may be amended from time
to time.
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ARTICLE VII
INTERCONNECTION
SECTION A
DESIGN, CONSTRUCTION AND INSTALLATION OF INTERCONNECTION
PSE&G shall design, construct and install the INTERCONNECTION for the
purpose of enabling PSE&G to interconnect the PROJECT with the PUBLIC SERVICE
SYSTEM. However, PSE&G shall not initiate any activity in connection with the
design, construction or installation of the INTERCONNECTION until receipt of the
RELEASE NOTICE.
Upon receipt of the RELEASE NOTICE, PSE&G shall promptly review its then
existing manpower requirements and construction commitments in order to
formulate an estimated completion date for the INTERCONNECTION. PSE&G shall not
unreasonably delay or withhold the formulation of an estimated completion date.
In connection with formulating a completion date, PSE&G shall use best efforts
to establish an estimated completion date consistent with SELLER's estimated
date of pre-operation testing. After formulation of the estimated completion
date PSE&G shall provide SELLER with written notice thereof.
PSE&G shall use best efforts to: (i) initiate the tasks required to obtain
any REQUIRED PERMIT, easement(s), license(s), rental(s) or right(s)-of-way for
the construction and installation of the INTERCONNECTION; and (ii) complete the
design, construction and installation of the INTERCONNECTION on or before the
DATE OF INITIAL
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OPERATION. Best efforts, as herein provided, means the commencement and pursuit,
in good faith, of a program of design, construction, installation, review and
examination so as to complete the INTERCONNECTION in accordance with the
applicable estimated completion date; provided, however, it is expressly
understood and agreed that PSE&G's best efforts to complete same on or by the
estimated completion date shall be subordinate and subject to and construed in
light of and consistent with any suspension effected pursuant to and in
accordance with Section B of this ARTICLE VII and PSE&G's primary obligation to
provide and maintain safe, adequate and proper service to its retail and sale-
for-resale customers and to operate and maintain its plant, property and
equipment in such condition as to enable it to do so. SELLER has been advised
and acknowledges and agrees that certain of the activities necessary to initiate
and complete the construction and installation of the INTERCONNECTION may be
affected and/or influenced by conditions, events and/or factors which are not
within the direct control of PSE&G.
PSE&G shall advise SELLER when the INTERCONNECTION is completed.
Thereafter, subject to and in accordance with the provisions of ARTICLE XVI,
PSE&G will permit SELLER to synchronize its electric generation units with the
PUBLIC SERVICE SYSTEM.
PSE&G shall not be liable to SELLER for any direct or indirect cost(s),
expense(s), loss(es), liability(ies) or
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damage(s) which SELLER may incur or sustain, which cost, expense, loss,
liability or damage arises out of, relates to or results from any delay in the
completion of the INTERCONNECTION, except where the delay in the completion of
the INTERCONNECTION results from PSE&G's failure to use best efforts, as defined
herein.
SELLER shall indemnify and hold harmless PSE&G and each and every of its
officers, agents, servants and employees, its successors and assigns of, from
and against, any and all claims, demands, suits and actions, and/or
liabilities, damages, and/or judgments, as well as against any fees, costs,
charges or expenses which PSE&G, its officers, agents, servants and employees,
its successors and assigns incur in the defense of any such claims, suits,
actions or similar such demands, made or filed by any third-party with whom
SELLER is in privity of contract or claims to be in privity of contract with
SELLER if such claim is ultimately upheld, to the extent such claims, suits,
actions or similar demands arise out of, relate to, or result from PSE&G's
failure to complete the INTERCONNECTION in a timely manner as herein provided,
except where such failure results from PSE&G's failure to use best efforts as
defined in this Section A to complete the INTERCONNECTION. In affecting and
implementing any right of or obligation to indemnify pursuant to and in
accordance with the provisions of this paragraph, the procedural provisions set
forth in ARTICLE XX of this AGREEMENT shall be applicable.
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The INTERCONNECTION shall be constructed and installed reasonably in
accordance with the Proposed Plan (Exhibit 1). It is understood that change(s)
in the Proposed Plan may be necessary from time to time prior to and/or during
construction. PSE&G shall have the right and the authority to make any change(s)
in the Proposed Plan for or route of the INTERCONNECTION, where PSE&G, in its
reasonable judgment, determines such change(s) is necessary or appropriate;
provided, however, in the event any change in the Proposed Plan which PSE&G
determines is necessary or appropriate will result in an increase of more than
five percent (5%) of the estimated cost for same, PSE&G shall not be permitted
to make such change(s) without SELLER's consent. SELLER shall not unreasonably
delay or withhold its consent for any such change(s). In the event such
change(s) in PSE&G's sole judgment is necessary or appropriate to enable the
PROJECT to operate with the PUBLIC SERVICE SYSTEM in a safe and reliable manner
and SELLER withholds or delays its consent, PSE&G shall have the right to
suspend design, construction and installation of the INTERCONNECTION and/or
terminate this AGREEMENT in accordance with ARTICLE XXIII. Changes in the
Proposed Plan shall not require any amendment to this AGREEMENT.
SECTION 9
INTERCONNECTION COSTS
SELLER shall be liable for and shall pay to PSE&G all costs PSE&G incurs in
designing, constructing and
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installing the INTERCONNECTION as well as all other costs which PSE&G incurs in
effecting the interconnection of the PROJECT with the PUBLIC SERVICE SYSTEM,
which costs are denominated in this AGREEMENT as costs associated with the
design, construction and installation of the INTERCONNECTION (herein
collectively referred to as costs associated with or costs incurred in
connection with the design, construction and installation of the
INTERCONNECTION).
PSE&G estimates that the total cost associated with the design,
construction and installation of the INTERCONNECTION will be $________. This
estimate shall not in any way diminish, change or affect SELLER's responsibility
for and obligation to pay to PSE&G all costs PSE&G actually incurs associated
with the design, construction and installation of the INTERCONNECTION. PSE&G's
anticipated expenditure pattern associated with these costs is contained in the
PAYMENT SCHEDULE.
SELLER's responsibility for and obligation to pay to PSE&G the costs
associated with the design, construction and installation of the INTERCONNECTION
shall be discharged as follows: commencing on or prior to the last day of the
MONTH mutually agreed by and between SELLER and PSE&G subsequent to the receipt
by PSE&G of the RELEASE NOTICE (MONTH 1) and thereafter on or prior to the last
day of each of the successive ______ (___) MONTHS (MONTH ___ through and
including MONTH ___), SELLER shall remit to PSE&G for each such MONTH the
payment specified in the following PAYMENT SCHEDULE:
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PAYMENT SCHEDULE
TO BE ESTABLISHED
TOTAL OF PAYMENTS FOR ESTIMATED COSTS $_______________
The PAYMENT SCHEDULE above establishes the amortization schedule by which
SELLER makes payment of the costs contained in the estimate specified in this
Section of this ARTICLE VII. Said estimate is effective through ___________,
19__. In the event SELLER does not issue the RELEASE NOTICE to PSE&G on or
before ___________, 19__, PSE&G shall have the right to adjust said estimate and
therefor the amortization schedule in the PAYMENT SCHEDULE to reflect any change
in estimated costs. In such event, PSE&G shall furnish written notice to SELLER
of any new cost estimate and will furnish to SELLER a revised PAYMENT SCHEDULE.
The revised estimate and revised PAYMENT SCHEDULE shall be incorporated into
this AGREEMENT as modification pursuant to and in accordance with ARTICLE XXVII
of this AGREEMENT.
In the event SELLER fails to remit any payment specified in and in
accordance with the schedule specified in the PAYMENT SCHEDULE above, PSE&G may,
in addition to any other remedy or right PSE&G may have under this AGREEMENT,
immediately suspend performance of its obligations under
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Section A of this ARTICLE. PSE&G shall provide SELLER with written notice of any
such suspension (hereinafter referred to as Notice of Suspension). In such
event, and in addition to any other right or remedy it may have under this
AGREEMENT, PSE&G shall have the right to make demand for and receive payment
from ISSUER under the CREDIT for: (i) any costs associated with the design,
construction and installation of the INTERCONNECTION which PSE&G has incurred,
as of the date of suspension, and for which SELLER has failed to make payment
therefor on or by the date of demand; and/or (ii) any costs associated with the
design, construction and installation of the INTERCONNECTION which PSE&G incurs
thereafter as a consequence of a commitment made or liability incurred by PSE&G
prior to the date of suspension in connection with performance of its
obligations under Section A of this ARTICLE.
Within ninety (90) days of completion of construction of the
INTERCONNECTION, PSE&G shall furnish to SELLER a Final Reconciliation. The Final
Reconciliation shall contain a statement setting forth the nature and amount of
costs actually incurred by PSE&G in connection with the design, construction and
installation of the INTERCONNECTION, as well as a reconciliation between the
total payments made by SELLER, in accordance with the provisions of this Section
B, and the amount of costs actually incurred in connection with the design,
construction and installation of the INTERCONNECTION.
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In the event that the total cost actually incurred in connection with the
design, construction and installation of the INTERCONNECTION exceeds the total
payments made by SELLER, SELLER shall be responsible for and shall make payment
to PSE&G of any differential resulting from such reconciliation. SELLER shall
make payment for any such differential within thirty (30) days of the date of
the delivery to SELLER of the Final Reconciliation. In such event, the Final
Reconciliation shall constitute PSE&G's bill to SELLER for payment of any such
differential.
In the event the total of the payments made by SELLER to PSE&G, in
accordance with the provisions of this ARTICLE VII, exceeds the costs actually
incurred in connection with the design, construction and installation of the
INTERCONNECTION, PSE&G shall remit to SELLER, with the Final Reconciliation, a
payment to reimburse SELLER for any such overpayment.
In connection with effecting the Final Reconciliation, SELLER shall have
the right to review, after a timely request therefor, any documentation or data
available to PSE&G to enable SELLER to verify the accuracy of the Final
Reconciliation. However, such review shall not extend the due date of, or extend
or postpone or otherwise affect SELLER's obligation to pay in a timely manner
any payment due, as specified in and required by the Final Reconciliation.
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SECTION C
CREDIT FOR INTERCONNECTION COSTS
In connection with, and for the purposes of, securing performance by SELLER
of its obligation to pay PSE&G for the costs which PSE&G incurs in connection
with the design, construction and installation of the INTERCONNECTION, SELLER
shall establish a CREDIT as set forth below:
1. Letter of Credit
In the event SELLER establishes as CREDIT an irrevocable letter of
credit, it shall be issued to PSE&G as beneficiary and shall be established at
and made payable by a commercial bank (ISSUER) acceptable to PSE&G on reasonable
terms and conditions acceptable to PSE&G; provided, however, PSE&G shall not
unreasonably withhold approval of any letter of credit. The CREDIT shall be
established for and structured so as to permit PSE&G to make a demand(s) for and
receive payment from ISSUER and shall require the ISSUER to honor on sight any
written demand(s) for payment under the CREDIT as specified in and in accordance
with the provisions of Sections B and D of this ARTICLE. The CREDIT shall be
established following the receipt of the RELEASE NOTICE to be effective not
later than thirty (30) days following a written notice from PSE&G and shall have
an Expiry Date ___ months after the date of issuance of such CREDIT (which
period is hereinafter referred to as the Effective Period). The aggregate amount
of the CREDIT shall be
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established and maintained during the Effective Period in an amount of ______
dollars ($________).
2. Escrow Account
In the event SELLER establishes as CREDIT an ESCROW ACCOUNT, the
ESCROW ACCOUNT shall be established with ESCROW AGENT pursuant to and
substantially in accordance with the terms and conditions of the form of ESCROW
AGREEMENT agreed to by and between SELLER and PSE&G prior to the execution of
this AGREEMENT (Exhibit 4). The ESCROW ACCOUNT shall be established/for and
structured so as to permit PSE&G to make a demand(s) for and receive payment
from ESCROW AGENT and shall require the ESCROW AGENT to honor written demand(s)
by PSE&G for payment for CANCELLATION COSTS. The ESCROW AGENT shall be
established to be effective not later than fifteen (15) days of the date of the
RELEASE NOTICE and shall remain in effect until the Expiry Date (hereinafter
referred to as the Effective Period). The aggregate amount of the CREDIT shall
be established and maintained until the Expiry Date. The aggregate amount of the
ESCROW ACCOUNT and the Expiry Date shall be specified by PSE&G in a notice to be
issued by PSE&G to SELLER as soon as practicable after execution of this
AGREEMENT.
In the event SELLER fails to have established for and have issued to PSE&G,
as beneficiary, the CREDIT, in accordance with the provisions of this ARTICLE,
PSE&G may, in addition to any other remedy it may have under this
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AGREEMENT, suspend performance of its obligations under Section A of this
ARTICLE.
SECTION D
CANCELLATION COSTS
In order to complete the design, construction and installation of the
INTERCONNECTION, PSE&G shall be required to enter into contractual arrangements
with, inter alia, equipment/material suppliers and third-party contractors. Upon
occurrence of any Event of Termination as specified in ARTICLE XXIII during the
construction period, PSE&G shall have the right to cancel or terminate any
supplier and/or contractor agreements entered into in connection with
discharging its obligations to design, construct and install the
INTERCONNECTION. In the event PSE&G exercises any right pursuant to and in
accordance with this Section D to cancel or terminate any supplier and/or
contractor agreements/orders, PSE&G may incur CANCELLATION COSTS. In such event,
SELLER shall be liable for and make payment to PSE&G for all CANCELIATION COSTS
which PSE&G incurs.
Additionally, upon occurrence of an Event of Termination as defined in
ARTICLE XXIII during the construction period, PSE&G may be required to remove
and/or complete the construction work in progress in order to maintain the
integrity, safety and reliability of the PUBLIC SERVICE SYSTEM. In such event,
PSE&G may also incur CANCELLATION COSTS. SELLER shall be liable for and make
payment to PSE&G for all such CANCELLATION COSTS which PSE&G incurs.
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In the event PSE&G incurs any CANCELLATION COSTS, PSE&G shall have the
right to demand payment for and receive payment from ISSUER under the CREDIT for
all such costs; provided, however, in the event the CREDIT is insufficient,
PSE&G retains the right to demand payment from SELLER for any such deficiency,
and in such event, SELLER shall be obligated to make payment to PSE&G for any
such CANCELLATION COSTS not paid under the CREDIT.
In connection with determining the amount of any demand(s) for payment of
ISSUER to be made by PSE&G for any CANCELLATION COSTS incurred, PSE&G shall give
SELLER a monetary credit for the value to PSE&G of any facilities or equipment
received by and which are thereafter useful to PSE&G.
In the event PSE&G terminates or cancels any supplier and/or contractor
agreements/orders as permitted in this Section D, PSE&G shall have complete
discretion relative to the manner of resolving any claim and/or demand by any
contractor and/or supplier in connection therewith and further, PSE&G shall be
the sole judge of the acceptability of any compromise in settlement or
resolution of any such claim or demand. Additionally, PSE&G shall be the sole
judge as to what is necessary to maintain the safety, integrity or reliability
of the PUBLIC SERVICE SYSTEM relative to the removal or completion of the
construction work in progress. PSE&G shall exercise reasonable care in resolving
contractor/supplier
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claim(s)/demand(s) and in effecting any required removal or completion of the
construction work in progress so as to mitigate the dollar amount paid in
effecting the resolution of such claim(s)/demand(s) or in the dollar amount
expended in completing such removal or completion tasks; provided, however, that
PSE&G shall have no liability to SELLER for or on account of the dollar
amount(s) paid in effecting the resolution of any such claim(s)/demand(s) or in
effecting such removal/completion tasks, except where the resolution of any such
claim(s)/demand(s) or the completion of such tasks were effected by PSE&G in a
manner which was in willful disregard of its obligation to mitigate, as defined
in this paragraph.
ARTICLE VIII
OPERATIONS COORDINATION
Effective with the DATE OF INITIAL OPERATION and during any term of this
AGREEMENT, SELLER shall coordinate the operation of the PROJECT with the
operation of the PUBLIC SERVICE SYSTEM. To discharge its best efforts obligation
to coordinate operation of the PROJECT with the PUBLIC SERVICE SYSTEM, SELLER
shall: (i) maintain a power factor at or as near unity as practicable at the
point of connection of the PROJECT with and to the PUBLIC SERVICE SYSTEM, unless
requested otherwise by PSE&G; (ii) control its voltage and speed to values
acceptable to PSE&G consistent with sound utility practice; (iii) coordinate its
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relaying and fusing so as to conform with PSE&G's system protection practices,
in effect from time to time; (iv) maintain the PROJECT in a safe and reliable
operating condition; (v) submit to PSE&G the monthly schedules and estimates
required by this ARTICLE VIII; and (vi) perform such other actions, as may be
reasonably requested by PSE&G, to enable PSE&G to (a) operate the PUBLIC
SERVICE SYSTEM in a safe and reliable manner; and (b) operate the PUBLIC
SERVICE SYSTEM so as to discharge PSE&G's statutory obligations to provide safe,
adequate and proper service to its retail and sale-for-resale customers. Each of
SELLER and PSE&G shall use its best efforts to operate the COGENERATION FACILITY
and the PUBLIC SERVICE SYSTEM with due regard for the PUBLIC SERVICE SYSTEM and
the COGENERATION FACILITY.
As of the DATE OF COMMERCIAL OPERATION, SELLER shall provide to PSE&G by
the first (1st) day of each MONTH the following: (i) an hourly schedule of the
estimated NET ELECTRICAL CAPACITY SELLER plans to supply to the RECEIPT POINT
for receipt by PSE&G in the succeeding MONTH; (ii) an estimate of the generation
of NET ELECTRICAL ENERGY which SELLER plans to supply to the RECEIPT POINT for
receipt by PSE&G, in the succeeding MONTH; (iii) an estimate of the generation
of NET ELECTRICAL ENERGY which SELLER plans to supply to the RECEIPT POINT for
receipt by PSE&G for the succeeding twelve (12) MONTHS; and (iv) the names and
telephone numbers of responsible management level employees
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for contact by PSE&G personnel at any time during the succeeding MONTH relative
to any matter arising out of, relating to, or resulting from PSE&G's obligation
to provide SERVICE to SELLER under this AGREEMENT. In addition, SELLER shall
furnish to PSE&G annually a schedule of planned maintenance and/or repair
activities for the succeeding thirty-six (36) months. SELLER agrees to use its
best efforts to schedule planned maintenance only during the months of October,
November, April and May.
SELLER agrees to notify PSE&G of its planned maintenance at least one (1)
month prior to a scheduled outage. PSE&G will review the effect of the proposed
schedule on the overall maintenance schedules of PJM and PSE&G and advise SELLER
of problems that may be created by SELLER's scheduled outage within ten (10)
days of receipt of SELLER's notice and suggest reasonable alternative schedules.
Except in an emergency, SELLER shall give prior notice of not less than
eight (8) hours for any anticipated outage other than planned maintenance.
SELLER agrees to attempt to give notice to PSE&G as soon as practical in the
event of emergencies or other unanticipated outages.
SELLER shall maintain and classify (in a timely manner) outage statistics
in accordance with the then current PJM Interconnection outage classification
procedures and shall supply such statistics to PSE&G as requested.
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Pursuant to and consistent with SELLER's obligation to coordinate operation
of the PROJECT with the operation of the PUBLIC SERVICE SYSTEM, SELLER shall
install and maintain, at its expense, during any term of this AGREEMENT, a
telephone line reserved for communication by and between PSE&G operating
personnel and SELLER operating personnel.
PSE&G shall use best efforts to coordinate PUBLIC SERVICE SYSTEM
maintenance, repair, rearrangement, relocation, removal or reinforcement
activities with SELLER's planned maintenance of the COGENERATION FACILITY so as
to minimize any interruption, curtailment or reduction of acceptance of the
COGENERATION FACILITY's NET POWER OUTPUT; provided, however, the scheduling,
implementation and conduct of such activities by PSE&G shall remain within the
sole discretion of PSE&G. PSE&G will provide a schedule of planned maintenance
to SELLER as soon as is practicable after such a schedule is available for
distribution.
ARTICLE IX
NET ELECTRICAL POWER OUTPUT SPECIFICATIONS
The NET ELECTRICAL POWER OUTPUT supplied by SELLER to the RECEIPT POINT for
receipt by PSE&G during the term of this AGREEMENT shall be at a nominal voltage
of 69,000 volts, 60 hertz, balanced three-phase alternating current produced by
synchronous generator(s) equipped with automatic voltage regulation and
automatic speed control. The NET
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ELECTRICAL POWER OUTPUT shall be free from harmonics which would interfere with
PSE&G's metering accuracy, the PUBLIC SERVICE SYSTEM, or the quality of PSE&G's
service to its retail and sale-for-resale customer loads. In no event shall the
operation of the COGENERATION FACILITY result in total harmonic distortion as
defined by NEMA MG 1-22, as revised, greater than-five percent (5%) of the
fundamental component as measured at the POINT OF INTERCONNECTION.
ARTICLE X
METERING/RECORDS
PSE&G shall install, own, operate and maintain an electricity recording
meter at the SUBSTATION FACILITY which, in the judgment of PSE&G, is required or
necessary to enable PSE&G to make an accurate measurement of the quantity of NET
ELECTRICAL POWER OUTPUT received at the RECEIPT POINT from the COGENERATION
FACILITY. The electricity recording meter shall be of a type suitable for
interconnection billing purposes. The electricity recording meter, as installed,
shall have full load and light load "as left" accuracies that do not deviate
more than (plus or minus) 0.3% from 100%. The lag load "as left" accuracy shall
be within 0.5% of the full load accuracy. PSE&G shall operate and maintain such
electricity recording meter so as to assure, to the maximum extent practicable,
that such meter provides an accurate record of the quantities supplied to and
received by PSE&G at the RECEIPT POINT from the COGENERATION FACILITY.
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PSE&G shall designate, select and specify all associated electricity
recording equipment (Associated Equipment) required by PSE&G to make measurement
of the NET ELECTRICAL POWER OUTPUT supplied by SELLER to the RECEIPT POINT,
including but not limited to current transformers, potential transformers,
conduits, cables and accessories. PSE&G shall purchase and arrange for the
delivery of such Associated Equipment to SELLER at the PROJECT for installation
by SELLER at SELLER's expense. PSE&G shall own, operate and maintain such
Associated Equipment.
The costs of the electricity recording meter and Associated Equipment
described in the preceding two paragraphs shall be paid by SELLER as a cost
associated with the design, construction and installation of the INTERCONNECTION
as provided in and in accordance with ARTICLE VII.
PSE&G shall have the right to secure and safeguard the electricity
recording meter and Associated Equipment installed and maintained at the
SUBSTATION FACILITY. Neither SELLER nor any person, other than PSE&G, shall be
permitted to operate, maintain, repair, alter, remove, replace, rearrange,
reconstruct, relocate, tamper or interfere with in any way said meter or
Associated Equipment.
Unless otherwise agreed to by PSE&G and/or except as otherwise provided in
this AGREEMENT, PSE&G's electricity recording meter shall be utilized for the
determination of
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the monthly charges reflected in any billing statement submitted to SELLER for
payment under this AGREEMENT.
SELLER may install, own, operate and maintain, its own expense, an at
electricity recording meter and Associated Equipment at the SUBSTATION FACILITY
or measuring and recording the quantity of NET ELECTRICAL POWER OUTPUT received
by PSE&G at the RECEIPT POINT from the COGENERATION FACILITY; provided that the
installation, operation and/or maintenance of such equipment does not utilize or
connect to PSE&G's electricity recording meter or Associated Equipment and does
not interfere, in any way, with the operation of such meter or equipment.
Unless otherwise agreed to by PSE&G and/or except as otherwise provided in
this AGREEMENT, the electricity recording meter installed and maintained by
SELLER at the SUBSTATION FACILITY shall not be utilized for any determination of
the charges to be included in any statement submitted to SELLER for payment by
PSE&G under this AGREEMENT.
The accuracy of PSE&G's electricity recording meter shall be verified by
PSE&G by testing once each year. Such accuracy test shall be conducted in
accordance with the standards set forth in the American National Standard Code
for Electricity Metering. Reasonable advance notice of such accuracy test(s)
shall be given by PSE&G to SELLER. SELLER representatives may attend any such
accuracy test. In the event SELLER's representatives elect to be present at any
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accuracy test, the test and any necessary adjustment to the electricity
recording meter shall be made in the presence of and observed by SELLER
representatives. SELLER may, for good cause, request PSE&G to conduct an
accuracy test of PSE&G's electricity recording meter. In the event good cause is
shown, PSE&G shall conduct an accuracy test at SELLER's request. Any cost or
expense associated with any accuracy test performed by PSE&G on PSE&G's
electricity recording meter shall be billed to and paid by SELLER; provided,
however, in the event an accuracy test is conducted in connection with a billing
dispute and PSE&G's electricity recording meter is determined as a result of
such test to be registering inaccurately in excess of one percent (1%), PSE&G
shall pay the costs of such accuracy test.
The accuracy of any electricity recording meter maintained by SELLER at the
SUBSTATION FACILITY shall be verified by test at least once each year. Such
accuracy test shall be conducted in accordance with the standards set forth in
the American National Standard Code for Electricity Metering. SELLER shall
establish, at the time of installation, and maintain the accuracy of such
electricity recording meter in accordance with the standard of accuracy set
forth in the American National Standard Code for Electricity Metering.
Reasonable advance notice of such accuracy test(s) shall be given by SELLER to
PSE&G. PSE&G may attend any such accuracy test(s). PSE&G may, for good
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cause, request SELLER to conduct or have conducted an accuracy test(s) of
SELLER's electricity recording meter. In the event good cause is shown, SELLER
shall conduct or have conducted an accuracy test of SELLER's electricity
recording meter. Any cost or expense associated with any accuracy test(s) shall
be paid by SELLER, except where such test(s) was conducted at PSE&G's request.
In the event PSE&G's electricity recording meter is out of service or is
registering inaccurately, the amount of inaccuracy shall be determined and such
meter shall be repaired, replaced and/or adjusted so as to accurately measure
the NET ELECTRICAL POWER OUTPUT supplied by SELLER to the RECEIPT POINT. Any
meter reading(s) and statement(s) for the period of the inaccuracy shall be
adjusted so as to reflect any correction of such inaccuracy as far as such
inaccuracy can be reasonably ascertained; provided, however, no adjustment shall
be made in any meter reading(s) nor shall any billing statement be adjusted for
or on account of a registration inaccuracy of one percent (1%) or less.
In the event a registration inaccuracy of greater than one percent (1%) is
found on PSE&G's electricity recording meter, a billing adjustment shall be
made. The billing adjustment shall be made for the period of inaccuracy, if
ascertainable, or in the event the period of the inaccuracy cannot be reasonably
ascertained, the period of inaccuracy shall be deemed to have encompassed one-
half (1/2) of the time period since the last accuracy test of the
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meter (hereinafter referred to as the Surrogate Period). The quantities
delivered for the period of inaccuracy, if ascertainable, or, if not
ascertainable, the Surrogate Period, shall be determined and adjustments made
for billing purposes by determining or estimating the quantity received by PSE&G
during the relevant period from the best available source/data, which
source/data may include but not be limited to: (i) registration data obtained
from the electricity recording meter maintained by SELLER at the SUBSTATION
FACILITY; and/or (ii) receipts by PSE&G during an equivalent or similar period
when such meter was registering accurately; and/or (iii) correction of the
error, if the percentage of error is ascertainable, by calibration, test or
mathematical calculation; provided, however, in the event SELLER metering
equipment meets applicable PSE&G standards and PSE&G determines that such
equipment has been installed, operated and maintained in accordance with
applicable PSE&G standards/practices/procedures, the period of inaccuracy and
the quantities delivered for such period shall be determined and the
adjustment(s) made for payment purposes solely by reference to SELLER
electricity recording equipment.
PSE&G and SELLER shall retain the records each prepares and maintains in
the ordinary course of business relative to the amount of NET ELECTRICAL POWER
OUTPUT produced by the COGENERATION FACILITY and supplied to and received by
PSE&G at the RECEIPT POINT and any records each prepares and maintains relative
to any maintenance, repair
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or testing of any electricity measuring meter maintained at the SUBSTATION
FACILITY. The records possessed by one party shall be made available for
inspection by the other party upon reasonable notice of request therefor. All
such records shall be maintained for a period of six (6) years.
SELLER shall install equipment at the PROJECT to enable a measurement of
the following electrical quantities: (i) gross real electrical power output of
each COGENERATION FACILITY generator; (ii) gross reactive electrical power
output of each COGENERATION FACILITY generator; (iii) terminal voltage of each
COGENERATION FACILITY generator; (iv) voltage at the POINT OF INTERCONNECTION;
(v) real power flow on the INTERCONNECTION at the POINT OF INTERCONNECTION; (vi)
reactive power flow on the INTERCONNECTION at the POINT OF INTERCONNECTION; and
(vii) kilowatthours of NET ELECTRICAL ENERGY received by PSE&G at the POINT OF
INTERCONNECTION. PSE&G shall designate, select and specify the equipment to be
installed at the PROJECT to enable a measurement of the aforementioned
electrical quantities. PSE&G shall purchase and arrange for the delivery of such
equipment to SELLER at the PROJECT for installation by SELLER at SELLER's
expense. The costs of such equipment shall be paid by SELLER as a cost
associated with the design, construction and installation of the INTERCONNECTION
as provided in and in accordance with ARTICLE VII of this AGREEMENT. PSE&G shall
operate and maintain the equipment installed to measure the electrical
quantities specified in
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this paragraph. SELLER shall pay PSE&G for any costs associated with the
operation and maintenance and/or repair of such equipment. SELLER shall pay any
billing for operation and maintenance of such equipment within thirty (30) days
of the date of the billing.
SELLER shall be permitted to synchronize any electric generation unit with
the PUBLIC SERVICE SYSTEM if, but only if, the equipment PSE&G has directed
SELLER to install, pursuant to the preceding paragraph, has been installed, has
been inspected by PSE&G and pursuant to such inspection, such installation is
determined by PSE&G to meet applicable standards for operation. PSE&G shall
conduct and complete the inspection of such installation within fifteen (15)
working days of receipt of notice from SELLER that the installation of the
equipment has been completed and is available for inspection. In the event PSE&G
determines, as a result of its inspection of the installation, that such
installation does not meet applicable standards for operation, PSE&G shall,
within five (5) working days, furnish written notice to SELLER of such fact
setting forth the basis for the determination and any corrective actions SELLER
will be required to take to make the installation acceptable to PSE&G.
Additionally, SELLER shall: (i) lease, at its expense, a telephone circuit
or otherwise establish a telecommunications link(s) to permit telemetering by
means of both digital data links and analog signals, of the
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measurements of the electric quantities as specified in this AGREEMENT at
PSE&G's Electric System Operations Center in Newark, New Jersey; (ii) pay the
costs associated with the installation by PSE&G of equipment required (a) to
provide an indication at PSE&G's Electric System Operations Center of the status
of circuit breakers at the COGENERATION FACILITY and SUBSTATION FACILITY; (b) to
provide an alarm indication of hard lockout relays; and (c) to enable PSE&G to
open circuit breaker(s) or other switching equipment at the SUBSTATION FACILITY
through supervisory control from PSE&G's Electric System Operations Center to
permit the rapid separation of the PROJECT from the PUBLIC SERVICE SYSTEM; and
(iii) pay the costs associated with the purchase and installation of equipment
for the purpose of integrating any telemetered information into PSE&G's Electric
System Operations Center, including the cost of equipment necessary to receive,
display, record and process such telemetered information.
The costs described in subparagraphs (ii) and (iii) in the preceding
paragraph shall be paid by SELLER as a cost associated with the design,
construction and installation of the INTERCONNECTION as provided in and in
accordance with ARTICLE VII of this AGREEMENT. Such equipment shall be owned,
operated and maintained by PSE&G.
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ARTICLE XI
USE OF THE PUBLIC SERVICE SYSTEM
The nature and extent of and the terms and conditions relating to SELLER's
use of the PUBLIC SERVICE SYSTEM are set forth in their entirety in this
AGREEMENT. Except as otherwise provided in and pursuant to the terms and
conditions of any applicable PSE&G Tariff on file with the NJBPU or the FERC,
SELLER shall not be permitted to use the PUBLIC SERVICE SYSTEM nor shall PSE&G
be obligated to provide any service to SELLER, other than as provided in this
AGREEMENT. Any rights to or interest in the PUBLIC SERVICE SYSTEM which SELLER
has or may claim as a result of this AGREEMENT shall cease or expire upon
termination of this AGREEMENT.
ARTICLE XII
EASEMENTS
Except as otherwise specifically provided in this ARTICLE XII, PSE&G shall
acquire any permit(s), easement(s), license(s), rental(s) or right(s)-of-way
necessary to interconnect the PROJECT with the PUBLIC SERVICE SYSTEM. Any costs
associated with the acquisition of any such easement(s), license(s), rental(s)
or right(s)-of-way of a non-recurring nature shall be billed to and paid by
SELLER as a cost associated with the design, construction and installation of
the INTERCONNECTION in accordance with ARTICLE VII of this AGREEMENT. Any costs
associated with
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the acquisition of any easement(s), license(s), rental(s) or right(s)-of-way of
a recurring nature associated with the acceptance of the COGENERATION FACILITY's
NET ELECTRICAL POWER OUTPUT under this AGREEMENT shall be billed to SELLER and
SELLER shall make payment for any billing of any such recurring costs within
thirty (30) days of the receipt thereof.
In order to interconnect the PROJECT with the PUBLIC SERVICE SYSTEM, PSE&G
may be required to maintain certain facilities and equipment on property owned
by SELLER. In such event and to enable PSE&G to operate, maintain, repair,
reinforce, rearrange, replace, relocate or remove the facilities and equipment
necessary to effect, operate and maintain an interconnection between the PROJECT
and the PUBLIC SERVICE SYSTEM, SELLER shall obtain from CAMPBELL for conveyance
to PSE&G an easement to the property owned by the CAMPBELL for a term, i.e., a
duration and in a form and containing terms and conditions acceptable to and
approved by PSE&G. The easement, inter alia, shall permit PSE&G, its agents,
servants and employees, at any time upon reasonable notice, to have access to
such property so as to permit PSE&G, its agents, servants and/or employees to
perform any tasks associated with any incident to the operation, maintenance,
repair, reinforcement, rearrangement, relocation and/or removal of the
facilities and equipment necessary to effect, operate and maintain the
interconnection of the PROJECT with the PUBLIC SERVICE SYSTEM.
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ARTICLE XIII
PERMITS/APPROVALS
PSE&G shall proceed with and use best efforts to obtain any REQUIRED
PERMIT. In the event a third-party files any pleading with any regulatory or
other governmental body or institutes a suit at law or in equity challenging the
right of PSE&G to receive any REQUIRED PERMIT or in the event any such body
challenges the propriety of the issuance to PSE&G of any REQUIRED PERMIT, PSE&G
shall not be obligated to commence or, in the event construction has commenced,
to complete construction of the INTERCONNECTION until PSE&G obtains a final and
non-appealable order/judgment relative to the issuance of such REQUIRED PERMIT
or, in the event of a challenge to the issuance thereof, a final and non-
appealable order/judgment upholding the issuance of any REQUIRED PERMIT. SELLER
agrees to cooperate fully with PSE&G to the extent PSE&G deems such cooperation
necessary to secure any REQUIRED PERMIT and/or, in the event same is secured,
to defend the issuance of any REQUIRED PERMIT.
However, in the event the issuance to PSE&G of any REQUIRED PERMIT is
challenged by a third-party and a final and non-appealable order/judgment has
not been issued in connection with such challenge and, absent an order
restraining such further construction, PSE&G shall be obligated to commence or
complete construction of the INTERCONNECTION, despite the absence of a final and
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non-appealable order/judgment relative to such challenge, if, but only if:
(i) SELLER submits a request in writing to PSE&G requesting PSE&G to
commence or complete construction of the INTERCONNECTION; and
(ii) SELLER agrees in such writing to indemnify and hold harmless PSE&G and
each and every of its officers, agents, servants and employees, its
successors and assigns, from and against any and all claims, demands,
suits, actions and liabilities, losses, damages, and/or judgments, which
may arise from the particular action being challenged as well as against
any fees, costs, charges or expenses which PSE&G, its officers, agents,
servants and employees, its successors and assigns incur in the defense
of any such claims, suits, actions or similar such demands made or filed
by any third party which in any manner arise out of, relate to, or result
from PSE&G's actions which are being challenged.
PSE&G shall not be obligated to commence or complete construction of the
INTERCONNECTION in the event issuance of any REQUIRED PERMIT is denied to PSE&G.
Further, PSE&G shall not be obligated to commence or complete construction in
the event that any decision of any governmental body to issue any REQUIRED
PERMIT is overturned by any court or regulatory body or any court or regulatory
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body has issued a stay, pending a final adjudication of a challenge, prohibiting
construction activity under any REQUIRED PERMIT issued to PSE&G.
Any cost(s) and/or expense(s) associated with obtaining such REQUIRED
PERMIT and/or any cost(s) and/or expense(s) associated with defending the
issuance of any such REQUIRED PERMIT shall be paid by SELLER as a cost/expense
associated with the design, construction and installation of the INTERCONNECTION
as provided in and in accordance with ARTICLE VII of this AGREEMENT.
ARTICLE XIV
DEDICATION OF FACILITIES
No undertaking by PSE&G under any provision of this AGREEMENT shall
constitute the dedication to SELLER or to the public of the PUBLIC SERVICE
SYSTEM.
ARTICLE XV
REARRANGEMENT
PSE&G represents to SELLER that it has no present plans or intention to
convert its PUBLIC SERVICE SYSTEM in the area of the PROJECT to a higher
voltage. However, in the event PSE&G should decide, for cause, at any time or
from time to time to convert the PUBLIC SERVICE SYSTEM at the point of
connection of the PROJECT to the PUBLIC SERVICE SYSTEM, or in the vicinity
thereof, to a different voltage PSE&G shall advise SELLER in writing as soon as
PSE&G shall
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make such decision, but at least three (3) years in advance of making any such
conversion. SELLER shall have no obligation to pay for any of the costs
associated with the conversion of the PUBLIC SERVICE SYSTEM (including the
INTERCONNECTION) to a higher voltage. However, SELLER shall be obligated to
install and shall be responsible to pay for the facilities and equipment
required to be installed at the PROJECT to continue the interconnected operation
of the PUBLIC SERVICE SYSTEM and the COGENERATION FACILITY. Additionally, SELLER
shall be responsible to pay for any modification to or replacement of any PSE&G
electricity recording meter and associated electricity recording equipment which
PSE&G requires to be modified or replaced at the SUBSTATION FACILITY as a
consequence of any such conversion. Unless other billing and payment
arrangements are mutually agreed upon by PSE&G and SELLER, SELLER shall be
billed and shall pay any billing(s) for such costs as such costs are incurred by
PSE&G, in accordance with ARTICLE VII of this AGREEMENT. Cause, as specified in
this ARTICLE, shall include but not be limited to obsolescence, changing
patterns of demand and usage of electric power and energy by PSE&G's retail and
sale-for-resale customers or physical destruction of plant, whether the result
of deterioration or casualty.
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ARTICLE XVI
COGENERATION FACILITY/SUBSTATION FACILITY
In view of PSE&G's statutory obligations to its retail and sale-for-resale
customers, PSE&G has adopted general requirements relative to the construction
of generation and substation facilities by others. These requirements have been
adopted by PSE&G to ensure that any facilities a party plans to construct for
connection to the PUBLIC SERVICE SYSTEM are designed, constructed and installed
so as to be compatible with the PUBLIC SERVICE SYSTEM and to ensure that
operation of these facilities does not adversely affect the integrity,
reliability and/or safe operation of any interconnection facility and/or the
PUBLIC SERVICE SYSTEM. In connection with the construction of such facilities,
PSE&G requires that the plans and specifications for such generation and
substation facilities be submitted to PSE&G for review prior to the design,
construction and installation of these facilities solely to enable PSE&G to
determine, and thus ensure, that the contemplated design, construction and
installation for such facilities comport with the aforementioned requirements.
SELLER shall, at its own expense, design, construct, install, own/lease,
operate and maintain the COGENERATION FACILITY and SUBSTATION FACILITY. In order
to fulfill its obligation to supply, SELLER shall use its best efforts to secure
financing on terms acceptable to SELLER in its sole discretion and, upon
securing financing, use best
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efforts to: (i) initiate the tasks required to obtain any REQUIRED PERMIT,
easement(s), license(s), rental(s) or right(s)-of-way for the construction and
installation of the PROJECT; and (ii) complete the design, construction and
installation of the PROJECT.
Prior to or in connection with execution of this AGREEMENT, a copy of
"Interconnection Protection and Safety Requirements and Standards for Customer-
Owned Generating Facilities" (Exhibit 2) has been furnished to SELLER. SELLER
shall design, construct and install the COGENERATION FACILITY consistent with
the requirements set forth in Exhibit 2. Deviations from the requirements set
forth in Exhibit 2, relative to the design, construction and installation of the
COGENERATION FACILITY, may be permitted; provided, however, any deviation
therefrom must be submitted to and accepted by PSE&G. Notwithstanding any
implication to the contrary contained in this ARTICLE, the right of acceptance
by PSE&G with respect to the COGENERATION FACILITY, as specified by this ARTICLE
shall be limited to a determination as to whether the design of the COGENERATION
FACILITY is consistent with the requirements contained in Exhibit 2.
As soon as practicable after execution of this AGREEMENT, SELLER shall
furnish to PSE&G the following:
A. Plans and specifications for the COGENERATION FACILITY and SUBSTATION
FACILITY.
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B. Single line diagram and details of the proposed protection schemes.
C. Instruction manuals for all protective components.
D. Component specifications and internal wiring diagrams of protection
components if not provided in instruction manuals.
E. All protective equipment ratings if not provided in instruction manuals.
F. Generator data required to analyze fault contributions and load flows,
including, but not limited to, equivalent impedances and time constants.
Subsequent to submission to and review by PSE&G of Items A through F
enumerated above, PSE&G shall prepare and submit to SELLER "Recommendations and
Specifications for a 69,000-Volt Customer Substation" (hereinafter referred to
as Recommendations). SELLER shall design the facilities and equipment for the
69kV SUBSTATION FACILITY consistent with the requirements set forth in
Recommendations. After preparation of the plans and specifications for the
facilities and equipment for the 69kV SUBSTATION FACILITY, SELLER shall submit
same to PSE&G for its review and acceptance. The plans and specifications for
the SUBSTATION FACILITY may deviate from the requirements set forth in
Recommendations; provided, however, any deviation therefrom must be submitted
and be acceptable to PSE&G. The final plans and specifications relating to the
design of the
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facilities and equipment for the 69kV SUBSTATION FACILITY must be submitted to
and accepted by PSE&G in accordance with the provisions of this ARTICLE XVI. The
SUBSTATION FACILITY, as completed, shall be consistent with the final plans and
specifications submitted to and accepted by PSE&G.
PSE&G shall use best efforts to complete any review of any submissions made
to PSE&G by SELLER pursuant to and in accordance with the provisions of this
ARTICLE XVI within thirty (30) days of receipt of any such submission.
Prior to the DATE Of INITIAL OPERATION, PSE&G will perform the functional
tests on the relays required by PSE&G located in the SUBSTATION FACILITY. PSE&G
will specify and effect the settings of such relays. During the term of this
AGREEMENT, PSE&G shall have access to and the right to inspect and perform
scheduled maintenance on such relays as well as the right to readjust the
settings of such relays as required.
Upon completion of the INTERCONNECTION, the PUBLIC SERVICE SYSTEM shall be
available for and capable of accepting NET ELECTRICAL POWER OUTPUT of SELLER.
Thereafter, SELLER shall notify PSE&G when SELLER decides to place any electric
generation unit(s) into INITIAL OPERATION. At that time, SELLER shall permit
PSE&G to examine the SUBSTATION FACILITY and such electric generation unit(s) to
enable PSE&G to determine whether the SUBSTATION FACILITY and the electric
generation unit(s) satisfy the final plans and specifications submitted to and
accepted by
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PSE&G and the requirements contained in Exhibit 2, respectively. PSE&G shall be
obligated to synchronize any electric generation unit with the PUBLIC SERVICE
SYSTEM and receive electric power and energy from the COGENERATION FACILITY at
the RECEIPT POINT from any such electric generation unit at the PROJECT if but
only if: (i) PSE&G has determined, after inspection, that the SUBSTATION
FACILITY has been completed and the construction and installation thereof has
been effected consistent with and in accordance with the final plans and
specifications therefor which have been submitted to and accepted by PSE&G;
(ii) SELLER has made the installation at the SUBSTATION FACILITY required by
ARTICLE X and the installation meets the standards set forth in that ARTICLE;
(iii) PSE&G has examined and pursuant to such examination determined that any
electric generation unit(s) being placed into INITIAL OPERATION satisfies the
requirements contained in Exhibit 2; and, (iv) SELLER has the installation
inspected and approved by an electrical inspection authority approved by the New
Jersey Department of Community of Affairs and receives and furnishes
satisfactory evidence to PSE&G of issuance of a Certificate of Approval relative
to the inspection. Thereafter, PSE&G shall permit synchronization of any such
electric generation unit(s) with the PUBLIC SERVICE SYSTEM and shall be
obligated, at SELLER's request, to commence receipt of electric power and energy
supplied to the RECEIPT POINT from any such electric generation unit(s).
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As SELLER decides to place other electric generation unit(s) into INITIAL
OPERATION, SELLER shall notify PSE&G and permit PSE&G to conduct an examination
thereof to determine whether same satisfies the requirements set forth in
Exhibit 2. SELLER shall not be permitted to synchronize such electric generation
unit(s) with the PUBLIC SERVICE SYSTEM nor shall PSE&G be obligated to receive
electrical power and energy supplied to the RECEIPT POINT from such electric
generation unit(s) unless and until: (i) PSE&G has examined, and pursuant to
such examination, determines that such successively completed electric
generation unit(s) satisfies the requirements set forth in Exhibit 2; and (ii)
SELLER has the installation inspected and approved by an electrical inspection
authority approved by the New Jersey Department of Community Affairs and
receives and furnishes satisfactory evidence to PSE&G of issuance of a
Certificate of Approval. Thereafter, PSE&G shall permit SELLER to synchronize
such electric generation unit(s) with the PUBLIC SERVICE SYSTEM and PSE&G shall
be obligated to receive electrical power and energy supplied to the RECEIPT
POINT from such electric generation unit(s).
SELLER shall not synchronize any electric generation unit(s) with the
PUBLIC SERVICE SYSTEM at any time without notification to and without obtaining
the consent of PSE&G, which consent shall not be withheld except pursuant to and
in accordance with the provisions of ARTICLE X and this ARTICLE XVI.
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Upon appropriate notification by SELLER, PSE&G shall use best efforts to
conduct and complete any examination of the COGENERATION FACILITY, SUBSTATION
FACILITY required under the provisions of this ARTICLE within fifteen (15)
business days. PSE&G shall not unreasonably delay any such examination nor
unreasonably withhold any acceptance required to trigger the DATE OF INITIAL
OPERATION. PSE&G's acceptance of the COGENERATION FACILITY and SUBSTATION
FACILITY consistent to and in accordance with the provisions of this ARTICLE
shall constitute the agreement required by PSE&G to trigger the DATE OF INITIAL
OPERATION.
After the DATE OF INITIAL OPERATION, SELLER shall not rearrange,
reconfigure, modify, alter or change in a material way: (i) the SUBSTATION
FACILITY without notice to and the acceptance by PSE&G of such rearrangement,
reconfiguration, modification, alteration or change which acceptance will not be
unreasonably delayed or withheld; or, (ii) any electric generation unit(s)
without notice to and acceptance by PSE&G of such rearrangement,
reconfiguration, modification, alteration or change, which acceptance will not
be unreasonably delayed or withheld and shall be governed by the requirements
specified in Exhibit 2.
Any review made by PSE&G of the Plans and Specifications of the
COGENERATION FACILITY or SUBSTATION FACILITY or any examination made by PSE&G of
the actual design, construction and/or installation of the COGENERATION
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FACILITY or SUBSTATION FACILITY and/or any determination made by PSE&G in
connection with any such review of examination shall be solely for the purpose
of permitting PSE&G, consistent with its statutory obligations to its retail and
sale-for-resale customers, to: (i) determine whether the design, construction
and installation of such facilities are compatible with the PUBLIC SERVICE
SYSTEM; and (ii) ensure that operation of the COGENERATION FACILITY and
SUBSTATION FACILITY will not adversely affect the integrity, reliability or safe
operation of the PUBLIC SERVICE SYSTEM.
PSE&G's review or examination, and any determination made in connection
therewith, is not intended to be, nor will same be made by PSE&G for the purpose
of, nor should same be interpreted, construed and/or relied upon by SELLER, or
any other person or entity, as an endorsement, approval, confirmation and/or
warranty of or by PSE&G relative to any aspect of the design, construction or
installation of SELLER's facilities, reliability, economic performance and/or
their safety, and/or technical feasibility, operational capability and/or the
suitability of same for their intended purpose(s). SELLER shall not represent to
any third-party that PSE&G's review was undertaken for any reason other than the
reasons expressly stated in this ARTICLE.
SELLER shall permit PSE&G, its officers, agents, servants and employees,
its successors and assigns, when and
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as requested, access to, egress and ingress, from and over the PROJECT, at any
time and upon reasonable notice, as same may be necessary or required by PSE&G,
to permit PSE&G, its officers, agents, servants and employees, its successors
and assigns, to take any action necessary to discharge its obligations or to
exercise its rights under this AGREEMENT, including but not limited to access
to: (i) permit PSE&G to examine, inspect, test, operate, maintain, repair,
remove, rearrange and/or replace its electricity recording equipment and
associated electricity measuring equipment; (ii) permit PSE&G to perform
switching operations on switchgear located in the SUBSTATION FACILITY; and (iii)
permit PSE&G to examine, inspect, test and set protective relays required by
PSE&G. SELLER shall not deny, refuse or delay PSE&G's access to the PROJECT,
provided that while at the PROJECT such PSE&G representatives shall observe such
reasonable safety precautions as may be required by SELLER.
ARTICLE XVII
LIABILITY
Neither Party nor its officers, directors, partners, agents, servants,
employees, affiliates, parent, subsidiaries or respective successors or assigns
shall be liable to the other Party (except for Replacement Energy and Capacity
Costs as provided for in ARTICLE IV of this AGREEMENT or as otherwise provided
in this AGREEMENT) for claims for incidental, special, direct, indirect or
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consequential damages (Damages) whether such Damages claim is based on a cause
of action based in warranty, negligence, strict liability, contract, operation
of law or otherwise except where such claim for Damages arises out of, relates
to or results from the gross negligence of such Party or the willful disregard
by a Party of its obligations under this AGREEMENT; provided, however, each
Party shall have the right to seek to recover from the other Party direct
damages upon the occurrence of a breach of this AGREEMENT as defined in and
which has been established pursuant to and in accordance with ARTICLE XXIV of
this AGREEMENT.
ARTICLE XVIII
FORCE MAJEURE
An event of "Force Majeure" as used herein means an event beyond the
reasonable control of and which occurs without the fault or negligence of the
Party claiming Force Majeure which events may include but are not limited to:
acts of God; strikes, lockouts or other similar such industrial disturbances;
acts of the public enemy, wars, civil disturbances, blockades, military actions,
insurrections or riots; landslides, floods, washouts, lightning, earthquakes,
tornadoes, hurricanes, blizzards or other storms or storm warnings; explosions,
fires, sabotage or vandalism; mandates, directives, orders or restraints of any
governmental, regulatory or judicial body or agency (other than mandates,
directives, orders or restraints
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either sought, approved or not contested by the party asserting Force Majeure or
issued in any bankruptcy or insolvency proceeding for the relief the party
asserting Force Majeure); breakage, defects, malfunctioning, or accident to
machinery, equipment, materials or lines of pipe or wires; freezing of
machinery, equipment, materials or lines of pipe or wires; inability or delay in
the obtaining of materials or equipment; inability to obtain or utilize any
permit, approval, easement, license or right-of-way. The settlement of strikes,
lockouts or other similar such industrial disturbances shall be entirely within
the discretion of the Party directly affected. The requirement herein that any
event of Force Majeure shall be remedied with all reasonable dispatch shall not
require the settlement of strikes, lockouts or other similar such industrial
disturbances when such course is, in the opinion of the Party directly affected,
inadvisable.
Notwithstanding this ARTICLE XVIII, for purposes of determining SELLER's
payment of Replacement Energy and Replacement Capacity Costs as provided in
ARTICLE IV, Section G, an event of Force Majeure shall not include equipment
failures due to (a) wear and tear and (b) defects in manufacture, design or
construction.
In the event PSE&G or SELLER is rendered unable, wholly or in part, by an
event of Force Majeure, to perform any obligation it has under this AGREEMENT,
it is agreed that, on PSE&G or SELLER giving notice and full particulars
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of such event of Force Majeure to the other Party, as soon thereafter as
practicable, the obligations of PSE&G or SELLER, so far as they are affected by
such event of Force Majeure, shall be suspended during the continuance of any
inability or incapacity so caused, but for no longer period; provided however,
neither Party shall be relieved from any obligation to make payment to the other
for expenses already incurred. PSE&G or SELLER shall use best efforts to remedy
the cause of such inability or incapacity with all reasonable dispatch.
Neither Party shall be liable to the other for any claim(s), loss(es),
damage(s), liability(ies) or expense(s) sustained or incurred by PSE&G or
SELLER, arising out of, relating to, or resulting from PSE&G's or SELLER's
inability or incapacity to perform its obligations under this AGREEMENT due to
any event of Force Majeure, as herein defined.
ARTICLE XIX
PROTECTIVE DEVICES
SELLER has been advised and acknowledges that actions, conditions, and/or
events on the PUBLIC SERVICE SYSTEM may adversely impair PROJECT operations
and/or PROJECT and/or CAMPBELL equipment and facilities. As such, SELLER agrees
to install, operate and maintain protective devices at the PROJECT and institute
and maintain procedures to minimize damage to PROJECT and/or CAMPBELL equipment
and
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facilities and to minimize any interruption in the supply of steam to CAMPBELL,
arising as a result of the occurrence of any such PUBLIC SERVICE SYSTEM (or PJM
System) condition.
ARTICLE XX
INDEMNIFICATION
Each Party shall indemnify and hold harmless the other Party and each and
every of its officers, agents, servants and employees, its successors and
assigns of, from and against any and all claims, demands and suits, actions, and
liabilities, losses, damages, and/or judgments, which may arise therefrom, as
well as against any fees, costs, charges or expenses which PSE&G or SELLER, its
officers, agents, servants and employees, its successors and assigns, incur in
the defense of any such claims, suits, actions or similar such demands made or
filed by any third-party, which in any manner arise out of, relate to, or result
from negligence, strict liability or breach of this AGREEMENT by the
indemnifying Party including but not limited to the design, construction,
engineering, installation, operation, maintenance, repair, replacement,
supervision, inspection, testing, protection, reinforcement, reconstruction,
decommissioning, removal, use, control or ownership of its facilities.
In case a claim is asserted or action brought against either Party as to
which it believes it is entitled to indemnification under this ARTICLE XX, the
party seeking
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indemnification shall promptly notify the other in writing of such claim or
action. Prompt notice as contemplated in the preceding sentence shall mean such
notice as would be required to enable the indemnitor to assert and prosecute
appropriate defenses relative to such claim or such action in a timely fashion.
If the Party seeking indemnification fails to give the other Party prompt notice
of any claim or action as provided in this Paragraph, that Party shall have no
obligation to indemnify pursuant to this ARTICLE XX. Upon receipt of such
notice request for indemnification, that Party shall promptly make a
determination of whether it believes is required to indemnify and shall promptly
notify the Party seeking indemnification in writing of that determination. If
the Party to whom such notice and request is directed determines that it is
required to indemnify the other Party pursuant to this ARTICLE XX, it shall
assume the defense of such claim or action, including the employment of counsel
and shall assume thereafter the payment of all costs and expenses relative to
the defenses of such claim or action. The non indemnifying Party shall cooperate
in all reasonable respects with the indemnifying Party in the defense of such
claim or action. The non indemnifying Party shall have the right, at its own
expense, to employ separate counsel in any such action and to participate in the
defense thereof. The indemnifying Party shall not be liable for any settlement
of any such claim or action effected without its consent. Before settling any
claim or action, the
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indemnifying Party shall demonstrate to the other that it has sufficient
financial means or has made adequate arrangements to make all payments under any
such settlement as and when due.
ARTICLE XXI
INSURANCE
At or prior to closing of the LOAN AGREEMENT, SELLER shall obtain and
maintain in force as hereinafter provided, property insurance, comprehensive
general liability insurance, including contractual liability coverage with a
combined single limit of not less than five million dollars ($5,000,000) for
each occurrence, to the extent commercially available on reasonable terms.
SELLER shall also obtain and maintain in force a workman's compensation or
employee's liability insurance policy in accordance with applicable New Jersey
statutory requirements. The insurance carrier or carriers and form of policy
shall be subject to prior review and approval of PSE&G to assure compliance with
provisions of this Paragraph, and shall be furnished by SELLER to PSE&G within
thirty (30) days of the closing of the LOAN AGREEMENT and thereafter on or
before January 1 of each year until this AGREEMENT is terminated. SELLER hereby
agrees to provide PSE&G with at least thirty (30) days notice of:
(i) the cancellation of any policy of insurance required by this
ARTICLE; or
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(ii) the reduction of any coverage below the levels required by this
ARTICLE.
SELLER shall also provide to PSE&G fifteen (15) days prior to the Commencement
of Construction evidence of satisfactory workman's compensation coverage.
Prior to the date SELLER's FACILITY is first operated in parallel with
PSE&G's electric system, SELLER shall furnish certificate of insurance to PSE&G
which certificate shall provide that such insurance shall not be terminated nor
expire except. upon thirty (30) days prior written notice to PSE&G, and shall
bear in substance the following clauses:
A. In consideration of the premium charged, PSE&G is named as an additional
insured on SELLER's comprehensive general liability insurance with respect
to all covered liabilities arising out of SELLER's use and ownership of
SELLER's COGENERATION FACILITY.
B. The inclusion of more than one insured under this policy shall not operate
to impair the rights of one insured against another insured; and the
coverages afforded by this policy will apply as though separate policies
had been issued to each insured. The inclusion of more than one insured
will not, however, operate to increase the limit of the carriers'
liability. PSE&G will not, by reason of its inclusion under this policy,
incur
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liability to the insurance carrier for payment of premium for this policy.
C. Any other insurance carried by PSE&G which may be applicable shall be
deemed excess insurance and SELLER's insurance primary for all purposes
despite any conflicting provision in SELLER's policy to the contrary.
D. It is expressly agreed and understood that the insurer(s) of SELLER's
COGENERATION FACILITY, naming PSE&G as an additional insured, shall waive
any right it has to subrogation with respect to PSE&G.
SELLER shall maintain such insurance in effect for so long as SELLER's
COGENERATION FACILITY is operated in parallel with PSE&G's electric system. If
SELLER fails to comply with the provisions of this Section, SELLER shall, at its
own cost, defend, indemnify, and hold harmless PSE&G, its directors, officers,
employees, agents, assigns, and successors in interest from and against any and
all loss, damage, claim, cost, charge, or expense of any kind of nature
(including direct, indirect, or consequential loss, damage, claim, cost, charge,
or expense, including attorney's fees and other costs of litigation) resulting
from the death or injury to any person or damage to any property, including the
personnel and property of PSE&G, to the extent that PSE&G would have been
protected had SELLER complied with all of the provisions of this ARTICLE.
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ARTICLE XXII
WARRANTIES
Except with respect to any lien possessed by a FINANCIER, SELLER warrants
and shall be obligated to supply to the RECEIPT POINT NET ELECTRICAL POWER
OUTPUT free and clear of any liens and/or adverse claims which might attach to
said electric power and energy prior to its supply to and receipt by PSE&G.
SELLER agrees to indemnify and hold harmless PSE&G against any and all claims,
demands, suits, actions, costs, and liabilities, damages, losses and/or
judgments arising out of, relating to or resulting from any such adverse claim
or lien, as well as against any fees, costs, charges or expenses which PSE&G
might incur in the defense of any such claim, suit, action or similar such
demand made or filed by such person, its successors or assigns, asserting such
adverse claim. In effecting the right of or obligation to indemnify pursuant-to
and in accordance with the provisions of this ARTICLE XXII the procedural
provisions set forth in ARTICLE XX of this AGREEMENT shall govern.
ARTICLE XXIII
EVENTS OF TERMINATION
The DATE OF INITIAL OPERATION shall occur on or prior to December 31, 1991,
unless extended by mutual written agreement of PSE&G and SELLER as provided in
this ARTICLE XXIII. SELLER on or before December 31, 1988 shall
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provide PSE&G with a schedule for detailed engineering, permitting, purchasing
and construction for the PROJECT, from which SELLER and PSE&G shall by mutual
agreement identify, in each case, critical path items for PROJECT development.
SELLER shall promptly notify PSE&G thereafter of any material revisions,
modifications or changes to such schedules.
Subsequent to submission of the schedules and up to the DATE OF INITIAL
OPERATION, SELLER shall provide quarterly status reports describing the progress
of engineering, permitting, purchasing (including delivery dates) and
construction of the PROJECT. Such reports shall include in sufficient detail
explanations of any delays in meeting scheduled dates for commencement or
completion of any listed items.
Either Party may terminate this AGREEMENT without liability to the other
Party, except as otherwise provided in this AGREEMENT, upon the occurrence of
any of the following events: (i) SELLER's failure to meet the DATE OF INITIAL
OPERATION as extended by Force Majeure; (ii) SELLER's failure to have the
COGENERATION FACILITY placed in COMMERCIAL OPERATION on or before July 1, 1992,
as extended by Force Majeure; (iii) SELLER's failure to complete any critical
path item(s) that would delay either the DATE OF INITIAL OPERATION or the DATE
OF COMMERCIAL OPERATION past the December 31, 1991 or July 1, 1992 dates as
extended by Force Majeure; (iv) a final and non-appealable
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order/judgment that on the effective date of this AGREEMENT the PROJECT fails to
meet the requirements for certification of a qualifying facility established as
of the effective date of the AGREEMENT in accordance with Title 18, Code of
Federal Regulations, Part 292, Subpart B, Section 292.203 through 292.207,
inclusive; provided, however, that any such determination shall not constitute
an Event of Termination pursuant to this ARTICLE XXIII if thereafter SELLER uses
reasonable efforts to regain qualifying facility status; (v) termination of the
agreement of lease between CAMPBELL and SELLER, on or before the DATE OF INITIAL
OPERATION, unless a new such lease shall be promptly entered into by CAMPBELL.
However, if any of events (i), (ii) or (iii) as described above occurs, and the
COGENERATION FACILITY is under a bona fide program of continuous construction,
the December 31, 1991 date and the July 1, 1992 date shall be extended for the
period reasonably required to satisfy such requirement by mutual written
agreement, but in no event shall any extension be allowed beyond twelve (12)
months of either of these respective dates. Notwithstanding the foregoing,
should SELLER fail to have the COGENERATION FACILITY placed in COMMERCIAL
OPERATION on or before July 1, 1992 and such failure is attributable to an event
of Force Majeure as provided in ARTICLE XVIII of this AGREEMENT, no extension of
this AGREEMENT shall be allowed beyond June 1, 1994 at which time this AGREEMENT
at the election and in the sole discretion of PSE&G shall terminate, provided,
however, the
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June 1, 1994 date will be extended if at such time SELLER is capable of
delivering a minimum of 75-80 MW at the nominated SUMMER SEASON conditions in
ARTICLE II, Section C and subject to PSE&G's acceptance of SELLER's plans to
achieve COMMERCIAL OPERATION within a reasonable time period.
If any Event of Termination occurs and either Party elects to exercise its
right, as provided in the preceding Paragraph, to terminate this AGREEMENT, such
Party shall provide the other Party with written notice of termination of the
AGREEMENT (hereinafter referred to as Notice of Termination). The Notice of
Termination shall specify the basis for such termination. The AGREEMENT and the
Parties obligations hereunder shall terminate effective thirty (30) days after
receipt by the other Party of such Notice of Termination.
Termination of the AGREEMENT for and on account of any Event of Termination
specified in this ARTICLE XXIII shall not relieve SELLER from any obligation
under this AGREEMENT to pay PSE&G for any unpaid costs associated with the
design, construction and installation of the INTERCONNECTION, including but not
limited to INTERCONNECTION COSTS, CANCELLATION COSTS, or any other unpaid bill
or BILLING STATEMENT and/or Replacement Energy and Replacement Capacity Costs as
provided in ARTICLE IV, Section G, Paragraph 5 of this AGREEMENT.
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ARTICLE XXIV
EVENTS OF DEFAULT AND BREACH OF CONTRACT
SECTION A
DEFAULT BY SELLER
SELLER shall be in default under this AGREEMENT up on the happening or
occurrence of any of the following events or conditions, each of which shall be
deemed to be an "Event of Default," and each of which shall be considered a
breach of contract for purposes of this AGREEMENT unless (i) it is cured in
accordance with the provisions specified below, and (ii) SELLER compensates
PSE&G for any direct damages which PSE&G suffers as a result of such default.
1. SELLER breaches or fails to observe or perform, any of the obligations,
covenants, conditions, services or responsibilities under this AGREEMENT,
unless, within thirty (30) days after written notice from PSE&G specifying
the nature of such breach or failure, SELLER either cures such breach or
failure or, if such cure cannot be completed within thirty (30) days,
commences and diligently pursues such cure.
2. There is an assignment for the benefit of SELLER's creditors, or SELLER is
adjudged a bankrupt, or a petition is filed by or against SELLER under the
provisions of any state insolvency law or under the provisions of the
Federal Bankruptcy Laws, or the business or principal assets of SELLER are
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placed in the hands of a receiver, assignee or trustee, or SELLER is
dissolved, or SELLER's existence is terminated, or its business is
discontinued; provided, however, that the events described in this
Paragraph 2 shall not constitute an Event of Default or otherwise affect
the validity of this AGREEMENT, so long as the terms, covenants and
conditions of this AGREEMENT on the part of SELLER are performed, and in
such event, this AGREEMENT shall continue to remain in full force in
accordance with the terms herein contained.
3. SELLER takes any actions which prevent PSE&G from performing any of the
obligations, covenants, conditions, responsibilities or services under this
AGREEMENT, unless, within thirty (30) days after written notice from PSE&G
specifying the nature of such action or failure to act, SELLER either cures
such action or failure to act, or, such cure cannot be completed within
thirty (30) days, commences and diligently pursues such cure.
4. SELLER, subsequent to the DATE OF COMMERCIAL OPERATION fails to deliver
electric power to PSE&G for two hundred and forty (240) out of three
hundred and sixty five (365) days for any reason other than Force Majeure
or a curtailment in accordance with ARTICLE II, Section D(2), (3), (4), (5)
or (6) of this AGREEMENT.
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5. SELLER fails to complete regular and required maintenance, testing or
inspection of the COGENERATION FACILITY and appurtenant equipment as
required by this AGREEMENT within thirty (30) days after written notice of
the need therefor by PSE&G; provided, however, if such maintenance testing
or inspection cannot be completed within thirty (30) days SELLER shall not
be in default if it has commenced and is diligently pursuing such
activities.
6. SELLER continues to violate any code, regulation and/or statute applicable
to the construction, installation or operation of the interconnection
equipment and devices on SELLER's side of the RECEIPT POINT and such
violation is adverse to PSE&G, in accordance with this AGREEMENT, after
written notice by PSE&G of such violation; provided, however, that if an
immediate cessation of such violation is not possible or required by the
nature of such violation SELLER shall not be in default if it immediately
commences and diligently pursues steps necessary to cease any such
violation.
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SECTION B
DEFAULT BY PSE&G
PSE&G shall be in default under this AGREEMENT upon the happening or
occurrence of any of the following events or conditions, each of which shall be
deemed to be an "Event of Default" and each of which shall be considered a
breach of contract for purposes of this AGREEMENT unless (i) it is cured in
accordance with the provisions specified below, and (ii) PSE&G compensates
SELLER for any direct damages which SELLER suffers a result of such default.
1. PSE&G breaches or fails to observe or perform any of the obligations,
covenants, conditions, services or responsibilities under this AGREEMENT,
unless, within thirty (30) days after written notice from SELLER specifying
the nature of such breach or failure, PSEW either cures such breach or
failure, or, if such cure cannot be completed within thirty (30) days,
commences and diligently pursues such cure.
2. PSE&G fails to accept deliveries of electricity from the COGENERATION
FACILITY for any reason other than a reason permitted under ARTICLE II or
ARTICLE XVIII of the AGREEMENT and such failure continues for a period of
thirty (30) days following receipt of notice of such failure.
3. There is an assignment for the benefit of PSE&G's creditors, or PSE&G is
adjudged bankrupt, or a
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petition is filed by or against PSE&G under the provisions of any state
insolvency law or under the provisions of the Federal Bankruptcy Law, or
the business or principal assets of PSE&G are placed in the hands of a
receiver, assignee or trustee, or PSE&G is dissolved, or PSE&G's existence
is terminated, or its business is discontinued; provided, however, that the
events described in this Paragraph 3 shall not constitute an Event of
Default or otherwise affect the validity of this AGREEMENT, so long as the
payment for energy and capacity delivered by the COGENERATION FACILITY to
PSE&G as provided under ARTICLE IV hereof continues to be paid and the
other terms, covenants and conditions of this AGREEMENT on the part of
PSE&G are performed, and in such event, this AGREEMENT shall continue to
remain in full force in accordance with the terms herein contained.
4. PSE&G takes any actions which prevent SELLER from performing any of the
obligations, covenants, conditions, responsibilities or services under this
AGREEMENT, unless within thirty (30) days after written notice from SELLER
specifying the nature of such action or failure to act, PSE&G either cures
such action or failure to act, or, if such cure cannot be completed within
thirty (30) days, commences and diligently pursues such cure.
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5. PSE&G fails to pay, when due, the payment provided under ARTICLE IV, and
such failure continues for a period of thirty (30) days following the
receipt by PSE&G of notice of such failure; provided, however, PSE&G shall
not be considered in default if (i) it has paid the undisputed portion of
any payment due under this AGREEMENT and (ii) the Parties are in the
process of resolving any disputed portion in accordance with the terms set
forth in ARTICLE VI of this AGREEMENT.
SECTION C
REMEDIES
In the event a party claims that an Event of Default has occurred, such
party shall provide the other party with written notice thereof (hereinafter
referred to as Notice of Breach). The Notice of Breach shall state the basis for
such claim and any remedy sought. The Parties shall have thirty (30) days within
which to resolve the dispute via negotiation. If within such thirty (30) day
period after service of the Notice of Breach, the Parties are unable to resolve
their differences by negotiation, either Party shall have the right to submit
the dispute for resolution to either arbitration or to any regulatory body
having jurisdiction.
The nature and extent of any damage incurred or sustained by the non-
breaching Party, as a result of any Event of Default shall be determined and
calculated as of the date the Event of Default commenced.
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Except as otherwise provided in ARTICLE XVIII and ARTICLE XXIV of this
AGREEMENT, neither Party shall refuse to make, suspend or delay any payment(s)
otherwise required to be made under this AGREEMENT or refuse to carry out any of
its obligations under this AGREEMENT for or on account of or as a result of an
alleged breach of this AGREEMENT or Event of Default.
Any waiver by a Party of any breach or Event of Default shall be deemed to
extend only to the particular breach or Event of Default waived and shall not
limit or otherwise affect any right(s) that such party may have with respect to
any other of future breach or Event of Default, whether of a similar or
difference nature.
ARTICLE XXV
ARBITRATION
Any controversy, dispute or claim between the Parties to this AGREEMENT,
which the Parties are unable to resolve by negotiation or over which any
regulatory body lacks jurisdiction, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (AAA), then in effect, and the provisions of this ARTICLE. If
arbitration is chosen by either Party, no suit at law which seeks to resolve
any controversy, dispute or claim between the Parties shall be instituted by
either Party hereto, except where such suit is instituted to confirm an
arbitration award received pursuant
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to this ARTICLE. However, nothing contained herein shall deprive either Party of
any right to: (i) obtain injunctive or other equitable relief in any Court in
the State of New Jersey, on an interim basis in accordance with ARTICLE XXVI of
this AGREEMENT or otherwise pending disposition of the arbitration of any
controversy, dispute or claim if such relief is available under applicable
principles of law and equity; and/or (ii) assert any crossclaim or third-party
claim in any suit at law instituted by a third-party; and/or (iii) file and
prosecute any complaint at and with the regulatory agency having jurisdiction or
make and prosecute any claim or position in any filing made with such regulatory
agency by either party or some third-party.
Any controversy, dispute or claim submitted to arbitration shall be settled
by arbitration in Newark, New Jersey in accordance with the laws of the State of
New Jersey. Any award entered pursuant to such arbitration shall be binding on
both Parties and judgment upon the award rendered or received may be entered in
the Superior Court of the State of New Jersey pursuant to N.J.S.A. 2A:24-1 et
seq.
Exclusive jurisdiction relative to the entry of judgment on any arbitration
award relative to any controversy or claim between the parties shall be in any
court of appropriate subject matter jurisdiction located in New Jersey, and the
Parties to this AGREEMENT expressly subject themselves hereby to the personal
jurisdiction of said court for entry of any such judgment and for the
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resolution of any dispute, action, or suit arising in connection with the entry
of such judgment.
The controversy or claim to be arbitrated shall be referred to three (3)
arbitrators, one to be selected by each party and the third to be selected by
the AAA. The selections to be made by the parties shall be made from the list of
the National Panel of Arbitrators maintained by the AAA. The arbitrator to be
selected by the AAA shall be qualified to pass on any technical or engineering
matters and shall be independent of and acceptable to both PSE&G and SELLER. All
decisions and awards shall be made by a majority of the arbitrators, except for
decisions relating to discovery as set forth herein.
In the event any arbitrator dies, or refuses to act, or becomes incapable,
incompetent or unfit to act before hearings have been completed and/or before an
award has been rendered, a successor arbitrator may be selected by the party who
originally made the selection. The selection of the successor arbitrator shall
be made consistent with the selection procedure set forth in the preceding
paragraph.
The arbitrators selected pursuant to this AGREEMENT shall be governed by
and apply the laws of the State of New Jersey and federal law, as applicable, in
conducting any arbitration proceeding and/or in making any award.
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Notice of a demand for arbitration (hereinafter referred to as Demand for
Arbitration) of any controversy or dispute between the Parties shall be filed in
writing with the AAA by the Party seeking arbitration and a copy of same shall
be served contemporaneously with such filing on the other Party. The notice
shall state, with specificity, the nature of the dispute and the remedy sought.
After such notice has been filed, the Parties may make discovery of any matter
relevant to such dispute before the hearing, to the extent and in the manner
provided by the Rules Governing civil Practice in the Superior Court contained
in the Rules Governing the Courts of the State of New Jersey. Any question that
may arise with respect to the obligations of the Parties relative to discovery
and/or relative to the protection of the discovery materials shall be referred
solely to the arbitrator selected by the AAA. His determination shall be final
and conclusive. Discovery shall be completed not later than ninety (90) days
after filing of the notice of arbitration unless such period for discovery is
extended by the arbitrator selected by the AAA, upon a showing of good cause by
either Party to the arbitration.
The arbitrators may consider any material which is relevant to the subject
matter of any such controversy even if such material might also be relevant to
an issue or issues not subject to arbitration hereunder. A stenographic record
shall be made of any arbitration hearing.
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Any costs associated with any arbitration under this ARTICLE, including but
not limited to attorney fees and witness expenses, shall be paid by the Party
against whom an award is entered unless the arbitrators by their award otherwise
provide.
Arbitration may not be utilized and the arbitrators selected in accordance
with this ARTICLE shall not possess the authority or power to alter, amend or
modify any of the terms or conditions or charges set forth in this AGREEMENT,
and further, the arbitrators may not enter any award which alters, amends or
modifies such terms, conditions or charges in any form or manner.
ARTICLE XXVI
SPECIFIC PERFORMANCE
Without regard to the requirements or provisions of this AGREEMENT, in
addition to any of the rights and/or remedies referred to in this AGREEMENT,
either Party shall have the right to institute an action against the other
Party in a court of equity in the State of New Jersey or at the NJBPU to obtain
specific performance by such other Party of any of such other Party's
obligations under this AGREEMENT if available in accordance with applicable
principles of law and equity.
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ARTICLE XXVII
ENTIRE AGREEMENT
The AGREEMENT constitutes the entire AGREEMENT between the Parties with
respect to the matters contained herein and all prior AGREEMENTS with respect
thereto are superseded hereby. Each Party confirms that it is not relying on any
oral representations or warranties of the other Party except as specifically set
forth herein. No additions, amendments or modifications hereof or of any terms
included herein shall be binding unless duly executed by both Parties.
ARTICLE XXVIII
ASSIGNMENT/TRANSFER
SELLER may at any time and from time to time during the term of this
AGREEMENT, assign its rights in this AGREEMENT to FINANCIER. PSE&G shall, at
SELLER's request, execute a Consent to Assignment provided that the terms and
conditions of same are reasonably acceptable to PSE&G and, in connection with
any such request, SELLER submits to PSE&G for review any relevant documents
requested by PSE&G, which documents shall be treated by PSE&G as confidential,
and not disclosed to any third-party without the written consent of SELLER. Upon
written notice to PSE&G, SELLER may transfer its rights and obligations under
this AGREEMENT to any entity controlling, controlled by or under common control
with SELLER. Except as otherwise provided herein with
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respect to FINANCIER or any entity controlling, controlled by or under common
control with SELLER, SELLER may not assign its rights and/or transfer its rights
and obligations in this AGREEMENT without the prior written consent of PSE&G,
which consent shall not be unreasonably withheld or delayed. Nothing contained
herein shall prevent SELLER from pledging or mortgaging all or any part of the
property of the PROJECT in connection with financing the PROJECT.
Except with respect to any entity controlling, controlled by or under
common control with SELLER, no assignee, transferee, pledgee or mortgagee and/or
any person designated by such assignee, transferee, pledgee or mortgagee may
operate the PROJECT, pursuant to any rights such party may have under any
mortgage, assignment, transfer, or security agreement, unless such entity or
person has been approved and authorized by PSE&G to operate the PROJECT, and in
connection with seeking to obtain such approval and authorization, agrees to be
bound by, subject to and to comply with the terms and conditions of this
AGREEMENT while operating the PROJECT. PSE&G shall not unreasonably delay or
withhold any such approval or authorization.
PSE&G may, on notice to and with the approval of SELLER, assign its rights
in this AGREEMENT. Additionally, PSE&G may, on notice to and with the approval
of SELLER, assign and transfer its rights and obligations under this AGREEMENT
to any entity controlling, controlled by or under
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common control with PSE&G. SELLER shall not unreasonably delay or withhold any
approval of an assignment or assignment/transfer by PSE&G provided that the
assignee or assignee/transferee agrees to be bound by, subject to and to comply
with the terms and conditions of this AGREEMENT.
ARTICLE XXIX
CURE BY FINANCIER
During any term of this AGREEMENT, SELLER shall provide PSE&G with such
information as to enable it to know the name(s) and address(es) of any FINANCIER
on a current basis. For so long as SELLER shall have outstanding and unpaid any
financing liabilities, PSE&G agrees to promptly furnish to all FINANCIERS, then
known to PSE&G, a copy of any Notice of Cancellation, Notice of Nonperformance,
Notice of Suspension, Notice of Breach, Demand for Arbitration or Notice of
Termination given to SELLER. Additionally, PSE&G shall not terminate this
AGREEMENT unless any written notice of such termination or breach, as the case
may be, and the reasons therefor have been given to and received by each
FINANCIER then known to PSE&G thirty (30) days prior to the effective date of
the termination. PSE&G shall not terminate this AGREEMENT if, after notice
thereof, and prior to any effective date of termination FINANCIER has:
(i) cured the condition precipitating the Notice of Breach under ARTICLE
XXIV or Notice of Termination under ARTICLE XXIII; or
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(ii) if the condition precipitating such Notice of Breach or such Notice
of Termination is not capable of being cured prior to the date of
termination, commenced in a diligent manner to cure the condition
precipitating the Notice of Breach or Notice of Termination and for
so long as the FINANCIER diligently continues such efforts; or
(iii) if the condition precipitating the Notice of Breach or Notice of
Termination is not capable of being cured prior to the date of
termination, caused the initiation of and is diligently prosecuting
efforts to gain possession of the PROJECT and for so long as the
FINANCIER diligently continues such efforts.
In the event FINANCIER gains possession of the PROJECT, FINANCIER shall promptly
designate a person to operate the PROJECT. The name and credentials of the
person so designated shall be promptly submitted thereafter to and such person
so designated must be approved and authorized by PSE&G to operate the PROJECT.
Any approval of the person so designated shall not be unreasonably delayed or
withheld by PSE&G. In the event PSE&G approves the person so designated, PSE&G
shall not be obligated to give authorization to the person so designated to
actually operate the PROJECT unless and until the person so designated agrees in
writing to be bound by, subject to and
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to comply with the terms and conditions of this AGREEMENT for the period during
which the person so designated intends to operate the PROJECT. Upon execution of
the aforesaid instrument, the person so designated shall thereafter, inter alia,
be responsible for all obligations incurred by it under this AGREEMENT and
commence payment. However, FINANCIER, and the person so designated, shall have
no responsibility whatsoever for any obligation SELLER incurred prior to the
date on which FINANCIER takes possession of the PROJECT.
In the event of a foreclosure and a resultant sale or transfer of the
PROJECT to a new entity, any obligation of PSE&G to perform its obligations
under the AGREEMENT shall be conditioned upon: (i) the approval by PSE&G of any
new operator of the PROJECT, which approval shall not be unreasonably withheld
or delayed; (ii) agreement by the new entity to comply with the rules and
regulations of the NJBPU, the FERC, and any other agency having jurisdiction
over the PROJECT relative to the sale or transfer of same; (iii) receipt by such
new entity of any license(s), permit(s) and approval(s) as may be required in
connection with the sale or transfer of the PROJECT; and (iv) the execution and
delivery of a written assumption agreement, in form satisfactory to PSE&G,
pursuant to which the new entity and/or operator agree to assume all obligations
under and agree therein to be bound by, subject to and to comply with the terms
and conditions of this AGREEMENT.
<PAGE>
-116-
Notwithstanding any rights which FINANCIER may have, in the event PSE&G
interrupts acceptance of the NET ELECTRICAL POWER OUTPUT from the COGENERATION
FACILITY in connection with the occurrence of the condition or event which
precipitated the Notice of Termination or Notice of Breach, PSE&G shall not be
obligated to resume acceptance of such NET ELECTRICAL POWER OUTPUT unless the
condition or event or cause thereof which precipitated the Notice of Termination
or Notice of Breach is or has been remedied in accordance with the provisions,
of this AGREEMENT. Prior to PSE&G being obligated to resume such acceptance from
the COGENERATION FACILITY, PSE&G shall have the right to require FINANCIER to
provide adequate assurance to PSE&G that the condition or event precipitating
the Notice of Termination or Notice of Breach will not reoccur.
ARTICLE XXX
FINANCIER SECURITY AGREEMENTS
As provided in ARTICLE XXVIII, SELLER may assign any rights in this
AGREEMENT to FINANCIER and may pledge or mortgage any or all of the property of
the PROJECT. In the event FINANCIER alleges that a breach or an event of default
has occurred under any operative agreement between FINANCIER and SELLER and
FINANCIER thereafter elects to exercise any right(s) under any applicable
security, mortgage, assignment or other agreement then in affect between
FINANCIER and SELLER, it is agreed that, upon receipt of such notice from
<PAGE>
-117-
FINANCIER, PSE&G shall provide notice to SELLER and thereafter PSE&G shall
accept the instructions of FINANCIER in accordance with the terms of any
applicable security, mortgage or assignment agreement. In such event, SELLER
shall have no claim against PSE&G for, and hereby agrees to release PSE&G from,
any liability for any cost, expense, loss, damage or liability SELLER may incur
or sustain arising out of, relating to or resulting from any action(s) which
PSE&G determines it is obligated to take pursuant to any operative agreement
between SELLER and FINANCIER.
Notwithstanding the foregoing, in the event PSE&G provides a notice to
SELLER under this Section, and SELLER notifies PSE&G that it disagrees with and
is actively contesting the FINANCIER'S allegation that an event of default has
occurred under any operative agreement between FINANCIER and SELLER, PSE&G may
in its reasonable discretion elect not to accept the instructions of such
FINANCIER, provided that SELLER shall (i) indemnify PSE&G in accordance with the
terms of ARTICLE xx for any cost, expense, loss, damage or liability which PSE&G
may incur or sustain as a result of PSE&G's failure to follow the instructions
of such FINANCIER, and (ii) provide PSE&G with a non-cancellable surety bond,
irrevocable bank letter of credit or other security in form, substance and
amount acceptable to PSE&G upon which PSE&G can draw in the event it incurs or
sustains any expense, loss, damage or liabilities as a result of its failure to
follow the instructions of such FINANCIER.
<PAGE>
-118-
ARTICLE XXXI
DETERMINATION OF PSE&G COSTS
The costs for any work done or service performed by PSE&G personnel, as
required by this AGREEMENT including without limitation the costs of the
INTERCONNECTION, which costs are to be billed to and to be paid by SELLER
pursuant to this AGREEMENT shal1 be determined by PSE&G in accordance with
PSE&G's "Procedures for Work Done at the Expense of others," then in effect.
ARTICLE XXXII
STANDARD FOR PERFORMANCE
Unless otherwise expressly provided for in this AGREEMENT, PSE&G shall
undertake and discharge any obligation it has in this AGREEMENT to, inter alia,
design, construct, install, operate, maintain, repair, replace, reinforce,
rearrange, purchase, select, examine, review, inspect or accept any facility or
equipment pursuant to and in accordance with any applicable PSE&G practice(s),
standard(s) and/or procedure(s). PSE&G shall use the same care and diligence in
controlling the costs of any such activity(ies) SELLER is required to make
payment for under this AGREEMENT as if the activity(ies) was being performed by
and for PSE&G's own account.
<PAGE>
-119-
ARTICLE XXXIII
STANDBY ELECTRIC SERVICE
In the event SELLER requires standby electric service to the COGENERATION
FACILITY same shall be furnished by PSE&G pursuant to an applicable tariff on
file with the NJBPU. In such event, pursuant to and in accordance with the
provisions of The Order of the NJBPU in "In the Matter of the Consideration and
Determination of Cogeneration and Small Power Production Standards Pursuant to
the Public Utility Regulatory Policies, Act of 1978, Docket No. 8010-687,"
PSE&G will establish a credit (Credit) for SELLER in an amount determined in
accordance with the following:
ESTIMATED COST FOR STANDBY FACILITY ACTUAL COST FOR = CREDIT
- ----------------------------------- X INTERCONNECTION
ESTIMATED COST FOR INTERCONNECTION
The estimated cost for standby facility will be furnished to SELLER as soon
as practicable after execution of this AGREEMENT.
This Credit will be refunded to SELLER without interest, in whole or in
part, in annual payments over the ten (10) year period following the DATE OF
COMMERCIAL OPERATION. The amount of refund for each annual period will be
calculated as follows:
TOTAL OF PAYMENTS MADE FOR
ELECTRIC SERVICE SUPPLIED BY PSE&G
UNDER THE APPLICABLE PREVAILING X 10% = AMOUNT OF REFUND
RATE SCHEDULE DURING THE PRECEDING
ANNUAL PERIOD
The total refund during such ten (10) year period shall not exceed the amount of
the Credit determined pursuant to and
<PAGE>
-120-
in accordance with the provisions of this Paragraph. If after such ten (10) year
period SELLER has not received, based on its annual payments for electric
service, a total refund of the Credit, SELLER shall forfeit any further
entitlement to any balance of the Credit remaining at the end of such ten (10)
year period.
ARTICLE XXXIV
SUCCESSORS AND ASSIGNS
This AGREEMENT shall be binding upon and shall inure to the benefit of or
may be performed by, the successors and assigns of the Parties, except that, no
assignment, pledge or other transfer of this AGREEMENT by any Party shall
operate to release the assignor, pledgor or transferor from any of its
obligations under this AGREEMENT, unless consent to the release is given in
writing by the other Party, which consent shall not be unreasonably delayed or
withheld, or unless such transfer is incident to a reorganization or merger or
consolidation with or transfer of all or substantially all of the assets of the
transferor to another person or business entity which person or entity shall, as
part of such succession, assumes all the obligations of the transferor under
this AGREEMENT.
<PAGE>
-121-
ARTICLE XXXV
CHOICE OF LAW
This AGREEMENT shall be interpreted, construed, governed by, performed and
enforced in accordance with the laws of the State of New Jersey and federal law,
where applicable. All questions concerning the validity, construction and
enforceability of this AGREEMENT as well as questions concerning the sufficiency
or other aspects of performance under this AGREEMENT shall be determined under
the laws of the State of New Jersey without recourse to the law governing
conflict of laws.
ARTICLE XXXVI
CAPTIONS
The subject headings of the ARTICLES of this AGREEMENT are inserted solely
for the purpose of convenient reference and are not intended to, nor shall same
affect the meaning of any provision of this AGREEMENT.
ARTICLE XXXVII
COUNTERPARTS
This AGREEMENT may be executed in counterparts. Each shall be deemed an
original but together shall constitute one and the same instrument.
<PAGE>
-122-
ARTICLE XXXVIII
MISCELLANEOUS
This AGREEMENT and the obligations of the Parties hereunder are subject to
all present and future valid laws and to all valid present and future orders,
rules and regulations of any court or regulatory authority having jurisdiction.
In case of conflict between any provisions hereof and any applicable law,
regulation or regulatory order, such applicable law, regulation or regulatory
order shall govern.
All terms defined in this AGREEMENT shall have the same defined meanings
when used in any notice, correspondence, report or other document made or
delivered pursuant to or in connection with this AGREEMENT, unless the context
shall otherwise require.
Each reference herein to SELLER and PSE&G shall be deemed to include their
respective successors and assigns.
All of the covenants, warranties, undertakings and agreements of SELLER and
PSE&G shall bind the respective Parties, their successors and assigns.
ARTICLE XXXIX
RESERVATIONS
No Party shall be prejudiced or bound, except as otherwise specifically
provided herein, nor shall any Party be deemed to have approved, accepted,
agreed or consented to any concept, theory or principle underlying or supposed
to
<PAGE>
-123-
underlie any of the matters contained herein, including but not limited to any
concept, theory, principle or method used to calculate the rates provided for
herein.
All Parties further understand and agree that the provisions of this
AGREEMENT relate only to the specific matter referred to herein and no Party or
person waives any claim or right which it may otherwise have with respect to any
matter not expressly provided for herein.
ARTICLE XL
SURVIVAL OF OBLIGATIONS
Termination of this AGREEMENT for any reason shall not relieve PSE&G or
SELLER of any obligation accruing or arising prior to such termination.
ARTICLE XLI
NOTICES
Any notice, request, demand, or statement which either PSE&G or SELLER may
desire to give to the other shall be in writing and except as otherwise provided
for in this AGREEMENT shall be considered as duly delivered when mailed by
certified mail or delivered against receipt by messenger or overnight courier
addressed to said Party as follows:
(a) If to PUBLIC SERVICE ELECTRIC AND GAS COMPANY:
Public Service Electric and Gas Company
80 Park Plaza - Mail Code T11A
P. 0. Box 570
Newark, New Jersey 07101-0570
ATTENTION: MANAGER - COGENERATION
<PAGE>
-124-
(b) If to SELLER or to such other person or address as the addressee may
have specified in a notice duly given as provided herein.
Except as otherwise provided in this AGREEMENT, routine communication's and
BILLING STATEMENTS shall be considered as duly delivered when mailed by either
certified or ordinary mail:
(a) If to PUBLIC SERVICE ELECTRIC AND GAS COMPANY:
Public Service Electric and Gas Company
80 Park Plaza - Mail Code T11A
P. 0. Box 570
Newark, New Jersey 07101-0570
ATTENTION: MANAGER - COGENERATION
(b) If to SELLER or to such other person or address as the addressee may
have specified in a notice duly given as provided herein.
General Electric Power Funding
1 River Road
Building 2, Room 741
Schenectady, N.Y. 12345
Attn: Vice President Investments
<PAGE>
-125-
IN WITNESS WHEREOF, this AGREEMENT has been executed and delivered as of
the date and year first above written.
SELLER
By: CAMDEN COGEN, L. P.
By:
___________________________
PUBLIC SERVICE ELECTRIC
AND GAS COMPANY
By: /s/ SIGNATURE APPEARS HERE
___________________________
<PAGE>
FIRST AMENDMENT TO
POWER PURCHASE AND INTERCONNECTION AGREEMENT
BETWEEN
Public Service Electric & Gas Company
and
Camden Cogen, L.P.
This First Amendment to the Power Purchase and Interconnection Agreement by
and between Public Service Electric & Gas Company ("PSE&G") and Camden Cogen,
L.P. ("SELLER") constitutes the First Amendment ("First Amendment") to the Power
Purchase and Interconnection Agreement ("Agreement") between the Parties.
Recitals
---------
WHEREAS, the Parties executed the Agreement on April 15, 1988 which
provides for the financing, design, construction and operation of a
grid-connected cogeneration facility (the "Facility") at the property of
Campbell Soup Company in the City of Camden, County of Camden and State of
New Jersey; and
WHEREAS, the New Jersey Board of Public Utilities ("NJBPU"), after
reviewing the Joint Petition filed by the Parties, approved the Agreement by
order dated June 29, 1989; and
<PAGE>
WHEREAS, subsequent to the execution of the Agreement and the approval of
same by the NJBPU, the Parties were notified of the decision of Campbell Soup
Company ("Campbell") that Campbell would be terminating its food processing and
manufacturing activities at the site proposed for the Facility; and
WHEREAS, the SELLER has entered into a twenty year steam supply agreement
with the Camden Paperboard Corporation ("Paperboard") which is located within
the City of Camden and within the service territory of PSE&G; and
WHEREAS, the loss of Campbell and the substitution of Paperboard as the
Project's thermal host requires certain amendments to the Agreement; and
NOW, THEREFORE, in consideration of the recitals and mutual covenants
contained herein, the Parties hereto agree as follows:
(1) The Agreement be and hereby is amended to delete each and every
reference to the property of CAMPBELL SOUP COMPANY or "Campbell" and inserting
in the place and stead thereof, "the property on, adjacent to or in the vicinity
of Camden Paperboard Corporation" or "PAPERBOARD", (hereinafter referred to as
the "Project Site").
2
<PAGE>
(2) Article II, Section F is amended to read as follows:
Section F
Condition Precedent
The following shall be conditions precedent to the effectiveness of this
AGREEMENT: (i) A subsequent finding by the NJBPU in an Order that this
AGREEMENT, as presently constituted, is reasonable and prudent throughout the
term of this AGREEMENT and that PSE&G will be able to flow through to and/or
fully and timely recover ratepayers through the Levelized Energy Adjustment
Clause or its successor all purchased power costs incurred by PSE&G pursuant to
this AGREEMENT, which approval by the NJBPU shall be under terms and conditions
reasonably acceptable to both PSE&G and SELLER; and (ii) recertification by the
FERC that the COGENERATION FACILITY is a Qualifying Facility in accordance with
18 C.F.R. Section 292.203.
After the foregoing conditions have been satisfied, the Parties shall,
within thirty (30) days, affirm in writing, executed by both Parties, that the
conditions precedent have been satisfied. In the event said conditions
precedent are not satisfied, this AGREEMENT shall be void.
This Agreement is further conditioned upon an Order of the NJBPU approving
the First Amendment to this Agreement, upon terms and conditions acceptable to
the parties, and authorizing the relocation of the COGENERATION FACILITY from
the property of Campbell Soup Company in Camden, New Jersey, to the Project
Site.
3
<PAGE>
(2) Article IV, Section G is amended in its entirety to read as follows:
Section G
Abandonment, Cancellation or Failure to Complete
If SELLER abandons, cancels or fails to complete the PROJECT before the
DATE OF COMMERCIAL OPERATION and this AGREEMENT is therefore terminated in
accordance with the provisions of ARTICLE XXIII, and if SELLER has not provided
written notice of such abandonment, cancellation or failure within four (4)
months of the date of NJBPU Order approving the First Amendment to the Agreement
it is acknowledged and agreed that PSE&G will suffer damages which, as the
result of PSE&G's dependence upon the delivery of the COGENERATION FACILITY'S
energy and capacity hereunder, PSE&G would be unable to mitigate fully. SELLER
and PSE&G agree that the occurrence of one or more of the following events shall
be the sole basis upon which SELLER may terminate the Agreement during such four
(4) month period: (x) an unanticipated land use or environmental limitation
which substantially and adversely impacts the financial viability of the Project
or (y) incremental estimated electric or gas interconnection costs substantially
in excess of the costs estimated by PSE&G for the original interconnections such
that the Project is no longer financially viable. PSE&G and SELLER further agree
that the amount of actual damages suffered by PSE&G under the foregoing
circumstances would be difficult or impossible to measure. Therefore, PSE&G and
SELLER agree that if the COGENERATION FACILITY shall fail to commence COMMERCIAL
OPERATION on or before the DATE OF COMMERCIAL OPERATION, as the same may be
extended, pursuant to ARTICLE XXIII of this AGREEMENT, SELLER shall pay PSE&G a
one-time liquidated damage amount equal to $721,556.
4
<PAGE>
(3) Article XXIII is amended in its entirety to read as follows:
EVENTS OF TERMINATION
SELLER has provided PSE&G with a schedule for the development, engineering,
permitting, financing and construction of the PROJECT, which schedule is annexed
hereto as Schedule A, reflecting Critical Path Items and the milestone dates
thereof for PROJECT development. SELLER shall complete each Critical Path Item
on or before the milestone date therefore as set forth in Schedule A.
Within five (5) business days of the date of Financial Closing, SELLER
shall submit a detailed schedule for the construction, start-up and testing of
the PROJECT ("Construction Schedule"), which Construction Schedule shall be
acceptable to PSE&G. The items listed thereon shall, for the purposes of this
Article, be deemed Critical Path Items.
Beginning on July 1, 1990, and subsequently thereafter, SELLER shall
provide quarterly status reports to PSE&G describing the progress of
engineering, permitting, purchasing (including delivery dates) and construction
of the PROJECT. Such reports shall include in sufficient detail explanations of
any delays in meeting scheduled dates for commencement completion of any listed
items. SELLER shall promptly notify PSE&G thereafter of any material revisions,
modifications or changes to such schedules.
Either Party may terminate this AGREEMENT without liability to the other
Party, except as otherwise provided in this AGREEMENT, upon the occurrence of
any of the following events: (i) SELLER's failure to meet the DATE OF INITIAL
OPERATION by November 1, 1992, unless extended by mutual agreement or by Force
Majeure; (ii) SELLER's
5
<PAGE>
failure to have the COGENERATION FACILITY placed in COMMERCIAL OPERATION on or
before December 1, 1992, unless extended by mutual agreement or by Force
Majeure; (iii) SELLER's failure to complete any Critical Path Item(s) that would
delay either the DATE OF INITIAL OPERATION or the DATE OF COMMERCIAL OPERATION
past the November 1, 1992 or December 1, 1992 dates, respectively, unless
extended by mutual agreement or by Force Majeure; (iv) a final and
non-appealable order/judgement that on the effective date of this AGREEMENT the
PROJECT fails to meet the requirements for certification of a qualifying
facility established as of the effective date of the AGREEMENT in accordance
with Title 18, Code of Federal Regulations, Part 292, Subpart B, Section 292.203
through 292.207, inclusive; provided, however, that any such determination shall
not constitute an Event of Termination pursuant to this ARTICLE XXIII if
thereafter SELLER uses reasonable efforts to regain qualifying facility status;
(v) termination of the acquisition agreement between the landowners of the
Project Site and SELLER, on or before the DATE OF INITIAL OPERATION, unless a
new such acquisition agreement shall be promptly entered into by SELLER.
However, if any of events (i), (ii) or (iii) as described above occurs, the
COGENERATION FACILITY is under a bona fide program of continuous construction,
the November 1, 1992 date and the December 1, 1992 date shall be extended for
the period reasonably required to satisfy such requirement by mutual written
agreement, but in no event shall any extensions be allowed beyond twelve (12)
months of either of these respective dates. Notwithstanding the foregoing,
should SELLER fail to have the COGENERATION FACILITY placed in COMMERCIAL
OPERATION on or before December 1, 1992 and such failure is attributable to an
event of Force Majeure as provided in Article XVIII of this AGREEMENT, no
extension of this AGREEMENT shall be allowed beyond June 1, 1994 at which time
this AGREEMENT at the election and in the sole discretion of PSE&G shall
terminate,
6
<PAGE>
provided, however the June 1, 1994 date will be extended if at such time SELLER
is capable of delivering a minimum of 75-80 MW at the nominated SUMMER SEASON
conditions in ARTICLE II, Section C and subject to PSE&G's acceptance of
SELLER's plans to achieve COMMERCIAL OPERATION within a reasonable time period.
If any Event of Termination occurs and either Party elects to exercise its
right, as provided in the preceding Paragraph, to terminate this AGREEMENT, such
Party shall provide the other Party with written notice of termination of this
AGREEMENT (hereinafter referred to as Notice of Termination). The Notice of
Termination shall specify the basis for such termination. The AGREEMENT and the
Parties obligations hereunder shall terminate effective thirty (30) days after
receipt by the other Party of such Notice of Termination.
Termination of the AGREEMENT for and on account of any Event of Termination
specified in this ARTICLE XXIII shall not relieve SELLER from any obligation
under this AGREEMENT to pay PSE&G for any unpaid costs associated with the
design, construction and installation of the INTERCONNECTION, including but not
limited to INTERCONNECTION COSTS, CANCELLATION COSTS, or any other unpaid bill
or BILLING STATEMENT and/or Replacement Energy and Replacement Capacity Costs as
provided in ARTICLE IV, Section G, Paragraph 5 of this AGREEMENT.
(4) SELLER shall permit PSE&G, its officers, agents, servants and
employees, its successors and assigns, when and as requested, access to, egress
and ingress, from and over the Project, at any time and upon reasonable notice,
as same may be necessary to discharge its obligations or to exercise its
7
<PAGE>
rights under the Agreement, as amended by the First Amendment, including but not
limited to access to: (i) permit PSE&G to determine that the Project is being
completed in accordance with the specifications provided by SELLER to PSE&G for
its review and (ii) permit PSE&G to determine that the Project is progressing
according to the schedules submitted by SELLER as required by the Agreement, as
amended by the First Amendment. In addition, SELLER shall upon request by PSE&G
provide PSE&G with all necessary data pertaining to the detailed engineering,
permitting, purchasing and construction schedules for the PROJECT in order to
permit PSE&G to determine that such schedules are reasonable and that the DATE
OF INITIAL OPERATION and the DATE OF COMMERCIAL OPERATION will be met.
(5) SELLER and PSE&G agree that a condition precedent to the effectiveness
of the First Amendment shall be its approval by the NJBPU. In the event approval
of the First Amendment by the NJBPU occurs later than July 1, 1990, the parties
shall renegotiate the milestone dates set forth in Schedule A. Such approval by
the NJBPU shall be in the form of a written order, under terms and conditions
acceptable to the parties in their sole discretion, including but not limited to
NJBPU approval of the recoverability from ratepayers, on a full and timely
basis, through the Levelized Energy Adjustment Clause or its successor,
consistent with the Order of Approval approving the Agreement, of all capacity
and energy related
8
<PAGE>
replacement power costs which arise out of or are incurred by PSE&G in
connection with the Agreement, as amended by the First Amendment.
(6) SELLER's procurement construction contract ("Construction Contract")
shall provide for significant bonus/penalty financial incentive provisions in
order to ensure Commercial Operation by December 1, 1992. Within five (5)
business days of the execution of the Construction Contract, SELLER shall
provide PSE&G with a summary of the terms and conditions of the Construction
Contract's bonus/penalty provisions.
(7) All terms and conditions contained in the Agreement and not otherwise
amended herein shall remain in full force and effect.
IN WITNESS WHEREOF, this First Amendment to Power Purchase and
Interconnection Agreement is executed and delivered on the 12th day of June,
1990.
CAMDEN COGEN, L.P.
By: /s/
-------------------------------
PUBLIC SERVICE ELECTRIC & GAS COMPANY
By: /s/
-------------------------------
9
<PAGE>
SECOND AMENDMENT TO
POWER PURCHASE AND INTERCONNECTION AGREEMENT
BETWEEN
Public Service Electric & Gas Company
and
Camden Cogen, L.P.
This Second Amendment to the Power Purchase and Interconnection Agreement
by and between Public Service Electric & Gas Company ("PSE&G") and Camden
Cogen, L.P. ("SELLER") constitutes the Second Amendment ("Second Amendment") to
the Power Purchase and Interconnection Agreement ("Agreement") between the
Parties.
Recitals
---------
WHEREAS, the Parties executed a First Amendment to the Agreement on
June 12, 1990; and
WHEREAS, pursuant to Article II, Section F ("Conditions Precedent") of the
Agreement, as amended by the First Amendment, the Parties jointly petitioned the
New Jersey Board of Public Utilities ("NJBPU") for an Order approving the First
Amendment; and
<PAGE>
WHEREAS, it was contemplated by the Parties that the NJBPU would consider,
and act upon the Joint Petition on or about July 1, 1990: and
WHEREAS, the Critical Path Items and Milestone Dates incorporated within
Schedule A of the First Amendment were agreed upon based on the Parties'
expectation that the NJBPU would act upon the Joint Petition on or about
July 1, 1990; and
WHEREAS, the NJBPU, at its meeting on July 18, 1990 postponed action on
the Joint Petition, such postponement making it unlikely for SELLER to
reasonably achieve certain of the said milestone dates: and
WHEREAS, the First Amendment contemplated the renegotiation of the
milestone dates in the event the NJBPU failed to approve same by July 1, 1990;
and
WHEREAS, the Parties desire to modify the Agreement further in light of the
said postponement.
NOW, THEREFORE, in consideration of the recitals and mutual covenants
contained, herein, the Parties hereto agree as follows:
2
<PAGE>
(1) Notwithstanding the milestone dates set forth in Schedule A (2) and (3)
of the First Amendment, the Parties agree that within 30 days of the Parties'
acceptance, in writing, of the final non-appealable Order of the NJBPU approving
the First Amendment and the Second Amendment to the Agreement, SELLER shall be
required to (i) Release Engineers for Preliminary Design, and (ii) Execute
Option for Project Site.
(2) Notwithstanding the milestone dates set forth in Schedule A (1) and (4)
through (13) of the First Amendment, the Parties agree to extend each of said
milestone dates for periods of time equivalent to the number of days between
July 1, 1990 and the date of the Parties' acceptance, in writing, of the final
non-appealable Order of the NJBPU approving the First Amendment and the Second
Amendment to the Agreement.
(3) In the event the Order of the NJBPU approving the First Amendment and
Second Amendment to the Agreement is stayed, pending any appeal which may be
filed by any person, including a Party to the Agreement, and the appeal is still
pending by December 1, 1990, the Parties may, upon mutual agreement, either (i)
agree to extend any one or more milestone dates, and/or (ii) amend such other
substantive terms of the Agreement affected by the delay or, (iii) agree to
terminate the Agreement, whereupon the Agreement will be deemed null and void
and neither Party shall have any further obligation to the other Party.
3
<PAGE>
(4) All items and conditions contained in the Agreement, as amended by the
First Amendment and not otherwise amended herein shall remain in full force and
effect.
IN WITNESS WHEREOF, this Second Amendment to the Agreement is executed and
delivered on the ______ day of ___________,1990.
CAMDEN COGEN, L.P.
By: /s/
--------------------------
Vice President
PUBLIC SERVICE ELECTRIC &
GAS COMPANY
By: /s/
--------------------------
4
<PAGE>
FIRST AMENDMENT TO
GAS SERVICE AGREEMENT
BETWEEN
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
AND
CAMDEN COGEN, L.P.
This amendment to the Gas Service Agreement by and between Public Service
Electric and Gas Company (Seller) and Camden Cogen, L.P. (CAMDEN) (hereinafter
jointly referred to as the Parties) constitutes the First Amendment (First
Amendment) to the Gas Service Agreement, dated May 15, 1991, (AGREEMENT) between
the Parties.
RECITALS
WHEREAS, the AGREEMENT provides that PSE&G will transport and sell, and
Cogen will receive and purchase, Natural Gas to be used as fuel for the
generation of electricity and steam at the Cogeneration Facility to be financed,
constructed, owned and operated by Cogen in Camden, New Jersey;
WHEREAS, the Parties desire to amend certain provisions of the AGREEMENT;
<PAGE>
NOW, THEREFORE, in consideration of the recitals and mutual covenants
contained herein, the Parties hereto agree as follows:
(1) Article 18, Paragraph 18.5 of the Agreement is amended in its entirety
as follows:
18.5 No modifications or amendment to the Agreement shall be effective, unless
such modification or amendment is in writing. Nor shall any modification or
amendment of a material nature to this Agreement be effective unless and until
same has been approved by the Board under terms and conditions that are
acceptable to Buyer and Seller in their sole discretion.
(2) Terms and conditions contained in the AGREEMENT and not otherwise
amended herein shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, this First Amendment to the Gas Service Agreement is
executed and delivered on this 1st day of November 1991.
WITNESS: SELLER:
PUBLIC SERVICE ELECTRIC AND
GAS COMPANY
/s/ [SIGNATURE APPEARS HERE] BY: /s/ [SIGNATURE APPEARS HERE]
_________________________________ _______________________________
Title: Vice President-Gas Supply
_____________________________
and Planning
_____________________________
BUYER:
CAMDEN COGEN, L.P.
WITNESS:
/s/ [SIGNATURE APPEARS HERE] BY: /s/ [SIGNATURE APPEARS HERE]
_________________________________ ________________________________
Title: Vice President
_____________________________
_____________________________
<PAGE>
ENERGY PURCHASE AGREEMENT
-------------------------
ENERGY PURCHASE AGREEMENT ("Agreement") entered into this 18th day of
December 1989, between Camden Cogen, L.P., a Delaware limited partnership
(Seller), and Camden Paperboard Corporation a New Jersey corporation ("Buyer").
Seller and Buyer, desiring to set forth the terms under which Seller
will deliver and Buyer will accept at the Steam Point of Delivery and pay for
thermal energy to be used in Buyer's Camden facilities, hereby agree as follows:
<PAGE>
TABLE OF CONTENTS
Section Title Page
- ------- ----- ----
1 DEFINITIONS ............................................... 1
1.1 General Definitions ....................................... 1
1.2 Other Defined Terms ....................................... 3
1.3 Accounting Terms .......................................... 3
2 CONSTRUCTION AND MAINTENANCE OF FACILITY .................. 4
2.1 Construction .............................................. 4
2.2 Operation and Maintenance after Completion of Construction 4
3 DELIVERY, ACCEPTANCE AND PRICE OF STEAM ................... 6
3.1 Minimum Annual Steam Usage ................................ 6
3.2 Corrective Efforts ........................................ 6
3.3 Minimum Tender ............................................ 7
3.4 Maximum Tender ............................................ 7
3.5 Price of Steam ............................................ 7
3.6 Condensate Return ......................................... 7
4 MEASUREMENTS AND PAYMENT TERMS ............................ 8
4.1 Measurement Devices ....................................... 8
4.2 Calibration and Adjustment ................................ 8
4.3 Corrections ............................................... 8
4.4 Audit ..................................................... 9
4.5 Billing and Payment ....................................... 9
5 FORCE MAJEURE ............................................. 10
5.1 Suspension of Obligation .................................. 10
5.2 Force Majeure Defined ..................................... 10
5.3 Notice of Occurrence ...................................... 11
5.4 Obligations to Correct Inability .......................... 11
6 ASSIGNMENT AND RIGHTS OF FINANCIER ........................ 12
6.1 Assignment ................................................ 12
6.2 Financing ................................................. 12
7 LIMITATION OF LIABILITY ................................... 13
7.1 Limitation of Liability ................................... 13
8 TERM ...................................................... 15
8.1 Term ...................................................... 15
8.2 Renewal Terms ............................................. 15
8.3 Expiration ................................................ 15
8.4 Termination ............................................... 15
9 REGULATORY, LEGISLATIVE AND JUDICIAL ACTIONS .............. 16
9.1 Denial of Regulatory Approvals ............................ 16
9.2 Repeal or Amendment of PURPA ............................. 16
9.3 Legislative or Judicial Action ............................ 16
9.4 Termination of Agreement .................................. 16
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<PAGE>
TABLE OF CONTENTS (cont'd)
Section Title Page
- ------- ----- ----
10 WARRANTIES ................................................ 17
10.1 General Warranties ........................................ 17
10.2 Commodity Warranties ...................................... 17
11 CONFIDENTIALITY ........................................... 18
11.1 Confidentiality of Information ............................ 18
11.2 Publicity ................................................. 18
12 DISPUTES .................................................. 19
12.1 Disputes .................................................. 19
13 MISCELLANEOUS ............................................. 20
13.1 Governing Law ............................................. 20
13.2 Notices ................................................... 20
13.3 Non-waiver ................................................ 20
13.4 Severability .............................................. 20
13.5 Captions .................................................. 21
13.6 Entire Agreement and Amendments ........................... 21
EXHIBITS
1 Specification for Steam and Condensate Return
2 Terminal Point Details
3 Project Schedule
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<PAGE>
SECTION 1
DEFINITIONS
1.1 General Definitions. The following terms when capitalized and used herein
shall have the following meanings:
(a) "Avoided Boiler Fuel Cost" shall mean a dollar amount per thousand
pounds of Steam determined by application of the following formula:
g x C
----
0.84
where g is the average cost per MMBtu (Higher Heating Value) to Seller
of fuel used in the Facility gas turbine during the period for which
Avoided Boiler Fuel Cost is being determined; and C is equal to 1.023
which is the stipulated amount of heat energy in MMBtu required to
convert 1000 pounds of return condensate and makeup water, in the
proportions and meeting the specifications set forth in Exhibit 1, to
Steam.
(b) "Buyer's Auxiliary Boiler" shall mean auxiliary boiler owned by Buyer
and located on his property including all its associated auxiliaries and
fuel storage and handling equipment. This boiler shall serve as a
back-up to the Seller's steam supply system.
(c) "Cogenerated Steam" shall mean steam generated through the sequential
production of electricity and then steam in the Facility and Tendered to
Buyer at the Steam Point of Delivery with the characteristics specified
in Exhibit 1.
(d) "Facility" shall mean the cogeneration plant, substation, and associated
facilities and equipment described in the specifications to be
constructed, owned/leased, operated and maintained by Seller on the
Seller's Site.
(e) "Financier" means any individual(s) or entity(ies) (and any
representative(s) or trustee(s) or any such individual(s) or
entity(ies)): (i) lending money to Seller for: (a) the construction or
term financing of the Facility; (b) the establishment and/or maintenance
of working capital requirements: and/or (c) the refinance or take-out of
any such loan(s); and/or (ii) participating as an equity investor;
and/or (iii) any lessor under a lease finance arrangement.
(f) "Higher Heating Value" shall mean the heat value in Btu per unit volume
of fuel as defined by the suppliers of fuel used in the facility.
(g) "Hour of Operation" shall mean an hour during which the Facility is
actually operating and producing electrical or useful thermal energy.
(h) "MMBtu" shall mean million British Thermal Units.
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(i) "Month" shall mean the calendar month commencing at 12:00 a.m. local
time on the first day of the calendar month and concluding at midnight
local time on the final day of the same calendar month.
(j) "Non-cogenerated Steam" shall mean steam generated in the Buyer's
Auxiliary Boiler.
(k) "Offsite Facilities" shall mean that equipment provided and installed by
Seller outside the Site and used in connection with the Facility
including connections for plant water, condensate return, electricity,
steam, waste water, potable water, sanitary sewer and oily water.
(l) Public Service Electric and Gas (PSE&G) shall mean the public utility
which is purchasing electricity from Seller.
(m) "PP&IA" shall mean that certain Power Purchase and Interconnection
Agreement dated April 15, 1988 between Seller and Public Service
Electric and Gas.
(n) "Return Condensate Point of Delivery" shall mean a point defined in
Exhibit 2.
(o) "Steam Discount Benefits Received" shall be calculated each month by the
application of the following formula:
For up to the first 35,000 pounds of Cogenerated Steam per hour of
operation of the Facility:
Avoided Boiler Fuel Cost x pounds of Cogenerated Steam delivered
----------------------------------------------------------------
1000
Plus for steam in excess of 35,000 pounds of Cogenerated Steam per hour
of operation of the Facility:
0.5 x Avoided Boiler Fuel Cost x pounds of Cogenerated Steam delivered
----------------------------------------------------------------------
1000
(p) "Steam Point of Delivery" shall mean a point defined in Exhibit 2.
(q) "Tender" shall be deemed to occur whenever, and to the extent that,
Seller offers to deliver Cogenerated Steam at the relevant Point of
Delivery giving allowance for normal operating delays associated with
increases in steam flow to Buyer. Seller will at all times be deemed to
be offering to deliver Steam unless it notifies Buyer to the contrary.
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(r) "Term" shall mean the term of this Agreement as defined under Article 8
below.
(s) "Year" shall mean a calendar year.
1.2 Other Defined Terms. When capitalized and used herein, the following terms
shall have the meanings provided in the indicated Sections of this
Agreement: Commercial Operation (Section 8.1), Construction Schedule
(Section 2.1), Force Majeure (Section 5.2), FUA (Section 3.1), PURPA
(Section 3.1).
1.3 Accounting Terms. Any accounting terms used in this Agreement which are not
specifically defined shall have the meanings customarily given them in
accordance with generally accepted accounting principles.
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SECTION 2
CONSTRUCTION AND MAINTENANCE OF FACILITY
2.1 Construction. During construction of the Facility:
(a) Seller shall, at its expense, be responsible for the design and
construction of the Facility. Seller shall use reasonable efforts to
maintain the construction schedule in Exhibit 3 ("Construction
Schedule").
(b) Buyer shall provide the following construction services at Buyer's
expense:
1. Full access to Buyer's roads as necessary for the construction of
the Facility. Seller shall use Buyer's roads so as not to
unreasonably interfere with the Buyer's operations;
(c) Buyer shall provide such consents, certificates, opinions of counsel
and the like as are reasonably requested by Financier or any entity
providing financing in connection with the Facility.
(d) Buyer shall assist Seller, if necessary, in obtaining agreements for
water or sewage and in permitting activities and the coordinating of any
publicity or communication with the local community.
(e) Buyer agrees to grant to Seller any casement in its property which is
necessary to allow Seller to construct steam lines, condensate lines and
electric transmission lines under this Agreement.
2.2 Operation and Maintenance after Completion of Construction. After
completion of construction of the Facility:
(a) Seller shall operate and maintain the Facility, or cause the Facility to
be operated and maintained, pursuant to generally accepted industrial
cogeneration practices.
(b) Seller shall provide Buyer on the second Friday of each month a report
giving the following:
1. Any significant factors which may affect or have affected Facility
operations;
2. A summary log for each meter required under Article 4 for the
previous month reporting recorded measurements, calibration
corrections and the next scheduled calibration; and
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3. A log of all scheduled and unscheduled partial or total downtime
during the previous month, the reasons therefor, and a schedule of
all partial or total scheduled downtime for the next two months.
4. A summary log of the Steam Discount Benefits Received in the previous
month and the total to date through the end of the previous month
which would be used in calculating Buyer's liability under Section
7.1 (a).
(c) Buyer shall provide Seller on the second Friday of each month a report
giving the following:
1. Projected steam needs during the next two months, in such detail as
Seller reasonably requests; and
2. Any significant factors which may affect operations at Buyer's plant.
(d) Buyer shall grant all casements necessary to provide Seller access to
any areas of Buyer's property for operation, maintenance or notification
of steam and condensate lines to be installed by Seller under this
Agreement and for operation and maintenance of the Buyer's Auxiliary
Boiler.
Seller agrees to operate and maintain the Buyer's Auxiliary Boiler to
supply steam to Buyer when the Facility is not operating. Buyer agrees
to supply all fuel and other consumables for the Buyer's Auxiliary
Boiler. Maintenance and repair costs for the Buyer's Auxiliary Boiler
shall be to the account of the Buyer. Buyer shall maintain all permits
necessary for the continued operation of the Buyer's Auxiliary Boiler.
<PAGE>
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SECTION 3
DELIVERY, ACCEPTANCE AND PRICE OF STEAM
3.1 Minimum Annual Steam Usage. Buyer shall, beginning on the date of Commercial
Operation and in each Year thereafter during the Term, and in the partial
Year with which the Term ends, accept and utilize in its thermal industrial
processes, when Tendered, an amount of Cogenerated Steam sufficient to
preserve the Facility's status as a qualifying cogeneration facility under
applicable state and federal laws and regulations in effect at the time of
execution of this Agreement, including but not limited to, the Fuel Use Act
of 1978 ("FUA") and the Public Utility Regulatory Policies Act of 1978
("PURPA"). The foregoing obligation shall be satisfied, if during each such
Year or partial Year, Buyer accepts and so utilizes, when Tendered, a
quantity of Cogenerated Steam sufficient to average at least 23,000 pounds
per hour of operation of the Facility. Buyer shall use reasonable efforts to
accept and so utilize such greater amounts of Cogenerated Steam as may be
necessary to maintain such qualification in the event such laws or
regulations are amended so as to require greater utilization.
3.2 Corrective Efforts. Buyer shall notify Seller promptly if, at any time
during the term of this Agreement, Buyer has reason to believe that it will
fail to meet its obligations under Section 3.1. Seller and Buyer shall meet
no less than quarterly to review matters of mutual concern hereunder
including Buyer's usage of Steam for the Year to date, its projected demand
for the balance of the Year, and Seller's projected ability to supply Steam
for the balance of the Year. If it appears that Buyer will fail to meet its
obligations under Section 3.1, Seller and Buyer shall take all reasonable
action necessary to prevent such failure from resulting in loss of the
Facility's qualifying status under the FUA and PURPA, and regulations
promulgated thereunder. If the above actions to prevent loss of qualifying
status by reason of Buyer's failure to meet its obligations are
unsuccessful, Seller shall, in cooperation with Buyer, evaluate any
reasonable alternatives which would permit Seller to 1) continue the
operation of the facility, 2) maintain the PP&IA pursuant to the terms of
said agreement and 3) not subject Seller or its Owners to federal and state
governmental regulation under FUHCA, Federal Power Act, New Jersey public
utility law or otherwise. Seller may elect to implement any of these
alternatives which, in its sole judgement, it deems satisfactory.
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The taking of any actions described above shall not excuse the absolute
nature of Buyer's obligation under paragraph 3.1(a).
3.3 Minimum Tender. Seller shall Tender useful thermal energy to Buyer at a
rate at least equal to that which Buyer has agreed to accept and utilize in
Section 3.1.
3.4 Maximum Tender. In no event will Seller tender steam at an average rate in
excess of 50,000 pounds per hour during any year. However, should the Buyer
wish to increase this maximum, Seller agrees to take all reasonable action
to accommodate Buyer up to a maximum average rate of 60,000 pounds per hour.
Buyer agrees to provide Seller with at least one years' notice of its intent
to increase the maximum tender.
3.5 Price of Steam
(a) Buyer shall pay Seller an amount equal to 0.0 times the Avoided Boiler
Fuel Cost per thousand pounds of Cogenerated Steam for the first 35,000
pounds per hour of Cogenerated Steam accepted by Buyer in any Month.
(b) Buyer shall pay Seller an amount equal to 0.50 times the Avoided Boiler
Fuel Cost per thousand pounds of Cogenerated Steam for Cogenerated
Steam in excess of 35,000 pounds per hour accepted by Buyer in any
month.
(c) The price payable for Steam in any month shall be adjusted appropriately
to account for any difference between (1) the enthalpy of return
condensate based upon the actual quantities, proportions and temperature
thereof and (2) the enthalpy of return condensate meeting the
temperature and quantity specifications set forth in Exhibit 1.
3.6 Condensate Return. Buyer shall return condensate in the quantities and
meeting the specifications set forth in Exhibit 1.
<PAGE>
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SECTION 4
MEASUREMENTS AND PAYMENT TERMS
4.1 Measurement Devices
(a) Seller shall install, operate and maintain at its expense such
measurement devices as are appropriate to accurately measure Cogenerated
Steam and return condensate delivered under this Agreement.
(b) Each measurement device provided for under this Agreement shall be of
standard manufacture and shall be located as near as practicable to the
Steam Point of Delivery and Return Condensate Point of Delivery.
(c) Measurement devices shall, unless otherwise agreed, continuously record
the variables measured.
(d) Buyer shall have access to measuring devices at all reasonable hours,
and may inspect charts and test data during normal business hours.
4.2 Calibration and Adjustment. Seller shall periodically (at intervals of no
more than three months) calibrate and adjust all measurement devices using
methods with an accuracy of 3% in the case of steam meters, 3% in the case
of meters measuring return condensate, and 3 deg. F in the case of
temperature measuring devices. Seller will give Buyer at least 10 days
notice in order for Buyer to observe these calibrations. Seller shall not be
obligated to reschedule any scheduled calibration to facilitate such
observation. Seller shall furnish calibration reports to Buyers.
4.3 Corrections. If any measurement device shall be found to be out of
calibration by more than 4% in the case of Steam meters and 4% in the case
of devices measuring return condensate and where the period of inaccurate
registry can be determined, the readings of such device shall be corrected,
and the corrected readings shall be used as a basis for redetermining the
deliveries of Steam or condensate, as the case may be, during the period of
inaccurate registry. When the period of inaccurate registry cannot be
determined it shall be assumed to be one-half of the period between the
correction of the device that was registering inaccurately and the next
prior calibration, testing or proving of such measuring device. If the
measurement device shall be found to have registered inaccurately less than
the above specified percentages, then the readings of such devices shall not
be corrected.
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4.4 Audit. Within 90 days after (i) the end of any Year during the Term and (ii)
the end of the Term, buyer, at its expense, may cause an audit to be
performed of the cost to Seller of fuel used in the Facility for the period
then ended. Such audit shall be performed by an independent public
accounting firm of national standing selected by Buyer and acceptable to
Seller. If such audit reveals an error in Seller's computation of such cost
which resulted in billings for the applicable period varying from the amount
properly billable according to the audit, an appropriate adjustment shall be
made. Seller shall preserve all original test data, charts and similar
records in its possession, and all invoices, contracts and similar records
relating to its fuel costs for a period of at least three years.
4.5 Billing and Payment. Seller shall render invoices each Month for Cogenerated
Steam based upon the quantities and rates of deliveries thereof during the
preceding Month, determined pursuant to this Article 4. Buyer shall pay the
full invoiced amount for Cogenerated Steam within 10 business days after
receipt of Seller's monthly invoice therefore, irrespective of any defense
or any rights of set-off, recoupment, counterclaim or deduction arising out
of this Agreement or otherwise.
Seller shall render an invoice to Buyer for any necessary or reasonable
maintenance or repair work performed by Seller on the Buyer's Auxiliary
Boiler. Seller shall obtain Buyer's approval in advance before performing
maintenance or repair work beyond normal routine maintenance. Buyer shall
pay the full invoiced amount within 10 business days after receipt of
Seller's monthly invoice therefore, irrespective of any defense or any
rights of set-off, recoupment, counterclaim or deduction arising our of this
Agreement or otherwise.
<PAGE>
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SECTION 5
FORCE MAJEURE
5.1 Suspension of Obligations. During the continuance of any Force Majeure (as
defined below) with respect to an obligation of a party to this Agreement,
the affected obligations of such party, other than any obligation of either
party to pay money when and to the extent due under the terms of this
Agreement, shall be suspended. Buyer's obligations under Section 3.1 shall
be excused during the Term for twelve months in the aggregate due to any of
the following: an event of Force Majeure; for a major plant overhaul,
retooling or equipment failure; or for economic conditions which cause Buyer
to operate its plant at reduced capacity. After such period, Buyer's
obligations shall be unaffected by such events or conditions.
5.2 Force Majeure Defined. For purposes of this Agreement, Force Majeure shall
mean, with respect to the obligation of party, any event, occurrence,
condition which prevents the performance of such party's obligation under
this Agreement and which such party could not have prevented by the exercise
of reasonable diligence. Such events, occurrences, conditions include, but
are not limited to:
(a) acts of God or acts of providence including, without limitation,
epidemics, landslides, hurricanes, floods, washouts, lightning,
earthquakes, storm warnings, perils of the sea, extreme heat or extreme
cold, any other adverse weather conditions and whether preceded by,
concurrent with, or followed by acts or omissions of any human agency,
whether foreseeable or not, which may directly or indirectly contribute
to or result in such party's inability to perform its obligations.
(b) acts of government including, without limitations, laws, orders, rules,
decrees, judgments, judicial actions, regulations, acts of arrest or
restraint, by any government (da jure or de facto), or any agency,
subdivision or instrumentality thereof, having, claiming or asserting
authority or jurisdiction over the subject matter of this Agreement,
when any such act of government directly or indirectly contributes to or
result in such party's inability to perform its obligations;
(c) acts of civil disorder including, without limitation, acts of sabotage,
acts of the public enemy, acts of war (declared to undeclared),
blockades, insurrections, riots, mass protests or demonstrations and
police action in connection with or in reaction to any such acts of
civil disorder, when such act of civil disorder directly or indirectly
contributes or results in such party's inability to perform its
obligations;
<PAGE>
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(d) acts of industrial disorder including, without limitation, strikes,
lockouts, and picketing when any such act of industrial disorder
directly or indirectly contributes to or results in such party's
inability to perform its obligations; provided, however, that the
settlement of any labor dispute to prevent or end any such act of
industrial disorder shall be within the sole discretion of the party to
this Agreement involved in such labor dispute, and the requirement that
any inability to perform shall be corrected with reasonable diligence
shall not apply to labor disputes;
(e) inability to obtain or acquire at reasonable cost grants, servitudes,
rights-of-way, permits, licenses, or any other authorizations from third
parties or agencies (private or governmental) or inability to obtain or
acquire at reasonable cost necessary materials and supplies, to
construct, maintain and operate any facilities required for the
performance of any obligations under this Agreement, when any such
inability directly or indirectly contributes to or results in such
party's inability to perform its obligations.
5.3 Notice of Occurrence. The party affected shall promptly notify the other
party of the occurrence of Force Majeure.
5.4 Obligation to Correct Inability. The party whose performance is prevented by
Force Majeure shall use reasonable diligence to correct its inability to
perform.
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SECTION 6
ASSIGNMENT AND RIGHTS OF FINANCIER
6.1 Assignment. Except for any assignment in connection with any financing of
the Facility, any reassignment in connection with the exercise of remedies
by the Financier, or to any entity controlling, controlled by or under
common control with Seller, any assignment of this Agreement or any rights
therein by either party shall be void unless consented to in writing by the
other party such consent not to be unreasonably withheld. The subcontracting
of portions of the performance required by this Agreement shall not be
deemed an assignment for purposes of the foregoing.
6.2 Financing. Buyer is aware that Seller will enter into a loan agreement
and/or other agreement in connection with any loan under which a Financier,
its agents, successors or assigns, may acquire the rights of Seller under
this Agreement. Upon any such acquisition of Seller's rights, Buyer agrees
to accept the Financier or its nominee in place of Seller for all purposes
under or in connection with this Agreement for the remainder of the Term.
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SECTION 7
LIMITATION OF LIABILITY
7.1 Limitation of Liability
(a) To the extent that Buyer fails to meet its obligation under Section
3.1 in any year during the term of this Agreement or should Buyer
terminate this Agreement prior to Commercial Operation, Buyer agrees
that it will pay to Seller an amount equal to a percentage of the total
steam discount benefits received by Buyer in accordance with the
following:
YEAR IN WHICH DEFAULT
OR TERMINATION OCCURS LIABILITY
- --------------------- ---------
From effective date 100% of projected steam discount
of this Agreement through benefits for first year.
Commercial Operation (See Note 1)
1st year of operation 100% of actual steam discounts
received to date plus projected
steam discount benefits for
balance of year (See Note 1)
2nd year of operation 80% of total steam discount
benefits received to date
3rd year of operation 60% "
4th year of operation 40% "
5th year of operation 20% "
6th - 20th years of operation 0% "
- -------------
Note 1. Projected Steam Discount Benefits for the first year shall be calculated
based on an assumption of 8000 hours of operation and 34,000 pounds per
hour of steam delivered. The average cost per MMBtu (HHV) of fuel for
the formula in 1.1 (a) shall be based on PSE&G's CIG gas tariff on the
date of termination, if prior to the Date of Commercial Operation.
If default or termination occurs after the Date of Commercial Operation
but prior to the end of the first full year of operation, the liability
will be the actual Steam Discount Benefits received to date plus the
Projected Steam Discount Benefits for the balance of the year which will
be based on the foregoing formula, prorated for the remaining hours in
the year and using the average actual fuel cost to data.
<PAGE>
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(b) Seller shall not be liable to Buyer for damages arising out of Seller's
failure to deliver Steam to Buyer hereunder due to failure to achieve
Commercial Operation.
(c) IN NO EVENT, EXCEPT TO THE EXTENT THE LIQUIDATED DAMAGES PROVIDED FOR
HEREIN MAY BE CONSTRUED TO COVER SUCH DAMAGES, WHETHER AS A RESULT OF
BREACH OF CONTRACT, WARRANTY, GUARANTEE, INDEMNITY, TORT, INCLUDING
NEGLIGENCE, STRICT LIABILITY OR OTHERWISE, SHALL EITHER PARTY BE LIABLE
TO THE OTHER FOR INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR
EXEMPLARY DAMAGES INCLUDING BUT NOT LIMITED TO: LOSS OF PROFITS OR
REVENUE, DOWN TIME COSTS, COSTS OF PURCHASED OR REPLACED STEAM.
<PAGE>
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SECTION 8
TERM
8.1 Term. The Term of this Agreement shall be effective upon execution and shall
continue for a period of 20 years (initial term) from the Date of Commercial
Operation per the PP&IA.
8.2 Renewal Terms. Upon the expiration of the initial term, this Agreement may
be renewed for two (2) successive five (5) year renewal terms subject to
mutual agreement of the parties provided written notice of intent to renew
is given by either Buyer or Seller to the other no less than three (3) years
prior to the expiration of the then pending term.
8.3 Expiration. At the expiration of the initial term or a renewal term, if
applicable, this Agreement and each party's obligation(s) hereunder shall
automatically terminate as of the effective date thereof; provided, however,
expiration of this Agreement shall not relieve either party from any
obligation arising under this Agreement to pay any monies due to the other
party which monetary obligation was incurred prior to the date of expiration
of this Agreement.
8.4 Termination. Seller shall have the right to terminate this Agreement, upon
10 days notice to Buyer, at any time prior to the date of Commercial
Operation if the Seller is unable to obtain the necessary permits or
reasonable financing to construct the Facility and neither party shall have
any further liability to the other except for those claims existing prior to
the termination. Buyer shall have the right to terminate this Agreement,
upon 10 days notice to Seller, without incurring the liability in Section
7.1 if Seller fails to achieve Commercial Operation of the Facility by June
1, 1994, the sunset date in the PP&IA, or the date to which that date may be
extended by the terms of the PP&IA.
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SECTION 9
REGULATORY, LEGISLATIVE AND JUDICIAL ACTIONS
9.1 Denial of Regulatory Approvals. Upon any denial of any application for any
permit or license (or any revocation or adverse modification of any such
permit or license) to construct or operate the Facility by a regulatory body
with jurisdictional authority, Seller, may, upon 10 days notice to Buyer,
terminate this Agreement. Upon such termination, each party shall bear all
the costs that it has incurred resulting from participation under this
Agreement from the date of this Agreement to and including the effective
date of such termination.
9.2 Repeal or Amendment of PURPA. In the event that PURPA is for any reason no
longer in effect, or is amended in such a way as to deny the benefits of the
PUHCA exemption to Seller or its Owners, Seller will negotiate in good faith
with PSE&G pursuant to the terms of the PP&IA. If the repeal or amendment of
PURPA results in a change in the PP&IA purchase rates then Seller and buyer
will negotiate in good faith and execute an amendment to this Agreement
within thirty (30) days to preserve as nearly as practicable the economic
benefits of the project to the Parties.
9.3 Legislative or Judicial Action. In the event any legislative or judicial
body or governmental agency reduces or disallows any payments made by PSE&G
pursuant to the terms of the PP&IA and the PP&IA purchase rates are revised
as a result thereof then Seller and Buyer will negotiate in good faith and
execute an amendment to this Agreement within thirty (30) days to preserve
as nearly as practicable the economics benefits of the project to the
Parties. Such revised pricing shall be effective as of the effective date of
the legislative, judicial or governmental agency pronouncement requiring
revised purchase rates per the PP&IA. Such amendment and such revised
pricing shall be null and void ab initio in the event that any such
legislative, judicial or governmental agency pronouncement is not upheld on
appeal, and Seller shall, within forty-five (45) days thereafter, pay to
Buyer the amount by which the payments paid under such amendment exceed the
amount which would have been made under the contract in the absence of such
amendment.
9.4 Termination of Agreement. In the event that the PP&IA between Seller and
PSE&G is terminated for any reason or if Seller and Buyer cannot reach
agreement following good faith negotiation under Sec. 9.2 or 9.3, then
Seller may, upon 10 days notice to Buyer, terminate this Agreement and
neither party shall have any further liability to the other except for those
claims existing prior to the terminations.
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SECTION 10
WARRANTIES
10.1 General Warranties. Seller, a partnership, and Buyer, a corporation
warrants that it is an entity duly organized and in good standing in its
state of registration, is qualified to do business in such state in which
such qualification is necessary for its performance of this Agreement, and
has all requisite corporate or other appropriate power to execute, deliver
and perform this Agreement, and that its execution, delivery and performance
hereof has been duly authorized by all necessary corporate or other
appropriate action.
10.2 Commodity Warranties
(a) Seller warrants that the Steam it provides to Buyer will be delivered
with the characteristics specified in Exhibit 1. Buyer warrants that
the return condensate it provides to Seller will be delivered with the
characteristics specified in Exhibit 1. The foregoing warranties are
exclusive and in lieu of all other warranties, whether written or oral.
SELLER DISCLAIMS ANY OTHER WARRANTY WHICH MIGHT BE IMPLIED BY LAW OR
OTHERWISE, INCLUDING BUT NOT LIMITED TO MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE.
(b) Upon notification to Seller or Buyer that Steam or return condensate,
respectively, do not comply with the warranty stated in Paragraph
10.2(a), the party so notified will take prompt remedial action, at no
cost to the other party, to correct such non-conformance. Neither party
will continue to deliver non-conforming commodities after such notice
unless the other party so requests. Except for enthalpy adjustments
under Article 3, the foregoing remedy shall be the exclusive remedy for
any and all claims, however instituted, based on breach of the quality
warranties stated in Paragraph 10.2(a).
<PAGE>
-18-
SECTION 11
CONFIDENTIALITY
11.1 Confidentiality of Information. Except as hereinafter provided, all
information obtained by Seller, its employees, subcontractors, agents and
any other representatives of Seller from Buyer concerning the business of
Buyer shall be considered confidential if so designated in writing by Buyer
at or prior to delivery and shall be treated with the same standard of care
as Seller's own proprietary information of like nature and kind and such
information shall not be divulged without obtaining prior written approval
by Buyer. Except as hereinafter provided, all information obtained by
Buyer, its employees, agents and any other representatives of buyer from
Seller concerning the Facility and business of Seller shall be considered
confidential if so designated in writing by Seller at or prior to delivery
and shall be treated with the same standards of care as Buyer's own
proprietary information of like kind and nature and such information shall
not be divulged without obtaining prior written approval by Seller.
No information shall be subject to such restrictions if (a) it is received
by the restricted party from a source other than the other party, and such
source, to the restricted party's knowledge, is not similarly restricted;
(b) it is, or becomes, public information; (c) it was in the restricted
party's possession and not subject to restriction at the time of receipt
from the other party; or (d) it is developed independently by the
restricted party. In addition, either party may disclose information if
legally required to do so. With respect to any information, unless notice
is given that a longer restriction period is required, such restrictions
shall expire 3 years after receipt thereof. The obligation set forth in
this paragraph shall be a continuing one and shall survive the termination
of this Agreement.
11.2 Publicity. Neither party shall publish any promotional material or issue
any press release relating to this Agreement without the prior written
approval of the other party.
<PAGE>
-19-
SECTION 12
DISPUTES
12.1 Disputes. In the event of a dispute between the parties, such dispute shall
be settled if possible by friendly negotiation. Each party shall have the
right by giving notice to the other party to refer a dispute to a meeting
of senior headquarter's management of the parties. Such meeting shall be
held within fourteen (14) business days following the giving of written
notice. If the matter is not resolved within twenty (20) business days of
the date of the notice referring the matter to senior headquarter's
management, or such later date as may be mutually agreed upon, either party
pursue whatever legal remedies it may have.
<PAGE>
-20-
SECTION 13
MISCELLANEOUS
13.1 Governing Law. This Agreement shall be governed and construed in accordance
with the law of the State of New Jersey and, where applicable, the federal
law of the United States of America.
13.2 Notices. All invoices and notices required to be given herein shall be
effective upon receipt and shall be in writing and personally delivered or
mailed, first class mail, postage prepaid, or given by telex, telegram,
telecopy or other similar means to Buyer or to Seller at the following
address (or such other address as may hereafter be designated by the
respective parties in writing):
If to Seller: 1 River Road
Building 2 - 7th floor
Schenectady, New York 12345
Attn.: General Manager - J. Craig Fuehrer
If to Buyer: 267 Jefferson Avenue
Camden, New Jersey 01804
Attn.: General Manger - James Whitten
If to Financier:
13.3 Non-waiver. This Agreement is binding upon and shall inure to the benefit
of the parties hereto, their representatives, successors and assigns. No
failure or successive failures on the part of any party, its respective
successors or assigns, to enforce any covenant or agreement, and no waiver
or successive waivers on its part of any condition of this Agreement shall
operate as a discharge of such covenant, agreement or condition, or render
the same invalid, or impair the right of such party, its respective
successors or assigns, to enforce same in the event of any subsequent
breech or breeches by the other party, its successors or assigns.
13.4 Severability. In the event that any of the terms, covenants or conditions
hereof or the application of any such term, covenant or condition shall be
held invalid as to a party or circumstance by any court or arbitrator
having jurisdiction, the remainder of such term, covenant or condition
shall not be affected thereby and shall remain in full force and effect,
and the parties shall negotiate in good faith to substitute a term or
condition in this Agreement to replace the one held invalid.
<PAGE>
-21-
13.5 Captions. All indexes, titles, subject headings, section titles and similar
items are provided for the purpose of convenience and are not intended to
be inclusive, definitive, or to affect the meaning of the contents or scope
of this Agreement.
13.6 Entire Agreement and Amendments
(a) This Agreement contains the entire agreement and understanding between
the parties as to the subject matter of this Agreement and supersedes
and merges all prior agreements, commitments, representations,
discussions and understandings between the parties.
(b) No amendment or modification to this Agreement shall be binding or
effective unless in writing and signed by an authorized representative
of the party against whom enforcement is sought.
IN WITNESS WHEREOF, the Seller and Buyer have caused this Agreement to be
signed on the date first above written.
CAMDEN COGEN, L.P.
BY: /s/ RONALD J. RANKIN
------------------------------------
Senior Project Development Manager
CAMDEN PAPERBOARD CORPORATION
BY: /s/ JAMES B. WHITTEN
-------------------------------------
Vice President and General Manager
<PAGE>
- --------------------------------------------------------------------------------
CAMDEN COGEN L.P.;
a Delaware Limited Partnership
----------
AMENDMENT AND RESTATEMENT
dated as of
April 1, 1993
of the
CONSTRUCTION AND TERM LOAN AGREEMENT
Dated as of February 4, 1992
----------
GENERAL ELECTRIC CAPITAL CORPORATION,
as Collateral Agent for the Lenders,
THE SENIOR TRANCHE AGENT NAMED ON SCHEDULE 6 HERETO,
as Agent for the Tranche A Lenders,
THE JUNIOR TRANCHE AGENT NAMED ON SCHEDULE 6 HERETO,
as Agent for the Tranche B Lenders and the Tranche C Lenders,
THE TRANCHE A LENDERS PARTY HERETO,
THE TRANCHE B LENDERS PARTY HERETO,
THE TRANCHE C LENDERS PARTY HERETO,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as the Letter of Credit Issuer
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS ............................................. 1
1.1 Certain Defined Terms ................................... 1
Additional Contract ..................................... 1
Adverse Environmental Event ............................. 1
Affected Agent .......................................... 2
Affected Lenders ........................................ 2
Affiliate ............................................... 2
Agency Fees ............................................. 2
Agents .................................................. 2
Agreement ............................................... 2
Amended and Restated Security Deposit Agreement ......... 2
Annual Period ........................................... 3
Applicable Eurocurrency Reserve Requirements ............ 3
Applicable Law .......................................... 3
Assigned Contracts ...................................... 3
Assignees' Ratio ........................................ 3
Assignment and Security Agreement ....................... 3
Assignments ............................................. 3
Base Rate ............................................... 4
Base Rate Loans ......................................... 4
Basic Documents ......................................... 4
Borrowing Date .......................................... 4
Business Day ............................................ 5
Called Principal ........................................ 5
Capital Contribution Agreement .......................... 5
Capital Lease ........................................... 5
Certified Construction Costs ............................ 5
Code .................................................... 6
Cogen ................................................... 6
Cogen Pledge Agreement .................................. 6
Collateral .............................................. 6
Collateral Security Documents ........................... 6
Commitment Percentage ................................... 6
Commonly Controlled Entity .............................. 6
Completion Budget ....................................... 6
Completion Certificate .................................. 6
Conformed Agreement Date ................................ 6
Consents to Assignment .................................. 7
Construction Budget ..................................... 7
Construction Lender ..................................... 7
Construction Loan Maturity Date ......................... 7
Construction Loans ...................................... 7
Construction Note ....................................... 7
Contractor Letter of Credit ............................. 7
Contractual Obligation .................................. 7
Counterparty ............................................ 8
Date of Commercial Operation ............................ 8
Debt Service Account .................................... 8
Declared Event of Loss .................................. 8
Default ................................................. 8
-i-
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Default Rate ............................................. 8
Development Fee .......................................... 8
Discounted Value ......................................... 8
Dollars .................................................. 8
Drawing Date ............................................. 8
EBDIT .................................................... 8
Eligible Assignee ........................................ 9
Environmental Discharge .................................. 9
Environmental Notice ..................................... 9
EPC Contractor ........................................... 10
EPC Contracts ............................................ 10
Equipment Supply Contract ................................ 10
ERISA .................................................... 10
Eurodollar Base Rate ..................................... 10
Eurodollar Interest Period ............................... 10
Eurodollar Loans ......................................... 11
Eurodollar Rate .......................................... 11
Event of Default ......................................... 11
Event of Loss ............................................ 11
Facility ................................................. 12
FERC ..................................................... 12
Fixed Charge Coverage Ratio .............................. 12
Fixed Eurocurrency Reserves Requirements ................. 13
Floating Eurocurrency Reserves Requirements .............. 13
Fuel ..................................................... 13
GAAP ..................................................... 14
Gas Purchase Agreement ................................... 14
Gas Service Agreement .................................... 14
GE Capital's Ratio ....................................... 14
General Electric ......................................... 14
General Partner Term Loan ................................ 14
General Partner Term Loan Agreement ...................... 14
Governmental Approvals ................................... 14
Governmental Authority ................................... 14
Guarantee Obligation ..................................... 15
Hazardous Materials ...................................... 15
Indebtedness ............................................. 15
Independent Engineer ..................................... 16
Insolvency ............................................... 16
Insolvent ................................................ 16
Installment Payment Date ................................. 16
Insurance and Condemnation Proceeds Account .............. 16
Intercreditor Agreement .................................. 16
Interest Payment Date..................................... 16
Interest Rate ............................................ 16
Interest Rate Hedging Agreement .......................... 17
Interest Rate Hedging Obligations ........................ 17
Lenders .................................................. 17
Lenders' Site Representative ............................. 17
Letter Agreement ......................................... 17
Letter of Credit Fees .................................... 17
Letters of Credit ........................................ 17
LIBOR .................................................... 18
LIBOR (Reference Banks) .................................. 18
-ii-
<PAGE>
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Lien ..................................................... 18
Limited Partner .......................................... 18
Loans .................................................... 18
Midlantic ................................................ 18
Midlantic Agreements ..................................... 19
Mortgage ................................................. 19
Multiemployer Plan ....................................... 19
Notes .................................................... 19
Obligations .............................................. 19
Operation and Maintenance Agreement ...................... 19
Operator ................................................. 19
Original Loan Agreement .................................. 20
Participants ............................................. 20
Participations ........................................... 20
Partners ................................................. 20
Partnership Agreement .................................... 20
Partnership Required Payments Reserve Account ............ 20
PBGC ..................................................... 20
Permitted Assignee ....................................... 20
Permitted Investments .................................... 21
Permitted Liens .......................................... 21
Person ................................................... 22
Plan ..................................................... 22
Plans and Specifications ................................. 22
Power Purchase Agreement ................................. 22
Presence ................................................. 22
Project .................................................. 22
Project Contracts ........................................ 22
Project Cost ............................................. 22
Prudent Utility Practice ................................. 22
PSE&G .................................................... 23
PSE&G Gas Letter of Credit ............................... 23
PSE&G Subordinated Mortgage .............................. 23
PUC ...................................................... 23
PURPA Qualifying Facility ................................ 23
Reference Tranche A Term Lenders ......................... 23
Relevant Environmental Law ............................... 23
Reorganization ........................................... 23
Reportable Event ......................................... 24
Reporting Participant .................................... 24
Required Lenders ......................................... 24
Requirement of Law ....................................... 24
Responsible Officer ...................................... 24
Second Capital Contribution Date ......................... 24
Security Agent ........................................... 24
Security Agreement ....................................... 25
Security Deposit Agreement ............................... 25
Senior Debt Service Reserve Letter of Credit ............. 25
Settlement Date .......................................... 25
Single Employer Plan ..................................... 25
Site ..................................................... 25
Steam Host ............................................... 25
Steam Supply Agreement ................................... 25
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<PAGE>
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Stipulated Redemption Values ............................. 25
Subsidiary ............................................... 25
Substantial Completion ................................... 26
Term Loan ................................................ 26
Term Loan Conversion Date ................................ 26
Term Notes ............................................... 26
Title Company ............................................ 26
Tranche A Distribution ................................... 26
Tranche A Lender ......................................... 26
Tranche A Term Loan Maturity Date ........................ 26
Tranche C Lender ......................................... 27
Tranche C Term Loans ..................................... 27
Tranche C Term Notes ..................................... 27
Transfer Assignment and Acceptance ....................... 27
Transferee ............................................... 27
Treasury Yield ........................................... 27
Turnkey Contract ......................................... 27
Turnkey Contractor ....................................... 27
Uniform Commercial Code .................................. 27
Voting Stock ............................................. 28
Working Day .............................................. 28
Yield-Maintenance Premium ................................ 28
1.2 Other Definitional Provisions ............................ 28
SECTION 2. AMOUNTS AND TERMS OF TERM LOAN ........................... 28
2.1 Term Loans ............................................... 28
2.2 Term Notes ............................................... 28
SECTION 3. LETTERS OF CREDIT AND REIMBURSEMENT LOANS ................ 30
3.1 Letter of Credit Commitment .............................. 30
3.2 Payments by the Borrower ................................. 31
3.3 Letter of Credit Fees .................................... 31
3.4 Obligations Absolute ..................................... 31
3.5 Indemnification .......................................... 32
3.6 Liability of the Letter of Credit Issuer and
the Credit Lender ...................................... 32
3.7 Assignments .............................................. 33
3.8 Participations ........................................... 33
SECTION 4. PROVISIONS RELATING TO ALL EXTENSIONS OF CREDIT: FEES
AND PAYMENTS ........................................... 33
4.1 Agency Fee ............................................... 33
4.2 Prepayments .............................................. 33
4.3 Interest Rates and Payment Dates ......................... 35
4.4 Interest Rate Conversions ................................ 36
4.5 Pro Rata Payments ........................................ 36
4.6 Inability to Determine Eurodollar Rate ................... 37
4.7 Computation of Interest and Fees ......................... 38
4.8 Increased Costs .......................................... 38
4.9 Indemnity ................................................ 40
4.10 Taxes .................................................... 40
4.11 Limitation of Liability ................................. 41
-iv-
<PAGE>
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SECTION 5. REPRESENTATIONS AND WARRANTIES ........................... 42
5.1 Financial Statements ..................................... 42
5.2 Partnership Existence and Business; Partners ............. 42
5.3 Compliance with Law ...................................... 43
5.4 Power and Authorization; Enforceable Obligations ......... 43
5.5 Permits and Approvals .................................... 45
5.6 No Legal Bar ............................................. 46
5.7 No Proceeding or Litigation .............................. 46
5.8 No Default or Event of Loss .............................. 47
5.9 Ownership of Property; Liens ............................. 47
5.10 Taxes .................................................... 47
5.11 Federal Regulations ...................................... 48
5.12 ERISA .................................................... 48
5.13 Investment Company Act ................................... 49
5.14 Collateral Security Documents ............................ 49
5.15 Full Disclosure .......................................... 50
5.16 Project Contracts ........................................ 50
5.17 Property Rights, Utilities, Etc. ........................ 50
5.18 Compliance with Building Codes, Zoning Laws, Etc . ....... 51
5.19 Principal Place of Business, Etc. ........................ 51
5.20 Representations and Warranties ........................... 51
5.21 Material Technology ...................................... 51
5.22 Sufficiency of Basic Documents ........................... 52
5.23 Environmental Matters .................................... 52
5.24 Public Utility Status .................................... 53
SECTION 6. CONDITIONS PRECEDENT ..................................... 54
6.1 Conditions to the Term Loans ............................ 54
(a) Term Notes .......................................... 54
(b) Capital Contributions ............................... 54
(c) Legal Opinions ...................................... 54
(d) Authorizing Actions ................................. 55
(e) Interest Rate Hedging Obligations ................... 55
(f) Easements ........................................... 55
(g) Representations and Warranties ...................... 56
(h) Additional Documents ................................ 56
(i) Additional Matters .................................. 56
SECTION 7. AFFIRMATIVE COVENANTS .................................... 57
7.1 Completion of Facility ................................... 57
7.2 Conduct of Business, Maintenance of Existence, Etc. ...... 57
7.3 Payment of Obligations ................................... 57
7.4 Performance under Other Agreements ....................... 57
7.5 Insurance Coverage ....................................... 58
7.6 Adjustment of Losses ..................................... 62
7.7 Application of Payments .................................. 62
7.8 Evidence of Insurance .................................... 62
7.9 Insurance Report ......................................... 63
7.10 No Duty of the Agents to Verify .......................... 63
7.11 Inspection of Property; Books and Records ............... 63
7.12 Compliance with Laws ..................................... 63
7.13 Financial Statements ..................................... 63
7.14 Certificates; Other Information .......................... 64
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<PAGE>
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7.15 Taxes and Claims ......................................... 66
7.16 Mechanics' and Materialmen's Liens ....................... 67
7.17 Maintenance of Property .................................. 68
7.18 Notices .................................................. 68
7.19 Assignments of Additional Contracts: Maintenance
of Liens of the Collateral Security Documents:
Mortgage ................................................. 70
7.20 Agent for Service of Process ............................. 71
7.21 Employee Plans ........................................... 71
7.22 Qualifying Facility Status ............................... 71
7.23 Fiscal Year .............................................. 71
7.24 Easements ................................................ 71
7.25 Storage of Materials ..................................... 71
7.26 Gas Supply Arrangements .................................. 71
SECTION 8. NEGATIVE COVENANTS ....................................... 72
8.1 Merger, Sale of Assets, Purchases, Etc. .................. 72
8.2 Indebtedness; Guarantee Obligations ...................... 72
8.3 Distributions, Etc. ...................................... 73
8.4 Liens .................................................... 73
8.5 Nature of Business ....................................... 73
8.6 Amendment of Contracts, Etc. ............................. 73
8.7 Investments .............................................. 73
8.8 Qualifying Facility ...................................... 73
8.9 Leases ................................................... 74
8.10 Change of Office ......................................... 74
8.11 Change of Name ........................................... 74
8.12 Compliance with ERISA .................................... 74
8.13 Transactions with Affiliates and Others .................. 74
8.14 Alterations of the Site or Project ....................... 75
8.15 Changes in Plans and Budgets .......................... 75
8.16 Change Orders ............................................ 75
8.17 Capital Expenditures ..................................... 75
8.18 Sale and Leaseback ....................................... 75
8.19 Approval of Significant Additional Contracts ............. 75
8.20 Gas Purchase Agreements .................................. 76
SECTION 9. EVENTS OF DEFAULT ........................................ 76
SECTION 10. THE AGENTS AND RELATIONS AMONG LENDERS, ETC. ............. 82
10.1 Appointment of Agents, Powers and Immunities ............. 82
10.2 Reliance by Agent ...................................... 83
10.3 Defaults ................................................. 83
10.4 Rights as Lenders ...................................... 83
10.5 Indemnification .......................................... 84
10.6 Non-Reliance on Agent and Other Lenders ................ 84
10.7 Resignation or Removal of Agents ......................... 84
10.8 Authorization ............................................ 85
SECTION 11. MISCELLANEOUS ............................................ 85
11.1 Amendments and Waivers ................................... 85
11.2 Notices .................................................. 86
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11.3 No Waiver; Cumulative Remedies ........................... 87
11.4 Survival ................................................. 87
11.5 Expenses ................................................. 87
11.6 Indemnification .......................................... 87
11.7 Successors and Assigns; Transferees;
Transferred Interests .................................... 88
11.8 Severability ............................................. 90
11.9 Headings ................................................. 90
11.10 Counterparts ............................................. 90
11.11 The Landers Sole Beneficiaries ........................... 90
11.12 Maximum Interest Rate .................................... 90
11.13 Governing Law ............................................ 91
11.14 Submission to Jurisdiction; Waivers ...................... 91
-vii-
<PAGE>
SCHEDULES
Schedule 1 Site and Easements
2 Permits and Approvals
3 Recordings and Filings
4 Construction Budget
5 Ordinary Course Permits Schedule
6 Commitments; Commitment Percentages;
7 Borrower Letters of Credit
Addresses
EXHIBITS
Exhibit A-l Form of Tranche A Term Note
A-2 Form of Tranche B Term Note
A-3 Form of Tranche C Term Note
B Form of Completion Certificate
C Form of Assignment and Acceptance
-viii-
<PAGE>
AMENDMENT AND RESTATEMENT, dated as of April 1, 1993 of the CONSTRUCTION
AND TERM LOAN AGREEMENT, dated as of February 4, 1992 among (i) CAMDEN COGEN
L.P., a Delaware limited partnership (the "Borrower"), of which Cogen
Technologies Camden GP Limited Partnership, a Delaware limited partnership (the
"General Partner"), is the sole general partner, (ii) the lenders from time to
time parties to this Agreement (the "Lenders") and (iii) GENERAL ELECTRIC
CAPITAL CORPORATION, a New York corporation ("GE Capital"), as agent for the
Lenders thereunder and as collateral agent for the Lenders hereunder (in such
capacity, the "Agent") and as the issuer of the Letters of Credit hereinafter
referred to.
W I T N E S S E T H:
WHEREAS, the Borrower, the Lender, the Agent and GE Capital, as issuer
of the Letters of Credit (in such capacity, the "Letter of Credit Issuer")
desire to amend and restate the Original Loan Agreement (as hereinafter defined)
in its entirety, among other things, to add the Senior Tranche Agent (the
"Senior Tranche Agent"), the Junior Tranche Agent (the "Junior Tranche Agent"),
the Tranche A Lenders, the Tranche B Lenders, the Tranche C Lenders as parties
hereto and to substitute the Tranche A Term Loans, the Tranche B Term Loans and
the Tranche C Term Loans in lieu of the Term Loan;
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
------------
1.1 Certain Defined Terms. As used in this Agreement, the following
terms have the following meanings (such definitions to be equally applicable to
both singular and plural forms of the terms defined):
"Additional Contract": (a) any contract entered into by the
Borrower after the date of execution and delivery of this Agreement, relating to
(i) the transmission or sale by the Borrower of any of the Facility's electrical
or steam output or (ii) the supply or transportation of Fuel to the Facility or
(b) any material contract entered into by the Borrower after the date of
execution and delivery of this Agreement relating to the supply of goods or
services necessary for the construction, maintenance or operation of the
Facility (other than employment contracts).
"Adverse Environmental Event": any event relating to
environmental protection or any other environmental matter the occurrence of
which creates a material likelihood that (a) the Project cannot be completed (i)
in accordance with
<PAGE>
2
the schedule set forth in the Turnkey Contract, (ii) within the Construction
Budget and (iii) in the manner necessary for the Facility once completed to have
the capacity and functional ability to perform, on a continuing basis (ordinary
wear and tear excepted), in normal commercial operation, the functions and
substantially all the ratings for which it was specifically designed in
accordance with the Plans and Specifications or (b) the ability of the Borrower
to perform its obligations under the Basic Documents to which it is a party
would be materially and adversely affected.
"Affected Agent": with respect to the Tranche A Term Loans,
the Senior Tranche Agent and with respect to the Tranche B and/or Tranche C Term
Loans, the Junior Tranche Agent.
"Affected Lenders": with respect to the Tranche A Term Loans,
the Tranche A Lenders, with respect to the Tranche B Loans, the Tranche B
Lenders and, with respect to the Tranche C Loans, the Tranche C Lenders.
"Affiliate": of any designated Person, each Person which,
directly or indirectly, controls or is controlled by or is under common control
with such designated Person and, without limiting the generality of the
foregoing, shall include (i) any Person which beneficially owns or holds 10% or
more of any class of voting securities of such designated Person or 10% or more
of the equity interest in such designated Person and (ii) any Person of which
such designated Person beneficially owns or holds 10% or more of any class of
voting securities or in which such designated Person beneficially owns or holds
10% or more of the equity interest. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Agency Fees": as defined in subsection 4.1.
"Agents": the collective reference to the Agent, the Senior
Tranche Agent and the Junior Tranche Agent.
"Agreement": this amended and restated Construction and Term
Loan Agreement, as further amended, supplemented or otherwise modified from time
to time.
"Amended and Restated Security Deposit Agreement": as defined
in the Capital Contribution Agreement.
<PAGE>
3
"Annual Period": a period of four consecutive calendar
quarters.
"Applicable Eurocurrency Reserve Requirements": with respect
to any Eurodollar Interest Period, the sum of (a) the product of (i) GE
Capital's Ratio and (ii) (l.OO-Fixed Eurocurrency Reserve Requirements) and (b)
the product of (i) Assignees' Ratio and (ii) (l.00-Floating Eurocurrency Reserve
Requirements).
"Applicable Law": as to any Person, the Certificate of
Incorporation and By-Laws or partnership agreement or other organizational or
governing documents of such Person, or any law, treaty, rule or regulation or
any determination of an arbitrator or a court or other Governmental Authority,
in each case applicable to or binding upon such Person or any of its properties
or to which such Person or any of its properties is subject.
"Assigned Contracts": the collective reference to the Capital
Contribution Agreement, the Project Contracts and from and after the date of
execution thereof by the Borrower, each Additional Contract which the Senior
Tranche Agent has requested to be assigned to the Agent pursuant to subsection
7.19.
"Assignees' Ratio": with respect to each Eurodollar Interest
Period in respect of a Tranche A Term Loan, the quotient of (i) the aggregate
principal amount of all Tranche A Term Loans and all Participations in Tranche A
Term Loans granted by GE Capital, in each case, held by banks which, as of the
first day of such Eurodollar Interest Period, are members of the Federal Reserve
System and are required by any regulation of the Board of Governors of the
Federal Reserve System or any other Governmental Authority having jurisdiction
to maintain reserve requirements prescribed for eurocurrency funding, divided by
(ii) the aggregate principal amount of the Tranche A Term Loans.
"Assigmment and Security Agreement": the Assignment and
Security Agreement dated the Conformed Agreement Date by the General Partner in
favor of the Agent, as amended by Amendment No. 1 thereto dated as of April 1,
1993, and as the same may be further amended, supplemented or otherwise modified
from time to time.
"Assignments": the collective reference to (a) the Assignments
with respect to the Power Purchase Agreement, the Equipment Supply Contract, the
Steam Supply Agreement, the Gas Service Agreement, the Turnkey Contract, and the
Operation and Maintenance Agreement executed by the Borrower in favor of the
Agent for the ratable benefit of the Lenders, and (b) from and after the date
any other Additional Contract is assigned by the Borrower to the
<PAGE>
4
Agent for the ratable benefit of the Lenders pursuant to subsection 7.19, an
assignment with respect to such contract in form and substance reasonably
satisfactory to the Required Lenders.
"Base Rate": for any day, a rate per annum (rounded upwards,
if necessary, to the next l/16 of 1%) equal to the greatest of (a) the Prime
Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on
such day plus l/2 of 1%. "Prime Rate" shall mean the rate of interest per annum
publicly announced from time to time by Bankers Trust Company as its prime rate
in effect at its principal office in New York City. "Federal Funds Effective
Rate" shall mean, for any day, the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for the day of
such transactions received by the Senior Tranche Agent from three federal funds
brokers of recognized standing selected by it. If for any reason the Senior
Tranche Agent shall have determined (which determination shall be conclusive
absent demonstrable error) that it is unable to ascertain the Federal Funds
Effective Rate for any reason, including the inability or failure of the Senior
Tranche Agent to obtain sufficient quotations in accordance with the terms
hereof, the Base Rate shall be determined without regard to clause (b) of the
first sentence of this definition, as appropriate, until the circumstances
giving rise to such inability no longer exist. Any change in the Base Rate due
to a change in the Prime Rate or the Federal Funds Effective Rate shall be
effective on the effective date of such change in the Prime Rate or the Federal
Funds Effective Rate, respectively.
"Base Rate Loans": the Tranche A Term Loans, at such time as
such Loans are made or maintained at an interest rate based on the Base Rate.
"Basic Documents": the collective reference to this Agreement,
the Notes, the Letters of Credit, the Original Loan Agreement, the Partnership
Agreement, the Capital Contribution Agreement, the Collateral Security
Documents, the Intercreditor Agreement, the Interest Rate Hedging Agreements,
and the Project Contracts.
"Borrower Letters of Credit": as defined in subsection 3.1.
"Borrowing Date": each date on which the Borrower borrowed
Construction Loans and the Term Loan Conversion Date.
<PAGE>
5
"Business Day": a day other than a Saturday, a Sunday or any
other day which shall be in the City of New York or in Camden, New Jersey, a
legal holiday or a day on which banking institutions are authorized by law to
close in the City of New York or in Camden, New Jersey.
"Called Principal": the principal of the Term Note that is to
be prepaid pursuant to subsection 4.2(b).
"Capital Contribution Agreement": the Capital Contribution
Agreement, dated the Conformed Agreement Date, among the General Partner, GE
Capital, the Agent and the Borrower, as amended by Amendment No. 1 thereto dated
February 9, 1993, and Amendment No. 2 thereto, dated as of April 1, 1993, and as
the same may be further amended, supplemented or otherwise modified from time to
time.
"Capital Lease": any lease of property, real or personal,
which, in accordance with GAAP, would be required to be capitalized on a balance
sheet of the lessee.
"Certified Construction Costs": the following costs and
expenses incurred by the Borrower in connection with the development, design,
engineering, acquisition, construction, financing, testing, start-up and
completion of the Project to the extent such costs are set forth in a Cost
Certificate (as defined in the Original Loan Agreement) delivered to the Agent
pursuant to subsection 7.13 of the Original Loan Agreement: (a) all amounts
payable by the Borrower pursuant to any EPC Contract; (b) all costs and expenses
payable by the Borrower in connection with the performance by it of its
covenants in any EPC Contract; (c) the cost of the interconnection facilities
and other items required for the Project which are not included within the work
to be performed by any EPC Contractor under any EPC Contract; (d) the
Construction Management Fee (as defined in the Original Loan Agreement); (e) the
Origination Fee (as defined in the Original Loan Agreement): (f) the fees and
expenses set forth in subsection 11.5; (g) the aggregate amount of interest that
has accrued on the principal amount of the Construction Loans; (h) the aggregate
amount of Commitment Fees (as defined in the Original Loan Agreement) that has
accrued on the Commitments (as defined in the Original Loan Agreement): (i) the
aggregate amount of Letter of Credit Fees that has accrued on the Letters of
Credit; (j) the aggregate amount of drawings under the Letters of Credit; (k)
the Development Fee; and (1) all other costs and expenses associated with the
construction of the Project, including, without limitation, Third Party
Development Expenses (as defined in the Original Loan Agreement) and Direct
Development Expenses (as defined in the Original Loan Agreement); provided, that
in the case of the foregoing clauses (a) through (1) such costs and
<PAGE>
6
expenses were (1) included in the Construction Budget or (2) otherwise
specifically agreed to by the Required Lenders.
"City of Camden Letter of Credit": as defined in subsection
3.1.
"Code" : the Internal Revenue Code of 1986, as amended from
time to time.
"Cogen": Cogen Technologies Camden, Inc., a Texas corporation.
"Cogen Pledge Agreement": the Pledge and Security Agreement,
dated as of the Conformed Agreement Date, made by Cogen in favor of the Agent,
as amended by Amendment No. 1 thereto, dated as of April 1, 1993, and as the
same may be further amended, supplemented or otherwise modified from time to
time.
"Collateral": the collective reference to all real and
personal property, tangible and intangible, and the proceeds thereof, subjected
from time to time to the Liens created by the Collateral Security Documents.
"Collateral Security Documents": the collective reference to
the Mortgage, the Security Agreement, the Security Deposit Agreement, the
Assignments, the Consents to Assignment, the Assignment and Security Agreement,
the Cogen Pledge Agreement and any other agreement or instrument hereafter
specifically identified in writing by the Borrower and the Agent to be a
"Collateral Security Document".
"Commitment Percentage": as to any Lender, the percentage set
forth opposite the name of such Lender on Schedule 6.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within the meaning
of Section 4001 of ERISA or is part of a group which includes the Borrower and
which is treated as a single employer under Section 414 of the Code.
"Completion Budget": a budget, in form and substance
satisfactory to the Agents, as to the projected Certified Construction Costs
necessary to complete the Facility.
"Completion Certificate": a certificate substantially in the
form of Exhibit B, signed by the Borrower. "Conformed Agreement Date':
February 4, 1992.
<PAGE>
7
"Consents to Assignment": the collective reference to (a) the
Consents and Agreements executed and delivered by each party (other than the
Borrower) to the Power Purchase Agreement, the Equipment Supply Contract, the
Steam Supply Agreement, the Gas Service Agreement, the Turnkey Contract and the
Operation and Maintenance Agreement, respectively, and (b) from and after the
date on which the assignment of any Additional Contract set forth in clause
(a)(i) of the definition thereof or any Additional Contract set forth in clause
(a)(ii) of the definition thereof which has a term (including any renewal terms)
of six months or more, is consented to by each party thereto (other than the
Borrower), a consent and agreement with respect to such assignment in form and
substance reasonably satisfactory to the Required Lenders.
"Construction Budget": the budget attached hereto as Schedule
4, which budget sets forth in reasonable detail all costs anticipated to be
incurred by the Borrower in connection with the development and construction of
the Project, as amended from time to time in accordance with the terms hereof.
"Construction Lender": the "Lender" as defined in the Original
Loan Agreement.
"Construction Loan Maturity Date": the earlier to occur of (i)
the Second Capital Contribution Date and (ii) December 31, 1993 (subject, upon
the occurrence of an event of force majeure under the Power Purchase Agreement
which results in an extension of the deadline for the occurrence of the Date of
Commercial Operation (as defined in the Power Purchase Agreement) to an
extension, with the prior written consent of the Required Lenders, which shall
not be unreasonably withheld, for a period ending on the earlier of such
extended deadline for the occurrence of the Date of Commercial Operation and
March 31, 1994).
"Construction Loans": the construction loans made to the
Borrower under the Original Loan Agreement.
"Construction Note": the construction note issued to the
Construction Lender pursuant to the Original Loan Agreement.
"Contractor Letter of Credit": the better of Credit for the
account of the Turnkey Contractor in favor of the Borrower, in form and
substance satisfactory to the Required Lenders, to support the obligations of
the Turnkey Contractor under the Turnkey Contract.
"Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
<PAGE>
8
"Counterparty": the Person (other than the Borrower) party to
an Interest Rate Hedging Agreement.
"Date of Commercial Operation": as defined in the Power
Purchase Agreement.
"Debt Service Account": the Junior Debt Service Account and
the Senior Debt Service Account.
"Debt Service Reserve Amount": as defined in the Security
Deposit Agreement.
"Declared Event of Loss": an Event of Loss which the Required
Lenders have declared in writing to the Borrower to constitute a Declared Event
of Loss.
"Default": any of the events specified in Section 9, whether
or not any requirement for the giving of notice, the lapse of time, or both, or
for the happening of any other condition, has been satisfied.
"Default Rate": the Interest Rate plus 2%.
"Development Fee": a fee payable to the General Partner on the
Term Loan Conversion Date in an amount equal to the lesser of (i) $11,486,000
minus the Operating Profits (as defined in the Partnership Agreement) allocable
to the General Partner under Section 5.1 of the Partnership Agreement and (ii)
the amount by which the Construction Loan Commitments exceed the outstanding
principal of and accrued and unpaid interest on the Construction Loans on the
Construction Loan Maturity Date after providing for the payment in cash of all
other unpaid Certified Construction Costs then due or to be incurred in
connection with the completion of the Project.
"Discounted Value": with respect to the Called Principal, the
amount calculated by discounting all remaining scheduled debt service payments
with respect to such Called Principal from their respective scheduled due dates
to the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on a quarterly
basis) equal to the Treasury Yield with respect to such Called Principal.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
"Drawing Date": the date on which the beneficiary of any
Letter of Credit makes a drawing thereunder.
"EBDIT" : for any period, net income before deductions for
depreciation expense, amortization expense, interest expense and income taxes.
<PAGE>
9
"Eligible Assignee": (i) any commercial bank or bank holding
company organized under the laws of the United States, or any State thereof, and
having total assets in excess of $3,000,000,000; (ii) any savings and loan
association or savings bank organized under the laws of the United States, or
any State thereof, and having "tangible capital" (as determined in accordance
with the minimum regulatory capital regulations promulgated by the Office of
Thrift Supervision, Department of the Treasury, pursuant to (SS) 567.9 of Volume
54, No. 215 of the Federal Register) in excess of $600,000,000; (iii) a
commercial bank or bank holding company organized under the laws of any other
country which is a member of the Organization of Economic Cooperation and
Development ("OECD") or has concluded special lending arrangements with the
International Monetary Fund associated with its General Arrangements to Borrow,
or of the Cayman Islands, or a political subdivision of any such country, and
having total assets in excess of $3,000,000,000 (or its equivalent in another
currency), provided that any such bank is acting through a branch or agency
located in the United States: (iv) the central bank of any country which is a
member of the OECD; (v) a finance company, insurance company or other financial
institution or fund (whether a corporation, partnership or other entity) which
is engaged in making, purchasing or otherwise investing in commercial loans in
the ordinary course of its business, and in the case of a proposed Tranche B
Lender or Tranche C Lender, having equity capital in excess of $150,000,000 (or
its equivalent in another currency) provided, however, with respect to the
Tranche A Term Loans an Eligible Assignee shall not be a Person described in
this clause (v); and (vi) any other financial institution reasonably acceptable
to the Senior Tranche Agent, the Junior Tranche Agent and the Borrower provided,
that any such institution referred to in the preceding clauses (i) through (vi)
is not listed as a competitor of the General Partner or an Affiliate of the
General Partner in that certain letter agreement dated as of February 4, 1992
between the Partnership and the Agent or is not an Affiliate of any such
competitor.
"Environmental Discharge": any discharge or release of
pollutants or effluent or emissions of any kind in violation of any Relevant
Environmental Law.
"Environmental Notice": any written complaint, order, citation
or other written communication from any Governmental Authority affecting or
relating to (a) the Project or (b) the Borrower or any activity or operations at
any time conducted by the Borrower on or in connection with the Project, in
either case, with regard to the occurrence, presence of, exposure to or
threatened occurrence, presence of or exposure to Environmental Discharges,
Hazardous Materials or any other environmental
<PAGE>
10
matter, the circumstances of which might result in or constitute a violation of
any Relevant Environmental Law.
"EPC Contractor": any contractor who, together with the
Borrower, is a party to an EPC Contract.
"EPC Contracts": the collective reference to the Equipment
Supply Contract and the Turnkey Contract.
"Equipment Supply Contract": the Equipment Contract, dated as
of February 3, 1992, by and between the Borrower and General Electric, and any
contract that has been substituted therefor in accordance with Section 9, in
each case as amended, supplemented or otherwise modified in accordance with the
provisions of subsection 8.6.
"ERISA": the Employee Retirement Income Security Act Of 1974,
as amended from time to time.
"Eurodollar Base Rate": LIBOR or LIBOR (Reference Banks), as
applicable.
"Eurodollar Interest Period": with respect to each Eurodollar
Loan:
(a) initially, the period from and including the Term Loan
Conversion Date to but excluding May 1, 1993; and
(b) thereafter, each period from and including the last
day of the next preceding Eurodollar Interest Period applicable to such
Eurodollar Loan and ending on the numerically corresponding day in the third
succeeding month;
provided that the foregoing provisions are subject to the following:
(A) if any Eurodollar Interest Period would otherwise end
on a day which is not a Working Day, such Eurodollar Interest Period shall be
extended to the next succeeding Working Day unless the result of such extension
would be to extend such Eurodollar Interest Period into another calendar month,
in which event such Eurodollar Interest Period shall end on the immediately
preceding Working Day;
(B) any Eurodollar Interest Period that would otherwise
extend beyond the Tranche A Term Loan Maturity Date shall end on the Tranche A
Loan Maturity Date or, if such day shall not be a Working Day, on the preceding
Working Day; and
(C) any Eurodollar Interest Period that begins on the last
Working Day of a calendar month (or on a
<PAGE>
11
day for which there is no numerically corresponding day in the calendar month at
the end of such Eurodollar Interest Period) shall end on the last Working Day of
a calendar month.
"Eurodollar Loans": the Tranche A Term Loans, at such time as
such Loans are made or maintained at an interest rate based on the Eurodollar
Rate.
"Eurodollar Rate": with respect to each Eurodollar Loan for
each Eurodollar Interest Period applicable thereto, the rate per annum (rounded
upwards to the nearest whole multiple of l/lOOth of one percent) equal to the
quotient of (a) the Eurodollar Base Rate, divided by (b) the Applicable
Eurocurrency Reserve Requirements.
"Event of Default": any of the events specified in Section 9;
provided that any requirement for the giving of notice, the lapse of time, or
both, or for the happening of any other condition, has been satisfied.
"Event of Loss": (a) the actual or constructive total loss of
the Facility, or the condemnation, confiscation or seizure of, or requisition of
title to all or substantially all of the Project, or the requisition by any
Governmental Authority for a period exceeding six months of the use of all or
substantially all of the Project; (b) the loss, destruction or damage of, or
condemnation, confiscation or seizure of, or requisition of title to, or
requisition by any Governmental Authority of the use of, such portion of the
Project as shall render the Facility unable to operate at substantially its
designed level of output or as a Qualifying Facility, unless (in a situation in
which clauses (a) and (c) are not applicable) (i) no Event of Default shall have
occurred and be continuing at the time of occurrence of any of the events
specified above in this clause (b), (ii) in the reasonable opinion of the
Required Lenders, it is feasible to restore, rebuild or replace the affected
portion of the Project and (iii) in the reasonable opinion of the Required
Lenders, sufficient funds are or will be available to the Borrower (1) to
restore, rebuild or replace the affected portion of the Project so that the
Facility will be able to operate at substantially its designed level of output
and to operate as a Qualifying Facility within 18 months after such loss and (2)
to pay all scheduled installments of principal of and interest on the then
outstanding Term Notes and obligations in respect of the Letters of Credit until
such restoration, rebuilding or replacement is completed; (c) in the reasonable
opinion of the Required Lenders, the Facility, is subject to being deemed by any
Governmental Authority having jurisdiction to be, or is subject to regulation
as, an "electric utility", "electric corporation", "electrical company", "public
utility" or a "public utility holding
<PAGE>
12
company" under any law, rule or regulation of any Governmental Authority, except
where (i) the effect of such determination would result only in the imposition
of reporting or safety requirements which, in the reasonable opinion of the
Required benders, are non-burdensome in nature and (ii) in the event that steam
from the Project is supplied, directly or indirectly, to Persons other than the
Steam Host under the Steam Supply Agreement or otherwise, the Borrower shall
have obtained a declaratory order or other official assurance, in each case, in
form and substance reasonably satisfactory to the Required benders, from the PUC
to the effect that such sales will not result in the Facility, the owner thereof
or any of such owner's Affiliates being deemed to be, or subject to regulation
as, a "public utility" under any Applicable Law (other than regulation of the
nature described in clause (i) of this clause (c)); (d) a change shall have
occurred after the date hereof in any Applicable Law or in the interpretation
thereof by any Governmental Authority charged with the administration or
interpretation thereof which, in the reasonable opinion of the Required Lenders,
would make any of the Basic Documents subject to cancellation, suspension or
termination, which cancellation, suspension or termination, in the reasonable
opinion of the Required Lenders, could reasonably be expected to have a material
adverse effect on the economic viability of the Project; or (e) an event of
force majeure or other event or condition shall exist which permits or requires
any party to any of the Basic Documents to cancel, suspend or terminate its
performance thereunder in accordance with the terms thereof or which could
excuse any such party from liability for non-performance thereunder, unless (i)
the parties to such Basic Document shall have effectively waived the condition
giving rise to such right or requirement with respect to such cancellation,
suspension, termination or release from liability, or (ii) in the reasonable
opinion of the Required Lenders, such cancellation, suspension, termination or
release from liability could not reasonably be expected to have a material
adverse effect on the economic viability of the Project.
"Facility": having a name plate combined cycle cogeneration
facility rating of 151 megawatts to be constructed on the Site pursuant to the
EPC Contracts, including all equipment related thereto.
"FERC": the Federal Energy Regulatory Commission or any
successor or analogous federal Governmental Authority.
"Fixed Charge Coverage Ratio": for any period of
determination, the ratio of:
(a) the EBDIT of the Borrower for the immediately preceding
four consecutive quarterly
<PAGE>
13
periods (plus or minus any amounts paid by the Counterparty to
the Borrower under any Interest Rate Hedging Agreement included in
EBDIT for such period) to
(b) (i) so long as GE Capital shall be the sole holder of the
Term Notes, the sum of (x) the aggregate amount of Tranche A
Distributions to be made to the Limited Partner pursuant to Section
4.3(a) of the Partnership Agreement during such periods, (without
giving effect to the proviso thereto) plus (y) the sum of (A) the
aggregate amount of interest payable on the General Partner Term Loan
during such periods and (B) the aggregate amount of scheduled
repayments of principal of the General Partner Term Loan to be made
during such period or (ii) if GE Capital shall not be the sole holder
of the Term Notes, the aggregate amount of scheduled payments of
principal of and interest on the Tranche A Term Loans (net of any
amounts payable by the Counter-party to the Borrower under any Interest
Rate Hedging Agreement during such period) to be made during such
period.
"Fixed Eurocurrency Reserves Requirements": the aggregate of
the rates (expressed as a decimal) of reserve requirements current on the date
two Working Days prior to the Term Loan Conversion Date (including, without
limitation, basic, supplemental, marginal and emergency reserves under any
regulations of the Board of Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect thereto), as in effect
on the Term Loan Conversion Date, dealing with reserve requirements prescribed
for eurocurrency funding (currently referred to as "Eurocurrency liabilities" in
Regulation D of such Board) required to be maintained by a member bank of such
system.
"Floating Eurocurrency Reserves Requirements": with respect to
any Eurodollar Interest Period for any Eurodollar Loan, the aggregate of the
rates (expressed as a decimal) of reserve requirements current on the date two
Working Days prior to the beginning of such Eurodollar Interest Period
(including, without limitation, basic, supplemental, marginal and emergency
reserves under any regulations of the Board of Governors of the Federal Reserve
System or other Governmental Authority having jurisdiction with respect
thereto), as now and from time to time hereafter in effect, dealing with reserve
requirements prescribed for eurocurrency funding (currently referred to as
"Eurocurrency liabilities" in Regulation D of such Board) required to be
maintained by a member bank of such system.
"Fuel": all fuel purchased by the Borrower for the operation
of the Facility.
<PAGE>
14
"GAAP": generally accepted accounting principles in the
United States as in effect from time to time.
"Gas Purchase Agreement": any agreement (other than the Gas
Service Agreement) to be entered into by the Borrower pursuant to which the
Borrower will purchase natural gas or other Fuel, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms hereof.
"Gas Service Agreement": the Gas Service Agreement, dated May
15, 1991, between the Borrower and PSE&G, as amended by the First Amendment
thereto dated November 1, 1991 and as the same may be further amended,
supplemented or otherwise modified from time to time in accordance with the
provisions of subsection 8.6.
"GE Capital's Ratio": with respect to each Eurodollar Interest
Period, the quotient of (i) a number equal to the aggregate principal amount of
the Tranche A Term Loans minus the aggregate principal amount of all Tranche A
Term Loans and all Participations in Tranche A Term Loans granted by GE Capital,
in each case, held by any banks which, as of the first day of such Eurodollar
Interest Period, are members of the Federal Reserve System and are required by
any regulation of the Board of Governors of the Federal Reserve System or any
other Government Authority having jurisdiction to maintain reserve requirements
prescribed for eurocurrency funding, divided by (ii) the aggregate principal
amount of the Tranche A Term Loans.
"General Electric": General Electric Company, a New York
corporation.
"General Partner Term Loan": a "Term Loan" as such term is
defined in the General Partner Term Loan Agreement.
"General Partner Term Loan Agreement": the Term Loan Agreement
dated as of the Conformed Agreement Date between the General Partner and GE
Capital, as the same may be amended, supplemented or otherwise modified from
time to time.
"Governmental Approvals": authorizations, consents, approvals,
waivers, exemptions, variances, franchises, permissions, permits and licenses
of, and filings and declarations with, any Governmental Authority.
"Governmental Authority": any nation or government, any state
or other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
<PAGE>
15
"Guarantee Obligation": as to any Person, any obligation of
such Person guaranteeing or in effect guaranteeing any Indebtedness, leases,
dividends or other obligations (the "primary obligations") of any other Person
(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, 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, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (d) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof;
provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation shall be deemed to be the lower
of (a) an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee Obligation is made and (b) the
maximum amount for which the guarantor may be liable pursuant to the terms of
the instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such Person may be liable are not
stated or determinable, in which case the amount of such Guarantee Obligation
shall be such Person's maximum reasonably anticipated liability in respect
thereof as determined by the Borrower in good faith.
"Hazardous Materials": asbestos and any toxic or hazardous
substances, materials, wastes or contaminants, medical wastes, infectious
wastes, polychlorinated biphenyls ("PCB's"), paint containing lead and urea
formaldehyde foam insulation, as any of such terms is defined from time to time
in or for the purposes of any Relevant Environmental Law.
"Indebtedness": as to any Person, at a particular date, the
sum (without duplication) at such date of (a) all indebtedness of such Person
for borrowed money or for the deferred purchase price of property or services
(other than obligations under agreements for the purchase of goods and services
in the normal course of business which are not more than 90 days past due), or
which is evidenced by a note, bond, debenture or similar instrument; (b) all
obligations of such Person under Capital Leases or operating leases: (c) all
obligations of such Person in respect of letters of credit, acceptances or
similar obligations issued or created for the account of such
<PAGE>
16
Person; (d) all liabilities secured by any lien on any property owned by such
Person even though such Person has not assumed or otherwise become liable for
the payment thereof: and (e) any obligation of such Person or a Commonly
Controlled Entity to a Multiemployer Plan.
"Independent Engineer": an independent engineering firm which shall be
reasonably acceptable to the Borrower and engaged by the Agent to examine the
Plans and Specifications, changes in the Plans and Specifications and cost
breakdowns and estimates, to make periodic inspections, on behalf of the
Lenders, of the work of construction of the Facility, to advise and render
reports to the Lenders concerning the Project, and to witness and verify tests
on behalf of the Lenders, including, without limitation, tests conducted in
determining Substantial Completion.
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of such term as used in
Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Installment Payment Date": each date set forth under
"Installment Payment Date" as set forth, with respect to the Tranche A Term
Loans, on the Tranche A Term Notes, with respect to the Tranche B Term Loans, on
the Tranche B Term Notes and, with respect to the Tranche C Term Loans, the
Tranche C Term Notes.
"Insurance and Condemnation Proceeds Account": the Insurance
and Condemnation Proceeds Account established pursuant to the Security Deposit
Agreement.
"Intercreditor Agreement": the Intercreditor and Subordination
Agreement dated as of April 1, 1993, among the Senior Tranche Agent, the Junior
Tranche Agent, the Tranche A Lenders, the Tranche B Lenders, the Tranche C
Lenders, the Letter of Credit Issuer and the Counterparty, as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
the provisions thereof.
"Interest Payment Date": each Installment Payment Date.
"Interest Rate": (a) with respect to Tranche A Term Loans
outstanding as Base Rate Loans, a rate per annum equal to the Base Rate for the
applicable Base Rate Interest Period plus the margin specified in the Letter
Agreement, (b) with respect to Tranche A Term Loans outstanding as Eurodollar
Loans, a rate per annum equal to the Eurodollar Rate for the applicable
Eurodollar Interest
<PAGE>
17
Period plus the margin specified in the Letter Agreement and (c) with respect to
the Tranche B Term Loans and the Tranche C Term Loans, the interest rate
specified in the Letter Agreement to be applicable to such Loans.
"Interest Rate Hedging Agreement": as defined in subsection
6.1(e).
"Interest Rate Hedging Obligations": as defined in subsection
6.1(e).
"Junior Debt Service Account" as defined in the Security
Deposit Agreement.
"Lenders": the collective reference to the Tranche A Lenders,
the Tranche B Lenders, the Tranche C Lenders, the Letter of Credit Issuer and
the Counterparty.
"Lenders' Site Representative": a representative retained by
the Agent during the period from the Conformed Agreement Date until completion
of the Facility (a) to review (i) all plans and specifications (including,
without limitation, data relating to design changes in the Facility), (ii)
quality control data, (iii) invoices relating to construction progress and to
services to be performed and materials to be supplied on a cost reimbursement
basis, and invoices relied on by the Turnkey Contractor in verifying
construction progress, (iv) contracts relating to the engineering of, the
procurement of services, equipment, supplies or other materials for, or the
construction of, the Facility (other than contracts relating to site monitoring,
inspection and quality control services and contracts relating to support
services provided by Persons which are not Affiliates of the Borrower) and (v)
all other data relating to construction progress and (b) to monitor, witness and
appraise the construction of the Facility, review and audit the records
specified in clauses (i) through (v) above and verify the costs specified in
clauses (i) through (v) above.
"Letter Agreement": the agreement, dated as of February 4,
1992, as amended as of April 1, 1993, between the Borrower and GE Capital with
respect to the amount of fees, interest and expenses payable hereunder and under
the Notes, as further amended, supplemented or otherwise modified from time to
time.
"Letter of Credit Fees": as defined in subsection 3.3.
"Letters of Credit": the collective reference to the PSE&G Gas
Letter of Credit, the City of Camden Letter of Credit, the Tender Bond and the
Senior Debt Service Reserve Letter of Credit.
<PAGE>
18
"LIBOR": with respect to any Eurodollar Interest Period, the
rate per annum determined on the basis of the offered rates for deposits in
Dollars for such Eurodollar Interest Period which appear on Telerate Page 3750
as of 11:00 a.m., London time, on the day that is two Working Days prior to the
beginning of such Eurodollar Interest Period. If such rate does not appear on
the Telerate Page 3750, the rate in respect of such Eurodollar Interest Period
will be determined as if the parties had specified "LIBOR (Reference Banks)" as
the Eurodollar Base Rate.
"LIBOR (Reference Banks)": with respect to any Eurodollar
Interest Period, a rate per annum equal to the arithmetic mean of the rates
offered by the Reference Tranche A Term Lenders at approximately 11:00 a.m.,
London time, on the day that is two Working Days prior to the first day of such
Eurodollar Interest Period for deposits in Dollars to prime banks in the London
interbank market for a period equal to the number of days in such Eurodollar
Interest Period and in an amount substantially equal to the amount of the
Tranche A Term Loans to be outstanding during such Eurodollar Interest Period.
The Senior Tranche Agent will request the principal London office of each of the
Reference Tranche A Term Lenders to provide a quotation of its rate. If at least
two such quotations are provided, the rate for such Eurodollar Interest Period
will be the arithmetic mean of the quotations. If fewer than two quotations are
provided as requested, the rate for such Eurodollar Interest Period will be the
arithmetic mean of the rates quoted by major banks in New York City, selected by
the Senior Tranche Agent, at approximately 11:00 a.m., New York City time, on
the first day of such Eurodollar Interest Period to leading European banks for a
period equal to the number of days in such Eurodollar Interest Period and in an
amount equal to the amount of the Tranche A Term Loans to be outstanding during
such Eurodollar Interest Period.
"Lien": any mortgage, security interest, pledge,
hypothecation, encumbrance or lien (statutory or other) of any kind or nature
whatsoever (including, without limitation, any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any such
agreement, and the filing of any statement under the Uniform Commercial Code or
comparable law of any jurisdiction).
"Limited Partner": GE Capital.
"Loans": Term Loans.
"Midlantic": Midlantic National Bank, a national banking
association.
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19
"Midlantic Agreements": the collective reference to (a) the
Revolving Loan Agreement dated as of April 1, 1993 (the "Revolving Loan
Agreement") between the Borrower and Midlantic, (b) the Security Agreement dated
as of April 1, 1993 between the Borrower and Midlantic and (c) each other
agreement, document and instrument entered into in connection with the
transactions contemplated by the Revolving Loan Agreement, as the same may be
amended, supplemented or otherwise modified in accordance with subsection 8.6.
"Mortgage": the Mortgage entered into between the Borrower and
the Agent for the benefit of the Lenders, as amended by Amendment No. 1 thereto
dated as of April 1, 1993, as the same may be further amended, supplemented or
otherwise modified from time to time.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Non-Competition Agreement": the Non-Competition Agreement,
dated as of December 31, 1990, between the Borrower and GE Power Funding, as the
same may be amended, supplemented or otherwise modified from time to time.
"Notes": : the Term Notes.
"Obligations": all the unpaid principal amount of, and accrued
interest on, the Notes and all other obligations and liabilities of the Borrower
to the Agents and the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of or in connection with this Agreement, the Notes, the
Letters of Credit, Interest Rate Hedging Agreement or the Collateral Security
Documents, whether on account of principal, interest, reimbursement obligations,
fees, indemnities, costs, expenses (including, without limitation, all fees and
disbursements of counsel to the Agents and the Lenders but subject to the terms
of the Letter Agreement) or otherwise. "Operating Budget": as defined in
subsection 7.14(h).
"Operation and Maintenance Agreement": the Operation and
Maintenance Agreement, dated as of February 4, 1993, between the Borrower and
the Operator and any contract that has been substituted therefor in accordance
with Section 9, in each case as amended, supplemented or otherwise modified from
time to time in accordance with the provisions of subsection 8.6.
"Operator": North American Energy Services Company, a
Washington corporation,or any other Person substituted
<PAGE>
20
therefor, reasonably satisfactory to the Required Lenders, which is responsible
for the operation and maintenance of the Facility pursuant to the Operation and
Maintenance Agreement.
"Original Loan Agreement": the Construction and Term Loan
Agreement, dated as of the Conformed Agreement Date, between the Borrower and GE
Capital, as agent, Construction Lender and Letter of Credit Issuer, as amended
by Amendment No. 1 thereto dated as of February 9, 1993.
"Participants": the collective reference to the Borrower, the
General Partner and each party to a Project Contract.
"Participations": as defined in subsection 11.7(c).
"Partners": collectively, the General Partner and the Limited
Partner.
"Partnership Agreement": the collective reference to (a) the
Amended and Restated Certificate of Limited Partnership of the Borrower, dated
as of March 24, 1988, filed with the Secretary of State of the State of Delaware
on March 25, 1988, (b) the Limited Partnership Agreement of the Borrower, dated
March 25, 1988 (as amended by the first amendment thereto, dated December 28,
1990, the second amendment thereto, dated December 31, 1990 and the third
amendment thereto, dated July 26, 1991), (c) the Amended and Restated
Certificate of Limited Partnership of the Borrower, dated as of December 31,
1990, as filed in the office of the Secretary of State of the State of Delaware
on January 11, 1991, (d) the Amended and Restated Certificate of Limited
Partnership of the Borrower, dated as of July 26, 1991, as filed in the office
of the Secretary of State of the State of Delaware on July 31, 1991, (e) the
Amendment to and Restatement of Limited Partnership of the Borrower, dated as of
December 1, 1991 and (f) the Amended and Restated Agreement of Limited
Partnership of the Borrower, dated February 9, 1993 (as amended by Amendment No.
1993),1 thereto dated as of April 1, in each case as amended, supplemented or
otherwise modified from time to time in accordance with the provisions of
subsection 8.6.
"Partnership Payments Reserve Account" the Required Payments
Reserve Account established pursuant to the Amended and Restated Security
Deposit Agreement.
"PBGC": the Pension Benefit Guarantee Corporation.
"Permitted Assignee": as defined in subsection 11.7(b).
<PAGE>
21
"Permitted Investments": (a) securities issued or directly and
fully guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition, (b) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with any Lender or with any domestic commercial bank of
recognized stature having capital and surplus in excess of $500,000,000, (c)
repurchase obligations with a term of not more than thirty days for underlying
securities of the types described in clauses (a) and (b) above entered into with
any financial institution meeting the qualifications specified in clause (b)
above, and (d) commercial paper issued by any Lender or the parent corporation
of any Lender, and commercial paper rated at least A-2 or the equivalent thereof
by Standard & Poor's Corporation or at least P-2 or the equivalent thereof by
Moody's Investors Service, Inc. and in each case maturing within six months
after the date of acquisition.
"Permitted Liens": (i) Liens created by the Collateral
Security Documents; (ii) Liens in favor of any Person other than the General
Partner, the Limited Partner or any Affiliate of any such Person which arise in
the ordinary course of business of the Borrower (including, without limitation,
materialmen's, mechanics', workers', repairmen's and employees' Liens and
similar Liens which arise in connection with any tax, assessment, governmental
charge or levy) but not (unless otherwise permitted by this Agreement) in
connection with any Indebtedness or Guarantee Obligation and which do not in the
aggregate materially impair the use and value of the Borrower's property or
assets in the conduct of its business or impair the rights or interests of the
Lenders with respect to the Collateral: provided that if any such Lien arose in
connection with any tax, assessment, governmental charge or levy or any claim
referred to in subsection 7.15 or any charge or claim of a mechanic or a
materialman, the Borrower shall be diligently contesting the same in accordance
with, and subject to, the provisions of subsection 7.15 or subsection 7.16, as
the case may be; and provided, further, that any such Lien arose out of
transactions relating to the Project; (iii) Liens arising out of judgments or
awards which are bonded or with respect to which at the time an appeal or
proceeding for review is being prosecuted in good faith and for the payment of
which adequate reserves shall have been provided; (iv) mineral rights, utility
easements, any other easements, and any covenants running with the land relating
to the Site or any similar deed restrictions, the existence and use of any of
which do not materially interfere with the use and enjoyment of the Facility or
<PAGE>
22
the Site; (v) any exceptions to title which are contained in the title insurance
policy delivered to the Agent pursuant to subsection 6.l(bb) hereof; (vi) Liens
created by the PSE&G Subordinated Mortgage; and (vii) Liens created by the
Midlantic Agreements.
"Person": an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan": at any particular time, any employee benefit plan
which is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
"Plans and Specifications": the plans and specifications
relating to the Project.
"Power Purchase Agreement": the Power Purchase and
Interconnection Agreement, dated April 15, 1988, between PSE&G and the Borrower,
as amended by the First Amendment thereto dated June 12, 1990 and the Second
Amendment thereto and as the same may be further amended, supplemented or
otherwise modified from time to time in accordance with the provisions of
subsection 8.6.
"Presence": as used in connection with any Environmental
Discharge or Hazardous Materials, presence, generation, manufacture,
installation, treatment, use, storage, handling, repair, encapsulation,
disposal, transportation, spill, discharge and release.
"Project": the Facility, the Site and all easements,
leasehold interests, licenses, permits, contract rights and other real and
personal property interests now owned or hereafter acquired by the Borrower or
in which the Borrower has any rights.
"Project Contracts": the collective reference to the Power
Purchase Agreement, the Equipment Supply Contract, the Steam Supply Agreement,
the Gas Service Agreement, the Turnkey Contract and the Operation and
Maintenance Agreement.
"Project Cost": as defined in the Capital Contribution
Agreement.
"Prudent Utility Practice": at a particular time, those
practices, methods, acts and omissions applicable to the operation and
maintenance of the Facility as are in accordance with standards of prudence
applicable to the electric utility industry for cogeneration facilities
<PAGE>
23
located in the Northeastern United States known at the time the decision
in question is made, which would have been expected to accomplish
the desired result at a reasonable cost consistent with reliability, safety and
expediency. Prudent Utility Practice is not intended to be limited to the
optimum practice, method, act or omission, at the exclusion of all others, but
rather is a spectrum of possible practices, methods, acts and omissions which
could have been expected to accomplish the desired result at a reasonable cost
consistent with reliability, safety and expediency.
"PSE&G": Public Service Electric & Gas Company, a New Jersey
corporation.
"PSE&G Gas Letter of Credit": as defined in subsection 3.1.
"PSE&G Subordinated Mortgage": the Subordinated Mortgage dated
as of February 4, 1992 between the Borrower and PSE&G pursuant to the Power
Purchase Agreement.
"PUC": Commissionersthe State of New Jersey Board of
Regulatory or similar regulatory authority of any other jurisdiction.
"PURPA": the Public Utility Regulatory Policies Act of 1978,
as amended from time to time.
"Qualifying Facility": a cogeneration facility meeting all of
the requirements for a "qualifying cogeneration facility" set forth in PURPA and
in Part 292 of the rules and regulations of FERC under PURPA.
"Reference Tranche A Term Lenders": four major banks in the
London interbank market selected by the Senior Tranche Agent.
"Relevant Environmental Law": as to any Person, any law,
treaty, rule or regulation, or any determination of an arbitrator or a court or
other Governmental Authority, relating to the handling, treatment, storage or
disposal of Hazardous Materials, the occurrence or remediation of any
Environmental Discharge, environmental protection or any other environmental
matter, in each case applicable to or binding upon such Person or any of its
properties or to which such Person or any of its properties is subject, the
violation of which or a series of related violations of which, or which
determination, creates a material likelihood that such Person will be subject to
penalties, fines or remediation costs in excess of $250,000 or to injunctive or
similar relief.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such Plan is in reorganization
<PAGE>
24
within the meaning of such term as used in Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty-day notice
period is waived under subsections .13, .14, .16, .18, .19, or .20 of PBGC Reg.
2615.
"Reporting Participant": each of the Borrower and the General
Partner.
"Required Debt Service Reserve Amount": as defined in the
Security Deposit Agreement.
"Required Lenders": at a particular time, the holder or
holders, as applicable, of at least 66-2/3% of the aggregate unpaid principal
amount of the Notes.
"Requirement of Law": as to any Person, (a) the Certificate of
Incorporation and By-Laws or partnership agreement or other organizational or
governing documents of such Person, (b) any law, treaty, rule or regulation or
any determination of an arbitrator or a court or other Governmental Authority
(other than any Relevant Environmental Law), in each case applicable to or
binding upon such Person or any of its properties or to which such Person or any
of its properties is subject and the violation of which, or which determination,
could reasonably be expected to (i) have a material adverse effect on the
business, operations, properties, condition (financial or otherwise) or
prospects of such Person or (ii) materially adversely affect the ability of such
Person to perform its obligations under the Basic Documents to which it is a
party and (c) any Relevant Environmental Law.
"Responsible Officer": of a Person, in the case of the
Borrower or the General Partner, the president or any vice president of the
general partner of the General Partner, or with respect to financial matters,
the chief financial officer of the general partner of the General Partner and in
the case of any Person which is a corporation, the president or any vice
president of such Person or with respect to financial matters, the chief
financial officer of such Person.
"Second Capital Contribution Date": as defined in the Capital
Contribution Agreement.
"Security Agent": Midlantic National Bank or any bank acting
as successor security agent under the Security Deposit Agreement.
<PAGE>
25
"Security Agreement": the Security Agreement dated as of the
Conformed Agreement date made by the Borrower in favor of the Agent, as amended
by Amendment No. 1 thereto dated as of April 1, 1993, and as the same may be
further amended, supplemented or otherwise modified from time to time.
"Security Deposit Agreement": the Amended and Restated
Security Deposit Agreement, dated as of April 1, 1993, among the Borrower,
Senior Tranche Agent, the Junior Tranche Agent, the Agent, GE Capital as lender
under the General Partner Term Loan Agreement and Limited Partner, the General
Partner, the Security Agent and Midlantic, as the same may be amended,
supplemented or otherwise modified from time to time.
"Senior Debt Service Reserve Letter of Credit": as defined in
subsection 3.1(b).
"Senior Debt Service Account": as defined in the Security
Deposit Agreement.
"Settlement Date": with respect to the Called Principal, the
date on which such Called Principal is to be prepaid pursuant to subsection
4.2(b).
"Single Employer Plan": any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.
"Site": the land described in Schedule 1, on which the
Facility is located and which the Borrower owns in fee simple.
"Steam Host": Camden Paperboard Corporation, a New Jersey
corporation.
"Steam Supply Agreement": the Energy Purchase Agreement dated
the 18th day of December, 1989 between the Steam Host and the Borrower, and any
contract that has been substituted therefor in accordance with Section 9, in
each case as amended, supplemented or otherwise modified from time to time in
accordance with the provisions of subsection 8.6.
"Stipulated Redemption Values": as defined in the Capital
Contribution Agreement.
"Subsidiary": as to any Person, a corporation of which shares
of stock 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 are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person, or a
<PAGE>
26
limited partnership of which such Person or any of its Subsidiaries is a general
partner or a business trust in which such Person holds a majority interest
(comparable to that for a corporation as described above).
"Substantial Completion": substantial completion of the
Facility, which shall be deemed to have occurred for the purposes of this
Agreement when (i) substantial mechanical completion of the Project has been
achieved, (ii) the Borrower has accepted the Facility from the Turnkey
Contractor, (iii) the Project can be commercially operated, and has met the
requirements for commercial operation set forth in the Power Purchase Agreement
and (iv) the Agent shall have received the Completion Certificate.
"Tender Bond": as defined in subsection 3.1.
"Term Loan": the collective reference to the Tranche A Term
Loans, the Tranche B Term Loans and the Tranche C Term Loans.
"Term Loan Conversion Date": the date on which the Borrower
issues, in accordance with the provisions of this Agreement, its Tranche A Term
Notes, Tranche B Term Notes and Tranche C Term Notes in substitution and
exchange for (but not payment of) its Construction Note.
"Term Notes": the collective reference to the Tranche A Notes,
the Tranche B Notes and the Tranche C Notes.
"Title Company": Continental Title Insurance Company or any
other title insurance company approved by the Agent to insure the priority of
the Lien of the Mortgage on the Site.
"Tranche A Distribution": Contribution Agreement.as defined in
the Capital
"Tranche A Lender": each financial institution party hereto
from time to time, holding a Tranche A Term Loan and listed as a Tranche A
Lender on Schedule 6 and its successor.
"Tranche A Term Loan Maturity Date": May 1, 2007.
"Tranche A Term Loans": as defined in subsection 2.1.
"Tranche A Term Notes": as defined in subsection 2.1.
"Tranche B Lender": each financial institution party hereto
from time to time, holding a Tranche B Term Loan and listed as a Tranche B
Lender on Schedule 6 and its successor.
<PAGE>
27
"Tranche B Term Loans": as defined in subsection 2.1.
"Tranche B Term Notes": as defined in subsection 2.1.
"Tranche C Tender": each financial institution party hereto
from time to time, holding a Tranche C Term Loan and listed as a Tranche C
Lender on Schedule 6 and its successor.
"Tranche C Term Loans": as defined in subsection 2.1.
"Tranche C Term Notes": as defined in subsection 2.2.
"Transfer Assignment and Acceptance": as defined in subsection
11.7(b).
"Transferee": as defined in subsection 11.7(c).
"Treasury Yield": with respect to the Called Principal, the
yield to maturity implied by the Treasury Constant Maturity Series yields
reported (for the latest day for which such yields shall have been so reported
as of the Business Day next preceding the Settlement Date with respect to such
Called Principal) in Federal Reserve Statistical Release H.15(519) Selected
Interest Rates (or any successor publication of the Federal Reserve Board) for
actively traded U.S. Treasury securities having a constant maturity equal to the
remaining weighted average life to final maturity (calculated in accordance with
accepted financial practice) of such Called Principal as of such Settlement
Date. Such implied yield shall be determined (a) by calculating the remaining
weighted average life to final maturity of such Called Principal rounded to the
nearest quarter-year and (b) if necessary, by linear interpolation between
Treasury Constant Maturity Series yields.
"Turnkey Contract": the Engineering, Procurement and
Construction Contract, dated as of February 3, 1992, by and between the Borrower
and the Turnkey Contractor, and any contract that has been substituted therefor
in accordance with Section 9, in each case as amended, supplemented or otherwise
modified from time to time in accordance with the provisions of subsection 8.6.
"Turnkey Contractor": Ebasco Constructors Inc., a Delaware
corporation.
"Uniform Commercial Code": the Uniform Commercial Code as in
effect from time to time in any applicable jurisdiction.
<PAGE>
28
"Voting Stock": the capital stock of a corporation having
voting power to elect directors under ordinary circumstances (irrespective of
whether at the time capital stock of any other class or classes of capital stock
of such corporation shall or might have voting power upon the occurrence of any
contingency).
"Working Day": any Business Day on which dealings in foreign
currency and exchange between banks may be carried on in New York City.
"Yield-Maintenance Premium": a premium equal to the sum of (i)
the excess, if any, of the Discounted Value of the Called Principal over such
Called Principal and (ii) any loss or expense resulting from the prepayment of
such Called Principal. The Yield-Maintenance Premium shall in no event be less
than zero.
1.2 Other Definitional Provisions. (a) All terms defined in
this Agreement shall have the defined meanings when used in the Notes, the
Letters of Credit or in any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in any certificate or other document
made or delivered pursuant hereto, accounting terms not defined in subsection
1.1, and accounting terms partly defined in subsection 1.1 to the extent
notdefined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section,
schedule and exhibit references are to this Agreement unless otherwise
specified.
(d) Terms defined in this Agreement by reference to any other
agreement, document or instrument shall have the meaning assigned to it in such
agreement, document or instrument whether or not such agreement, document or
instrument is then in effect.
SECTION 2. AMOUNTS AND TERMS OF TERM MAN
-----------------------------
2.1 Term Loans. Subject to the terms and conditions hereof and
the Capital Contribution Agreement, each Construction Lender severally agrees to
convert on the Second Capital Contribution Date (a) an amount equal to its
Commitment Percentage of $81,600,000 of the outstanding amount of the
Construction Loans made by such Lender to a term loan (a "Tranche A Term Loan";
collectively, the "Tranche A Term Loans"), an amount equal to its Commitment
Percentage of $27,200,000 of the outstanding amount of the Construction Loans
made by such Lender to a term loan (a "Tranche B Term Loan"; collectively, the
"Tranche B Term Loans") and (c) an amount
<PAGE>
29
equal to its Commitment Percentage of $10,202,500 of the Construction Loans made
by such Lender to a term loan (a "Tranche C Term Loan"; collectively, the
"Tranche C Term Loans"), provided that the outstanding aggregate principal
amount of the Construction Loans made by all the benders in excess of
$118,002,500 shall be paid in full on such date.
2.2 Term Notes. (a) Simultaneously with the conversion of the
Construction Loans of each Construction Lender into a Tranche A Term Loan, a
Tranche B Term Loan and a Tranche C Term Loan of such Construction Lender, the
Borrower shall issue to such Construction bender a new promissory note in
respect of the Tranche A Term Loan made by such Construction bender,
substantially in the form of Exhibit A-l with appropriate insertions
(individually, a "Tranche A Term Note"; collectively, the "Tranche A Term
Notes"); a new promissory note in respect of the Trance B Term Loan made by such
Lender substantially in the form of Exhibit A-2 with appropriate insertions
(individually, a "Tranche B Term Note"; collectively, the "Tranche B Term
Notes"); and a new promissory note in respect of the Tranche C Term Loan made by
such Lender substantially in the form of Exhibit A-3 with appropriate insertions
(individually, a "Tranche C Term Note": collectively, the "Tranche C Term
Notes") in each case payable to the order of such Construction Lender in
substitution for and replacement of (but not in payment of) the Construction
Note of such Construction Lender.
(b) The Tranche A Term Note issued to each Lender shall (a) be
dated the Second Capital Contribution Date, (b) be in a principal amount equal
to such Lender's Commitment Percentage of $81,600,000, (c) be payable in 56
consecutive quarterly installments of principal on each Installment Payment Date
in the amounts set forth on a schedule attached to the Tranche A Term Note, (d)
bear interest for the period from the date thereof until paid in full on the
unpaid principal amount thereof from time to time outstanding at the applicable
Interest Rate and (e) be entitled to the benefit of this Agreement and the
Collateral Security Documents.
(c) The Tranche B Term Note issued to each Lender shall (i) be
dated the Second Capital Contribution Date, (ii) be in a principal amount equal
to such Lender's Commitment Percentage of $27,200,000, (iii) be payable in 64
consecutive quarterly installments of principal on each Installment Payment Date
in the amounts set forth on a schedule attached to the Tranche B Term Note, (iv)
bear interest for the period from the date thereof until paid in full on the
unpaid principal amount thereof from time to time outstanding at the applicable
Interest Rate and (v) be entitled to the benefit of this Agreement and the
Collateral Security Documents.
(d) The Tranche C Term Note issued to each Lender shall (i) be
dated the Second Capital Contribution Date, (ii) be in a principal amount equal
to such Lender's Commitment
<PAGE>
30
Percentage of $10,202,500, (iii) be payable in 68 consecutive quarterly
installments of principal on each Installment Payment Date in the amounts set
forth on a schedule attached to the Tranche C Term Note, (iv) bear interest for
the period from the date thereof until paid in full on the unpaid principal
amount thereof from time to time outstanding at the applicable Interest Rate and
(v) be entitled to the benefit of this Agreement and the Collateral Security
Documents.
(e) Promptly following the receipt of an appropriately
completed and executed Tranche A Term Note, Tranche B Term Note and Tranche C
Term Note by each Construction Lender, such Construction Lender will return its
Construction Note to the Borrower marked cancelled.
SECTION 3. LETTERS OF CREDIT AND REIMBURSEMENT LOANS
3.1 Letter of Credit Committment. (a) Pursuant to the Original
Loan Agreement, the Letter of Credit Issuer executed and delivered (i) a certain
stand-by letter of credit for the account of the Borrower in favor of PSE&G, in
the stated amount of $5,200,000 and with an expiry date of June 1, 1994 to
secure certain obligations of the Borrower to PSE&G in respect of the
interconnection with the Facility of natural gas delivery systems (the "PSE&G
Gas Letter of Credit") and (ii) a certain stand-by letter of credit for the
account of the Borrower in favor of the City of Camden, in the stated amount of
$126,366 and with an expiry date of August 31, 1993 to secure certain
obligations of the Borrower to the City of Camden in respect of the completion
of certain external finishings and landscaping (the "City of Camden better of
Credit"), a copy of each of which is attached hereto as Schedule 7 (the PSE&G
Gas Letter of Credit and the City of Camden Letter of Credit, collectively
referred to as the "Borrower Letters of Credit").
Upon the request of the Borrower to the Letter of Credit
Issuer made not later than May 1, 1994, so long as no Event of Default shall
have occurred and be continuing, the Letter of Credit Issuer will extend the
expiry date of the PSE&G Gas Letter of Credit to a date not later than April 1,
1996.
(b) The Letter of Credit Issuer agrees that the Senior Tranche
Agent may request the Borrower, and the Borrower shall request the Letter of
Credit Issuer to issue, and the Letter of Credit Issuer, in its sole discretion
may elect to issue, on terms and conditions satisfactory to it in its sole
discretion, from time to time, a letter of credit (the "Senior Debt Service
Reserve Better of Credit") to the Senior Tranche Agent, for the ratable benefit
of the Tranche A Term benders and the Counterparty in a stated amount not
greater than the
<PAGE>
31
Required Debt Service Reserve Amount. The Senior Tranche Agent may draw
on the Senior Debt Service Reserve Letter of Credit on any Installment
Payment Date to the extent there are insufficient funds on deposit in the Senior
Debt Service Account and from other sources referred to in Section 4.02 of the
Security Deposit Agreement to make payment in full of the principal of and
interest on the Tranche A Term Loans which is due and payable on such
Installment Payment Date and at any other time that the Borrower shall fail to
pay principal and interest on the Tranche A Term Loans when the same shall be
due and payable.
3.2 Payments by the Borrower. The Borrower agrees to reimburse
the Letter of Credit Issuer for any payment made by it under any Borrower Letter
of Credit immediately upon the making of such payment by the better of Credit
Issuer and to pay interest on the unreimbursed portion of any such payment until
reimbursement in full thereof at a rate per annum equal to 1.5% above the Base
Rate.
3.3 Letter of Credit Fees. (a) The Borrower agrees to pay to
the better of Credit Issuer, with respect to all Borrower Letters of Credit, a
letter of credit fee equal to the rate set forth in the Letter Agreement on the
amount available to be drawn under the Borrower Letters of Credit.
(b) Letter of Credit fees with respect to the Borrower
Letters of Credit shall be payable monthly in advance.
3.4 Obligations Absolute. The obligations of the Borrower in
respect of the betters of Credit under this Agreement shall be absolute,
unconditional and irrevocable, and shall be paid strictly in accordance with the
terms of this Agreement, under all circumstances whatsoever, including, without
limitation, the following circumstances:
(a) any lack of validity or enforceability of any Letter of
Credit or any agreement or instrument related thereto;
(b) any amendment or waiver of or any consent to departure
from the terms of any better of Credit; provided, that any such amendment shall
have been effectuated in accordance with subsection 11.1 hereof;
(c) the existence of any claim, set-off, defense or other
rights which the Borrower may have at any time against any beneficiary or any
transferee of any better of Credit (or any Persons for whom any such beneficiary
or any such transferee may be acting), the better of Credit Issuer, the Agents,
the Lenders or any other Person, whether in connection with such Letter of
Credit, this Agreement, any other Basic Document or any agreement or instrument
related thereto, the transactions contemplated herein, or any unrelated
transaction;
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32
(d) any statement or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect
whatsoever;
(e) payment by GE Capital under any Letter of Credit against
presentation of a draft or certificate which does not comply with the terms of
such Letter of Credit; and
(f) any other circumstances or happening whatsoever, whether
or not similar to any of the foregoing.
3.5 Indemnification. The Borrower hereby indemnifies and holds
harmless the Letter of Credit Issuer and the Lenders from and against any and
all claims, damages, losses, liabilities, reasonable costs or expenses
whatsoever which the Letter of Credit Issuer or any Lender may incur (or which
may be claimed against the Letter of Credit Issuer or any Lender by any person
or entity whatsoever) by reason of or in connection with the execution and
delivery or transfer of, or payment or failure to pay under, any Letter of
Credit; provided, that the Borrower shall not be required to indemnify the
Letter of Credit Issuer or any Lender for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent, caused by
the failure of the Letter of Credit Issuer to act in good faith or to use care
in the examination of any draft or certificate presented under such Letter of
Credit in ascertaining whether on its face it appeared to comply with the terms
of such Letter of Credit. Nothing in this subsection 3.5 is intended to limit
the reimbursement obligation of the Borrower contained herein.
3.6 Liability of the Letter of Credit Issuer and the Lenders.
The Borrower assumes all risks of the acts or omissions of the beneficiary and
any transferee of the Borrower Letters of Credit with respect to its use of the
Borrower Letters of Credit. None of the Agents, the Letter of Credit Issuer nor
any other Lender nor any of their respective officers or directors shall be
liable or responsible for: (a) the use which may be made of the Borrower Letters
of Credit or for any acts or omissions of the beneficiary and any transferee in
connection therewith; (b) the validity, sufficiency or genuineness of documents,
or of any endorsements thereon, even if such documents should in fact prove to
be in any or all respects invalid, insufficient, fraudulent or forged; (c)
payment by the Letter of Credit Issuer against presentation of documents which
do not comply with the terms of the Borrower Letters of Credit, including
failure of any documents to bear any reference or adequate reference to the
Borrower Letters of Credit; or (d) any other circumstances whatsoever in making
or failing to make payment under the Borrower Letters of Credit, except only
that the Borrower shall have a claim against the Letter of Credit Issuer, and
the Latter of Credit Issuer shall be liable to the Borrower, to the extent, but
only to the
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33
extent, of any direct, as opposed to consequential, damages suffered by the
Borrower which the Borrower proves were caused by the failure of the Letter of
Credit Issuer to act in good faith or to use care in the examination of any
draft or certificate presented under the Borrower Letters of Credit in
ascertaining whether on its face it appeared to comply with the terms of the
Borrower Letters of Credit. In furtherance and not in limitation of the
foregoing, the Letter of Credit Issuer may accept documents that appear on their
face to be in order, without responsibility for further investigation.
3.7 Assignments. The Letter of Credit Issuer may allot to each
Tranche A Lender, and each Tranche A Lender may severally and irrevocably take
in the Borrower Letters of Credit, a participating interest in a percentage
equal to such Tranche A Lender's Commitment Percentage. No Tranche A Lender's
participation in the Borrower Letters of Credit or any of its rights or duties
hereunder shall be subdivided, assigned or transferred without the prior written
consent of the Letter of Credit Issuer, withheld.which consent will not be
unreasonably Such consent may be given or withheld without the consent or
agreement of any other Lender.
3.8 Participations. If the Letter of Credit Issuer shall allot
to any Tranche A Term Lender and such Tranche A Term Lender takes a
participating interest in the Borrower Letters of Credit, such Tranche A Term
Lender's participating interest in the Borrower Betters of Credit shall be
absolute and unconditional and shall not be affected by any circumstance,
including, without limitation, (a) any set-off, counterclaim, recoupment,
defense or other right which such Bender may have against the Better of Credit
Issuer, the Borrower or any other Person for any reason whatsoever; (b) the
occurrence or continuance of a Default or an Event of Default: (c) any adverse
change in the condition (financial or otherwise) of the Borrower; (d) any breach
of this Agreement by the Borrower or any other Lender; or (e) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.
SECTION 4. PROVISIONS RELATING TO ALL EXTENSIONS OF CREDIT;
FEES AND PAYMENTS
4.1 Agency Fee. (a) The Borrower agrees to pay to the Senior
Tranche Agent an agent's fee on the first Installment Payment Date after the
Term Loan Conversion Date and annually, in advance, thereafter (the "Agency
Fees") in the amount set forth in the Letter Agreement.
4.2 Prepayments. (a) Mandatorv Prepayment. (i) If the Required
Lenders have delivered a notice in writing to the Borrower declaring that a
Declared Event of Loss has occurred, the Borrower shall prepay in full, the
unpaid principal amount of the then outstanding Notes, together with accrued
interest
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34
thereon to the date of prepayment together with any amounts payable pursuant to
subsection 4.9 in respect of the Tranche A Term Loans and Yield Maintenance
Premium on the principal amount of the Tranche B Term Loans and Tranche C Term
Loans prepaid, and shall satisfy its obligations in respect of the Letters of
Credit by (A) paying or prepaying any amount due or to become due in respect of
such obligations, (B) providing the Lenders with cash collateral, pursuant to
documentation in form and substance satisfactory to the Lenders, in an amount
equal to the aggregate undrawn face amount of the Letters of Credit or (C)
causing the termination of the Letters of Credit and shall pay any unpaid Agency
Fees, Letter or Credit Fees and other fees accrued hereunder to the date of
prepayment, on the earlier of (x) the date occurring 90 days after the date of
receipt of such notice from the Required Lenders and (y) the date on which
insurance proceeds are received with respect to such Event of Loss; provided,
that with respect to any such Event of Loss that arises out of the loss,
destruction or damage of the Facility, the date specified in clause (x) above
shall be extended for an additional period (not to exceed 90 days) if, in the
reasonable opinion of the Required Lenders, insurance proceeds sufficient to
cover the amounts specified in clause (ii) above will be received within such
additional period.
(ii) If the Borrower receives any payments in respect of
liquidated damages pursuant to any EPC Contract, the Borrower shall promptly
prepay the principal amount of the then outstanding Loans, together with
interest thereon accrued to the date of prepayment, any amounts payable pursuant
to subsection 4.9 in respect of the Tranche A Term Loans and Yield Maintenance
Premium on the principal amount of the Tranche B Term Loans and Tranche C Term
Loans prepaid by an amount equal to the aggregate amount of such liquidated
damages payments.
(iii) If (i) the Fixed Charge Coverage Ratio as of any two
consecutive calendar quarters is less than 1.2 to 1.0 or (ii) if an Event of
Default has occurred and is continuing, any amount in the Partnership Required
Payments Reserve Account shall be applied on the next succeeding Installment
Payment Date to prepay the Term Loans pro rata with respect to the remaining
scheduled repayments to be made on the Term Notes together with any amounts
payable pursuant to subsection 4.9 in respect of the Tranche A Term Loans and
Yield Maintenance Premium on the principal amount of the Tranche B Term Loans
and Tranche C Term Loans prepaid.
(b) Optional Prepayment. The Borrower may, from time to time,
prepay the Term Loans, in whole or in part, together with interest thereon to
the date of prepayment, plus, in the case of prepayments of the Tranche B Term
Loans, the Yield Maintenance Premium on the principal amount prepaid. Optional
prepayments pursuant to this subsection 4.2(b) shall be made upon at least two
Working Days' prior written irrevocable notice to the Senior Tranche Agent and
the Junior
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35
Tranche Agent, specifying the date and amount of such prepayment. If any such
notice is given, the Borrower will make the prepayment specified therein and
such prepayment shall be due and payable on the date specified therein, together
with interest accrued thereon to the date of prepayment, plus, the Yield
Maintenance Premium on the principal amount of the Tranche B Term Loans prepaid.
Optional prepayments shall be applied to installments of the Term Loans pro rata
in the inverse order of maturity.
(c) Obligations under the Borrower Letters of Credit. The
Borrower's obligations in respect of the Borrower Letters of Credit may be
satisfied by (i) paying or prepaying any amount due or to become due in respect
of such obligations, (ii) providing the Lenders which hold a participating
interest in such Letters of Credit with cash collateral, pursuant to
documentation in form and substance satisfactory to such Lenders and the Letter
of Credit Issuer, in an amount equal to the aggregate undrawn face amount of the
Letters of Credit or (iii) causing the termination of the Borrower Letters of
Credit.
(d) Effect of Prepayment. Upon prepayment in full, the Senior
Tranche Agent, the Junior Tranche Agent and the Agent shall deliver to the
Borrower, at the Borrower's expense, such documents reasonably requested by the
Borrower to evidence the release of the Lender's Liens on the Collateral
pursuant to the Collateral Security Documents.
(e) No Reborrowing. Payments and prepayments made pursuant to
this subsection 4.2 may not be reborrowed.
4.3 Interest Rates and Payment Dates. (a) (i) The Tranche A
Term Loans which are Eurodollar Loans shall bear interest for each Eurodollar
Interest Period on the unpaid principal amount thereof at the Interest Rate set
forth in clause (b) of the definition thereof.
(ii) The Tranche A Term Loans which are Base Rate Loans shall
bear interest on the unpaid principal amount thereof at the Interest Rate set
forth in clause (a) of the definition thereof.
(iii) The Tranche B Term Loans and Tranche C Term Loans shall
bear interest on the unpaid principal amount thereof at the Interest Rate set
forth in clause (c) of the definition thereof.
(b) If all or a portion of the principal amount of any Tranche
A Term Loan made hereunder shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such Tranche A Term Loan, if a
Eurodollar Loan, shall be converted to a Base Rate Loan at the end of the
Eurodollar Interest Period therefor. Any such overdue principal amount with
respect to Tranche A Term Loans referred
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36
to in subsection 4.3(a) and with respect to Tranche B Term Loan and Tranche C
Term Loans shall bear interest at a rate per annum which is 2% above the rate
which would otherwise be applicable pursuant to such subsections from the date
of such non-payment until paid in full (as well after as before judgment).
(c) Interest on the aggregate unpaid principal amount of the
Loans shall be payable in arrears on each Interest Payment Date.
4.4 Interest Rate Conversions. Initially the Tranche A Term
Loans will be Eurodollar Loans. Any Eurodollar Loan will be continued as such
upon the expiration of the Eurodollar Interest Period with respect thereto;
provided, that no Eurodollar Loan will be continued as such when any Default or
Event of Default has occurred and is continuing, but shall be automatically
converted to a Base Rate Loan on the last day of the Eurodollar Interest Period
with respect thereto.
4.5 Pro Rata Payments. So long as no Event of Default shall
have occurred and be continuing, each payment (excluding any prepayments) by the
Borrower on account of the principal of and interest on the Notes and on account
of any Letter of Credit Fees hereunder shall be made pro rata to each Lender
according to the ratio that such Lender's outstanding Loans bears to all
outstanding Loans. If an Event of Default shall have occurred and be continuing,
or in the case of any prepayments, each payment by the Borrower on account of
the principal of and interest on the Notes and on account of any Letter of
Credit Fees hereunder shall be made in the manner notified to the Borrower in
writing by the Agent acting at the direction of the Lenders pursuant to the
Intercreditor Agreement, each of which notifications the Borrower may rely upon
as duly authorized by the Lenders. All payments (including prepayments) due
hereunder or under the Notes on account of principal, interest, fees, and any
other obligation incurred hereunder shall be paid, in the case of Tranche A
Loans, to the Senior Tranche Agent by wire or electronic transfer for deposit to
the credit of its account no. 50-205-776 at Bankers Trust Company, New York, New
York, ABA Number: 0210-0103-3, or such other account as the Senior Tranche Agent
may from time to time, in writing, specify to the Borrower, and, in the case of
the Tranche B Loans and the Tranche C Loans, to the Junior Tranche Agent by wire
or electronic transfer for deposit to the credit of its account no. 50-205 776
at Bankers Trust Company, New York, New York, ABA Number: 0210-0103-3, or such
other account as the Junior Tranche Agent may from time to time, in writing,
specify to the Borrower, in freely transferable Dollars and in immediately
available funds without set-off or counterclaim. The Senior Tranche Agent shall
distribute such payments to the Tranche A Landers, and the Junior Tranche Agent
shall distribute such payments to the Tranche B Lenders and the Tranche C
Benders, promptly upon receipt in like funds as received. No such payment,
however,
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37
shall be deemed to be a waiver of any claims the Borrower may assert against the
Agents or the Lenders. All payments hereunder shall be made without any
presentment of the Notes to the Borrower, but upon payment in full of the Notes,
the holders thereof shall cancel them and return them to the Borrower. If any
payment hereunder (other than payments on Eurodollar Loans) becomes due and
payable on a day other than a Business Day, such payment shall be extended to
the next succeeding Business Day and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension. If any payment on Eurodollar Loans becomes due and payable on a day
other than a Working Day, the maturity thereof shall be extended to the next
succeeding Working Day unless the result of such extension would be to extend
such payment into another calendar month, in which event such payment shall be
made on the immediately preceding Working Day.
4.6 Inability to Determine Eurodollar Rate. In the event that
the Senior Tranche Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower) that by reason of circumstances
affecting the interbank eurodollar market, adequate and reasonable means do not
exist for ascertaining the Eurodollar Rate applicable for any Eurodollar
Interest Period with respect to Eurodollar Loans that will result from the
required conversion of Base Rate Loans into Eurodollar Loans pursuant to
subsection 4.4 or the continuation of Eurodollar Loans beyond the expiration of
the then current Eurodollar Interest Period therefor, the Senior Tranche Agent
shall give notice of such event to the Borrower. Within 30 days following the
date of such notice by the Senior Tranche Agent, the Senior Tranche Agent (after
consultation with each Tranche A Lender) and the Borrower shall enter into
negotiations in good faith with a view to agreeing to an alternative basis
acceptable to the Borrower and the Tranche A Lenders for determining the
interest rate (the "Substitute Eurodollar Rate") which shall be applicable
during such Eurodollar Interest Period for the Eurodollar Loans to which such
Eurodollar Interest Period applies and which shall reflect the cost to the
Tranche A Lenders of funding such Eurodollar Loans for such Eurodollar Interest
Period from alternate sources at the rate set forth in the Letter Agreement. If,
at the expiration of 30 days from the giving of such notice by the Senior
Tranche Agent, the Senior Tranche Agent and the Borrower have agreed to such
Substitute Eurodollar Rate, such Substitute Eurodollar Rate shall take effect
with respect to such Eurodollar Interest Period from the beginning of such
Eurodollar Interest Period.
If, at the expiration of 30 days from the giving of such
notice by the Senior Tranche Agent, the Senior Tranche Agent and the Borrower
have not agreed to a Substitute Eurodollar Rate, (a) any requested Eurodollar
Loans shall be deemed to have been made as Base Rate Loans, (b) any Base Rate
Loans that were to have been converted to Eurodollar Loans
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38
shall be continued as Base Rate Loans and (c) any outstanding Eurodollar
Loans shall be converted, on the last day of the then current Eurodollar
Interest Period therefor, to Base Rate Loans. Until such notice has been
withdrawn by the Senior Tranche Agent, no further Eurodollar Loans shall be
made nor shall any Base Rate Loans be converted to Eurodollar Loans pursuant to
subsection 4.4(a).
4.7 Computation of Interest and Fees. (a) Interest in respect
of Tranche B Term Loans, Tranche C Term Loans and Eurodollar Loans and all fees
hereunder shall be calculated on the basis of a 360-day year for the actual days
elapsed. Interest in respect of Base Rate Loans shall be calculated on the basis
of a 365/366 day year for the actual days elapsed.
(b) The Senior Tranche Agent shall as soon as practicable
notify the Borrower and the Tranche A Landers of each determination of a
Eurodollar Rate and a Base Rate and of the effective date and amount of each
change in the Base Rate.
(c) Each determination of an interest rate by the Senior
Tranche Agent pursuant to any provision of this Agreement shall be conclusive
and binding on the Borrower and the Lenders in the absence of manifest error.
4.8 Increased Costs. (a) Notwithstanding any other provisions
of this Agreement, if any Applicable Law or any change therein or in the
interpretation or the application thereof by any Governmental Authority charged
with interpretation or administration thereof shall make it unlawful for any
Tranche A Lender to make or maintain Eurodollar Loans as contemplated by this
Agreement, such Lender shall give written notice thereof to the Borrower and the
obligation of such Lender hereunder to make Eurodollar Loans shall forthwith be
suspended so long as such Applicable Law, interpretation or application shall
continue, and Tranche A Term Loans then outstanding as Eurodollar Loans, if any,
shall be converted automatically to Base Rate Loans on the next succeeding
Interest Payment Date or within such earlier period as may be required by law.
If any such conversion of Eurodollar Loans is made on a day which is not the
last day of a Eurodollar Interest Period, the Borrower shall pay to such Lender
upon such Lender's request, such amount or amounts as may be necessary to
compensate such Lender for any loss or expense sustained or incurred by such
Lender in respect of the Eurodollar Loans as a result of such conversion,
including but not limited to any interest or fees payable by such Lender to
lenders of funds obtained by it in order to make or maintain the Eurodollar
Loans hereunder, and shall pay to such Lender the Eurodollar Rate on such
Eurodollar Loans to the date of such automatic conversion. A certificate as to
any additional amounts payable pursuant to the foregoing sentence submitted by
such Lender to the Borrower shall be conclusive absent manifest error.
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39
(b) In the event that any Applicable Law or any change therein
or in the interpretation or application thereof by any Governmental Authority
charged with the administration or interpretation thereof, or compliance by any
Lender with any request or directive (whether or not having the force of law)
received from any central bank or monetary authority or other Governmental
Authority:
(i) does or shall subject such bender to any tax of any kind
whatsoever or change therein with respect to this Agreement, the Notes
or any Eurodollar Loan hereunder, or the performance by such bender of
its obligations hereunder, or change the basis of taxation of payments
to such bender of principal, commitment fees, interest, letter of
credit fees or any other amount payable hereunder (except for changes
in the rate of tax on the overall net income of such Lender); or
(ii) does or shall impose, modify or hold applicable or change
any reserve (including, without limitation, basic, supplemental,
marginal and emergency reserves), special deposit, compulsory loan or
similar requirement against assets held by, deposits or other
liabilities in or for the account of, advances or loans by, or other
credit extended by, or letters of credit issued by or participated in
by, or any other acquisition of funds by (including, without
limitation, all eurocurrency funding by and all Eurocurrency
liabilities), any office of such Lender which are not otherwise
included in the determination of the Eurodollar Rate; or
(iii) does or shall impose on such Lender any other condition,
or change therein;
and the result of any of the foregoing is to increase the cost to such Lender of
making, committing to make, renewing, converting or maintaining Eurodollar
Loans, to increase the cost of issuing or maintaining or participating in any
better of Credit or to reduce any amount receivable thereunder, then, in any
such case, the Borrower shall promptly pay to such Lender, upon its demand, such
additional amount which will compensate such Lender for such additional cost or
reduced amount receivable which such Lender deems to be material as determined
by such Lender with respect to this Agreement, the Tranche A Term Notes, the
Eurodollar Loans or the Letters of Credit hereunder.
(c) In the event that the adoption of any Applicable Law,
rule, regulation or guideline regarding capital adequacy, or any change therein
or in the interpretation or application thereof by any Governmental Authority
charged with the administration or interpretation thereof or compliance by any
Tranche A Lender with any request or directive regarding capital adequacy
(whether or not having the force of law) from any central bank or Governmental
Authority including, without
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40
limitation, the issuance of any final rule, regulation or guideline, does or
shall have the effect of reducing the rate of return on such Tranche A Lender's
capital as a consequence of its obligations hereunder to a level below that
which such Tranche A Lender could have achieved but for such adoption, change or
compliance (taking into consideration such Tranche A Lender's policies with
respect to capital adequacy) by any material amount, then from time to time,
within 15 days after demand by such Tranche A bender, the Borrower shall pay to
such Tranche A Lender such additional amount or amounts as will compensate such
Tranche A bender for such reduction.
(d) If any Lender becomes entitled to claim any additional
amounts pursuant to this subsection 4.8, it shall promptly notify the Borrower
thereof. A certificate as to any additional amounts payable pursuant to this
subsection 4.8 submitted by such Lender to the Borrower shall be conclusive
absent manifest error. The covenants contained in this subsection 4.8 shall
survive the termination of this Agreement, payment of the outstanding Notes and
expiration of the Letters of Credit.
(e) In the event that the Borrower shall receive a
certificate with respect to additional amounts payable pursuant to subsection
4.8(a) or (b) in respect of Eurodollar Loans, the Borrower shall have the
option, exercisable by notice to the Senior Tranche Agent at least three Working
Days prior to the next succeeding Interest Payment Date, to convert all then
outstanding Eurodollar Loans to Base Rate Loans on such next succeeding Interest
Payment Date. Upon receipt of such notice, the Senior Tranche Agent shall
promptly notify each Tranche A Lender thereof. Should such option be exercised,
the Senior Tranche Agent agrees that in the event that such additional amounts
pursuant to this subsection 4.8 would at any time no longer be payable with
respect to Eurodollar Loans, it shall promptly notify the Borrower thereof and
as soon as practicable thereafter, the outstanding Base Rate Loans shall be
converted to Eurodollar Loans.
4.9 Indemnity. The Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss or expense which such Lender may
sustain or incur as a consequence of (a) default by the Borrower in payment when
due of the principal amount of or interest on the Eurodollar Loans or (b) a
prepayment by the Borrower of Eurodollar Loans on a day which is not the last
day of a Eurodollar Interest Period, including any lost yield on such Loans at
the applicable interest rates provided for herein, but excluding any lost
opportunity costs. This covenant shall survive termination of this Agreement,
payment of the outstanding Tranche A Term Notes and expiration of the Letters of
Credit.
4.10 Taxes. All payments made by the Borrower under this
Agreement, the Notes and the Letters of Credit shall be made free and clear of,
and without reduction for or on account
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41
of, any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority excluding net
income taxes and franchise taxes based upon net income imposed on the Agents or
any Lender by the United States of America or any political subdivision or
taxing authority thereof or therein (including Puerto Rico) and net income taxes
and franchise taxes based upon net income imposed by the country in which any
Lender is organized or in which its Eurodollar lending office is located or any
political subdivision or taxing authority thereof or therein (such non-excluded
taxes being called "Indemnified Taxes"). If any Indemnified Taxes are required
to be withheld from any amounts payable to any Lender hereunder or under the
Notes or the Letters of Credit, the amounts so payable to such Lender shall be
increased to the extent necessary to yield to such Lender (after payment of all
Indemnified Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Agreement and the Notes. Whenever any
Indemnified Tax is paid by the Borrower, as promptly as possible thereafter, the
Borrower shall send to the Senior Tranche Agent and the Junior Tranche Agent, a
certified copy of an original official receipt showing payment thereof. If the
Borrower fails to pay any Indemnified Taxes when due to the appropriate taxing
authority or fails to remit to the Senior Tranche Agent and the Junior Tranche
Agent the required receipts or other required documentary evidence, the Borrower
shall indemnify each Lender for any incremental taxes, interest or penalties
that may become payable by such Lander as a result of any such failure.
4.11 Limitation of Liability. The Agents, the Letter of
Credit Issuer and the Lenders agree that the liability of the Borrower under
this Agreement, the Notes and the other Obligations shall be limited to the
Collateral and the rights and remedies of the Lenders against the Collateral
pursuant to the Collateral Security Documents, and in no event shall the
Borrower or any Partner or any officer, director, partner or Affiliate thereof
be personally liable or obligated for any such obligations. Nothing herein shall
limit the full recourse of the Lenders to the Collateral pursuant to the
Collateral Security Documents or be deemed to constitute a waiver of liability,
if any, of any Person for damages for fraud or for any knowing misrepresentation
made by such Person herein or in any other Basic Document or in any certificate
or other document delivered pursuant hereto or thereto.
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42
SECTION 5. REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Lenders to enter into this Agreement,
to make the Loans and to take participating interests in the Borrower Letters of
Credit and to induce the Letter of Credit Issuer to issue the Letters of Credit,
the Borrower represents and warrants to the Agents, the Letter of Credit Issuer
and the Lenders that:
5.1 Financial Statements. (a) The respective unaudited
balance sheets of the Borrower and the General Partner as of November 30, 1991,
and the related unaudited statements of income, partners' capital and changes in
partners' capital and cash flow for the period then ended on such date,
heretofore furnished to the Agents and the Lenders and certified by a
Responsible Officer of the General Partner, are complete and correct in all
material respects and fairly present the financial condition of the Borrower or
the General Partner, as the case may be, on such date and the results of their
respective changes in partners' capital and cash flow for the period then ended,
in conformity with GAAP applied on a consistent basis. All liabilities, direct
and contingent, of the Borrower and the General Partner on such date required to
be disclosed pursuant to GAAP are disclosed in such financial statements.
(b) Since November 30, 1991, except as disclosed in writing
by the Borrower to the Agents and the Lenders, no material adverse change has
occurred in (i) the properties, business, operations, condition (financial or
otherwise) or prospects of the Borrower or the General Partner, (ii) the
Borrower's ability to perform its obligations under this Agreement, the Notes
and the other Basic Documents to which it is a party or (iii) the General
Partner's ability to perform its obligations under the Basic Documents to which
it is a party, and, except as contemplated by this Agreement and the
Non-Competition Agreement, no additional Indebtedness has been incurred by the
Borrower or the General Partner.
5.2 Partnership Existence and Business; Partners. (a) The
Borrower is a limited partnership duly organized and validly existing under the
laws of the State of Delaware and is duly qualified to do business in the States
of Texas and New Jersey, the only jurisdictions in which the conduct of its
business or the ownership or lease of its assets requires such qualification.
The Certificate of Limited Partnership of the Borrower has been duly filed in
the office of the Secretary of State of Delaware and no other filing, recording,
publishing or other act is necessary or appropriate in connection with the
existence or the business of the Borrower except those which have been duly made
or performed. From and after December 31, 1990, the Borrower has engaged in no
business other than the development of the Project and the negotiation,
execution, delivery and performance of the Basic Documents to which it is a
party on such date, and the Borrower has no obligations or
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43
liabilities other than those directly related to the conduct of such business.
The Borrower is and will be engaged solely in the business of constructing,
owning and operating the Project.
(b) The General Partner is a limited partnership duly
organized and validly existing under the laws of the State of Delaware and is
duly qualified to do business in the States of New Jersey and Texas, the only
jurisdictions in which the conduct of its business or the ownership or lease of
its assets requires such qualification. The General Partner is the sole general
partner of the Borrower, and is engaged solely in: (i) the business of being the
general partner of the Borrower, (ii) activities permitted pursuant to the
General Partner Term Loan Agreement and (iii) the performance of the Borrower's
obligations pursuant to the Basic Documents.
(c) The only partners of the Borrower on the date of
execution and delivery of this Agreement are the General Partner, as the sole
general partner, and the Limited Partner, as the sole limited partner.
(d) The Borrower does not have any Subsidiaries. The General
Partner has one Subsidiary, which Subsidiary is the Borrower.
5.3 Compliance with Law. Each of the Borrower and the General
Partner is in compliance with all Requirements of Law.
5.4 Power and Authorization: Enforceable Obligations. (a) The
Borrower has full power and authority and the lesal risht to construct, own and
operate its properties (including, without limitation, the Project), to conduct
its business as now conducted and as proposed to be conducted by it and to take
all action as may be necessary to complete the transactions contemplated
hereunder and under the Basic Documents. The Borrower has full power and
authority and the legal right, to execute, deliver and perform this Agreement,
the Notes and the other Basic Documents to which it is or is to become a party,
to grant the liens and security interests provided for in the Collateral
Security Documents to which it is a party, to borrow hereunder and to have
Letters of Credit issued for its account hereunder. The Borrower has taken all
necessary partnership and legal action to authorize the borrowings hereunder and
the issuance of the Letters of Credit on the terms and conditions of this
Agreement, the Notes and the other Basic Documents to which it is a party, to
grant the liens and security interests provided for in the Collateral Security
Documents to which it is a party and to authorize the execution, delivery and
performance of this Agreement, the Notes and the other Basic Documents to which
it is a party. No Governmental Approval, consent or authorization of, filing
with, or other act by or in respect of any other Person is required in
connection with the borrowings hereunder, the
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44
issuance of the Letters of Credit or with the execution, delivery or performance
by the Borrower or the validity or enforceability as to the Borrower of this
Agreement, the Notes or the other Basic Documents except the Governmental
Approvals and other consents and approvals set forth on Schedule 2, all of which
have been obtained and are in full force and effect and not subject to appeal or
judicial or governmental review, and Schedule 5, none of which are obtainable
prior to the Term Loan Conversion Date, but all of which are obtainable in the
ordinary course of the Borrower's business as and when required. Each of this
Agreement, the Notes and the other Basic Documents to which the Borrower is a
party has been duly executed and delivered by the Borrower and constitutes, and
each of the other Basic Documents to which the Borrower is to become a party
will, upon execution and delivery thereof by the Borrower and the other parties
thereto (if any), constitute, a legal, valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity. Except as otherwise disclosed in
writing to the Agents and the Landers, none of the Basic Documents to which the
Borrower is a party has been amended or modified except in accordance with
subsection 8.6, and all such Basic Documents are in full force and effect.
(b) The General Partner has full power and authority and the
legal right to own its properties and to conduct its business as now conducted
and proposed to be conducted by it, to execute, deliver and perform the Basic
Documents to which it is a party, to take all action as may be necessary to
complete the transactions contemplated thereunder, and to act as the general
partner of the Borrower. The General Partner has taken all necessary partnership
and legal action to authorize the execution, delivery and performance of the
Basic Documents to which it is a party and to grant the Liens provided for in
the Collateral Security Documents to which it is a party. No consent or
authorization of, filing with, or other act by or in respect of any other Person
(including any partner of the General Partner) is required in connection with
the execution, delivery or performance by the General Partner or the validity or
enforceability as to the General Partner of the Basic Documents to which it is a
party except the Governmental Approvals and other consents and approvals set
forth on Schedule 2, all of which have been obtained and are in full force and
effect and not subject to appeal or judicial or governmental review, and
Schedule 5, none of which are obtainable prior to the Term Loan Conversion Date,
but all of which are obtainable in the ordinary course of the Borrower's
business as and when required. Each of the Partnership Agreement and the other
Basic Documents to which the General Partner is a party has been duly executed
and delivered by the General Partner and constitutes, and each of the other
Basic Documents to which the General Partner is to become a party
<PAGE>
45
will, upon execution and delivery thereof by the General Partner and the other
parties thereto (if any), constitute, a legal, valid and binding obligation of
the General Partner enforceable against the General Partner in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general principles of equity.
(c) The Partnership Agreement has been duly authorized,
executed and delivered by each of the Partners and constitutes a valid and
legally binding obligation of each of the Partners enforceable in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general principles of equity.
5.5 Permits and Approvals. No material Governmental Approvals
or other material consents or approvals are required in connection with (a) the
participation by the Borrower or the General Partner in the transactions
contemplated by this Agreement and the other Basic Documents, (b) the
construction, use, ownership or operation of the Project in accordance with the
applicable provisions of the Basic Documents and in compliance with all
Requirements of Law, (c) the validity and enforceability of the Basic Documents,
(d) the transportation of Fuel to the Facility and the use of the Fuel for
operation of the Facility or (e) the grant by the Borrower and the General
Partner of the Liens created pursuant to the Collateral Security Documents and
the validity and enforceability thereof and the perfection of and the exercise
by the Agent of its rights and remedies thereunder, except for the permits,
Governmental Approvals and other consents and approvals set forth on Schedule 2,
all of which have been obtained and are in full force and effect and not subject
to appeal or judicial governmental or other review, and Schedule 5, none of
which are obtainable prior to the Term Loan Conversion Date, but all of which
are obtainable in the ordinary course of the Borrower's business as and when
required. The foregoing representation is made to the best knowledge after due
inquiry of the Borrower only with respect to the consents and approvals which
are required to be obtained by any Participant (other than the Borrower and the
General Partner). No Governmental Approval or other consent or approval is
required to permit the commencement of construction on the Site, except for the
permits and other consents and approvals required to be obtained by the Turnkey
Contractor pursuant to the Turnkey Contract. The Borrower has no reason to
believe that any Governmental Approval referred to in Schedule 5 cannot or will
not be obtained or made in the normal course of business as and when required,
except for any such Governmental Approval, the failure to obtain which could not
reasonably be expected to (i) have a material adverse effect on the business,
operations, property condition (financial or otherwise) or prospects of the
<PAGE>
46
Borrower or the rights or interests of the Lender or (ii) materially adversely
affect the ability of the Borrower to perform its obligations under the Basic
Documents to which it is a party.
5.6 No Legal Bar. The execution, delivery and performance of
this Agreement, the Notes and the other Basic Documents, the creation of the
Liens provided for in the Collateral Security Documents, the borrowings by the
Borrower hereunder, the issuance of the Borrower Letters of Credit and the use
of the proceeds thereof, (a) will not violate any Requirement of Law applicable
to the Borrower or the General Partner, (b) will not violate or result in any
breach of, or constitute any default under, any Contractual Obligation of the
Borrower or the General Partner, except to the extent that the failure to comply
therewith could not reasonably be expected to (i) have a material adverse effect
on the business, operations, property, condition (financial or otherwise) or
prospects of the Borrower or the General Partner, as the case may be, or (ii)
materially adversely affect the ability of the Borrower or the General Partner
to perform its obligations under the Basic Documents to which it is a party, and
(c) will not result in, or require, the creation or imposition of any Lien on
any of the properties or revenues of the Borrower or the General Partner
pursuant to any Requirement of Law or Contractual Obligation, except for
Permitted Liens. No approvals or consents of any trustee or any holder of any
indebtedness, obligations or securities of the Borrower or the General Partner
or, to the best knowledge of the Borrower, any other Participant are required in
connection with the execution, delivery and performance by the Borrower, the
General Partner or any other Participant of any Basic Document to which it is or
is to become a party, except such as have been duly obtained and are in full
force and effect.
5.7 No Proceeding or Litigation. Except as previously
disclosed by the Borrower to the Agents and the Lenders in a writing, no
litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the best knowledge of the Borrower,
threatened against the Borrower or the General Partner, or against any of their
respective properties, rights, revenues or assets, or the Project, or, to the
best knowledge of the Borrower, pending or threatened against any other
Participant, (a) which could reasonably be expected to have a material adverse
effect on the properties, business, operations, condition (financial or
otherwise) or prospects of the Borrower or the General Partner, (b) which could
reasonably be expected to have a material adverse effect on the construction,
completion or operation of the Project as contemplated by the Basic Documents,
(c) which could reasonably be expected to impair the value of the security
granted to the Agent pursuant to the Collateral Security Documents or (d) which
could reasonably be expected to have a material adverse effect on the
<PAGE>
47
ability of any Participant to perform its obligations under any Basic Document
to which it is a party.
5.8 No Default or Event of Loss. Neither the Borrower nor the
General Partner is in default under or with respect to any Contractual
Obligation (including without limitation, any Basic Document to which it is a
party) in any respect which could reasonably be expected to (i) have a material
adverse effect on the business, operations, property, condition (financial or
otherwise) or prospects of the Borrower or the General Partner or (ii)
materially adversely affect the ability of the Borrower or the General Partner
to perform its obligations under the Basic Documents to which it is a party. No
notice of default has been given to the Borrower or the General Partner under
any of the Basic Documents to which it is a party. To the best knowledge of the
Borrower, no other party to a Basic Document is in default thereunder in any
respect which could reasonably be expected to (i) have a material adverse effect
on the business, operations, property, condition (financial or otherwise) or
prospects of such party or (ii) materially adversely affect the ability of such
party to perform its obligations under the Basic Documents to which it is a
party. No Default or Event of Default has occurred and is continuing. No Event
of Loss has occurred which has not been notified in writing to the Agents and
the Lenders pursuant to subsection 7.18(a).
5.9 Ownership of Property; Liens. The Borrower has good title
to all Collateral owned by it free and clear of all liens other than Permitted
Liens. No mortgage or financing statement or other instrument or recordation
covering all or any part of the Collateral which has been executed by, or with
the permission of, the Borrower or the General Partner is on file in any
recording office, except such as has been filed in favor of the Agent or as
evidences Permitted Liens.
5.10 Taxes. (a) The General Partner has filed or caused to be
filed all tax returns which are required to be filed by it or by the Borrower,
and has paid or caused to be paid all taxes shown to be due and payable on such
returns or on any assessments made against it or the Borrower or any of its or
the Borrower's property and all other taxes, fees or other charges imposed on it
or the Borrower or any of its or the Borrower's property by any Governmental
Authority, except taxes, fees and other charges not yet due and payable or which
are being contested in accordance with the provisions of subsection 7.15.
(b) Except for (i) transfer taxes and registration,
recordation and other miscellaneous fees payable in connection with the
recordation of the Mortgage and the Security Agreement and the filing of
financing statements required to perfect the Lenders' rights under the
Collateral Security Documents, if any, which shall have been paid in full by the
Borrower on or before each Borrowing Date to the extent required hereunder,
<PAGE>
48
(ii) other taxes or fees, if any, which are indemnified against by the Borrower
pursuant to subsection 4.9 and 4.10 and which shall have been paid in full by
the Borrower on or before each Borrowing Date hereunder to the extent then
required and (iii) taxes imposed with respect to any Bender by the jurisdiction
in which such Lender is organized, doing business or in which an office of such
bender is located or any political subdivision or taxing authority thereof or
therein, to the best knowledge of the Borrower, neither the execution and
delivery of this Agreement, the Notes, the Letters of Credit or any other Basic
Document, nor the consummation of any of the transactions contemplated hereby or
thereby, will result in any tax, levy, impost, duty, charge or withholding
imposed by the United States or any agency or taxing authority thereof, or any
political subdivision or taxing authority thereof or therein, on or with respect
to such execution, delivery or consummation, or upon or with respect to the
Agents or the Benders.
5.11 Federal Regulations. Neither the Borrower nor the General
Partner is engaged or will engage in the business of extending credit for the
purpose of "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulations G, U and X of the Board
of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. No part of the proceeds of the Loans will be used for
"purchasing" or "carrying" any "margin stock" as so defined or for any purpose
which violates, or which would be inconsistent with, the provisions of the
Regulations of such Board of Governors.
5.12 ERISA. No Reportable Event has occurred during the
immediately preceding six-year period with respect to any Plan, and each Plan
has complied and has been administered in all material respects with applicable
provisions of ERISA and the Code. The present value of all benefits under each
Single Employer Plan maintained by the Borrower or any Commonly Controlled
Entity (based on those assumptions used to fund such Plan) did not, as of the
last annual valuation date applicable thereto, exceed the value of the assets of
such Plan allocable to such benefits. Neither the Borrower nor any Commonly
Controlled Entity has during the immediately preceding six-year period had a
complete or partial withdrawal from any Multiemployer Plan, and neither the
Borrower nor any Commonly Controlled Entity would become subject to liability
under ERISA if the Borrower or any Commonly Controlled Entity were to withdraw
completely from all Multiemployer Plans as of the most recent valuation date
applicable thereto. Neither the Borrower nor any Commonly Controlled Entity has
received notice that any Multiemployer Plan is in Reorganization or Insolvency
nor, to the best knowledge of the Borrower, is any such Reorganization or
Insolvency reasonably likely to occur. The present value (determined using
actuarial and other assumptions which are reasonable in respect of the benefits
provided and the employees participating) of the liability of the Borrower and
each Commonly Controlled Entity for post retirement benefits to
<PAGE>
49
be provided to their current and former employees under Plans which are welfare
benefit plans (as defined in Section 3(l) of ERISA) does not, in the aggregate,
exceed the assets under all such Plans allocable to such benefits.
5.13 Investment Company Act. Neither the Borrower nor the
General Partner is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
5.14 Collateral Security Documents. (a) Upon execution and
delivery thereof, the Collateral Security Documents will be effective to create,
in favor of the Agent, legal, valid and enforceable liens on and security
interests in all right, title, estate and interest of the Borrower or the
General Partner, as the case may be, in and to all items of Collateral (other
than those items of Collateral which, individually or in the aggregate, are not
material) and (i) all necessary and appropriate recordings and filings will have
been duly effected in all appropriate public offices and (ii) any cash or other
amounts then required to be deposited pursuant to the Security Deposit Agreement
will have been so deposited so that the liens and security interests created by
the Collateral Security Documents will constitute perfected first liens (other
than as to the Permitted Liens) on, and prior (other than as to the Permitted
Liens) perfected security interests in, all right, title, estate and interest of
the Borrower or the General Partner, as the case may be, in and to all items of
Collateral (other than those items of Collateral which, individually or in the
aggregate, are not material) described therein (other than any item of
Collateral as to which a security interest cannot be perfected by filing,
recording or registering) prior and superior to all other Liens, existing or
future, except Permitted Liens. The recordings and filings shown on Schedule 3
and the registration on the books of the General Partner of the pledge effected
by the Assignment and Security Agreement and the continuous possession by the
Security Agent of the cash required to be deposited pursuant to the Security
Deposit Agreement are all the recordings, filings and other action (other than
the periodic filing of continuation statements) necessary and appropriate in
order to establish, protect and perfect the Agent's lien on and security
interest in the right, title, estate and interest of the Borrower or the General
Partner, as the case may be, in and to all items of Collateral (other than those
items of Collateral which, individually or in the aggregate, are not material).
(b) As and when cash, cash equivalents, instruments,
certificates and other securities (the "Security Deposit Collateral") are
transferred in accordance with Applicable Law to, and held in the name of, the
Security Agent in the accounts referred to in the Security Deposit Agreement, a
fully perfected security interest in all right, title and interest of the
Borrower in and to the Security Deposit Collateral will exist in favor of the
Agent for the benefit of the Landers.
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50
5.15 Full Disclosure. No representation, warranty or other
statement made by the Borrower or the General Partner in any Basic Document or
in any Certificate, Written Statement or other document furnished to the Agents,
the Landers, the Lenders' Site Representative or the Independent Engineer by or
on behalf of the Borrower or the General Partner, contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained herein or therein, in light of the circumstances under
which they were made, not misleading. There is no fact known to the Borrower,
except for general conditions affecting the cogeneration industry, which the
Borrower has not disclosed to the Agents and the Lenders in writing prior to the
date hereof which materially adversely affects, or which could reasonably be
expected in the future to materially adversely affect, the Project or the
properties, business, operations or financial condition of the Borrower or the
General Partner or the ability of the Borrower or the General Partner to perform
its obligations under any Basic Document to which it is or is to be a party.
5.16 Project Contracts. Except as previously disclosed in a
writing by the Borrower to the Agents and the Lenders which specifically refers
to this subsection, to the best knowledge of the Borrower, each of the Project
Contracts constitutes the legal, valid and binding obligation of each of the
parties thereto, and is enforceable against each such party in accordance with
its terms except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors generally and by general principles of equity. Except as set forth on
Schedule 5, to the best knowledge of the Borrower, all Governmental Approvals
and other consents or approvals required in connection with the execution,
delivery and performance of each of the Project Contracts by the parties thereto
(other than the Borrower) have been duly obtained or made, are in full force and
effect and are not subject to appeal or judicial, governmental or other review.
None of the Governmental Approvals and other consents and approvals referred to
on Schedule 5 are obtainable prior to the Term Loan Conversion Date, but are
obtainable in the ordinary course of each such party's business as and when
required.
5.17 Property rights, Utilities. (a) All utility services,
means of transportation, facilities, other materials and easements that can
reasonably be expected to be necessary for the completion and operation of the
Facility in accordance with the obligations of the Borrower under the Power
Purchase Agreement and the Steam Supply Agreement, if any (including, without
limitation, gas, electrical, water and sewage services and facilities), are or
will be available to the Facility and, to the extent appropriate, arrangements
have been made to provide such services, means of transportation, facilities,
other materials and easements to the Facility.
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51
(b) The easements described in Schedule 1 and the easements
granted to the Borrower pursuant to the Project Contracts, if any, are the only
easements necessary for the Borrower to perform its obligations under the
Project Contracts.
5.18 Compliance with Building Codes, Zoning Laws. Etc. The
Project complies in all material respects with all applicable zoning, land use
and building codes, laws, regulations and ordinances. The Borrower has no
knowledge of any violations of any laws, ordinances, codes, requirements or
orders of any Governmental Authority affecting the Project, which violations
could reasonably be expected to have a material adverse effect on the Project.
5.19 Princinal Place of Business, Etc. The principal place of
business and chief executive office of the Borrower and the office where the
Borrower keeps its records concerning the Project and all contracts relating
thereto, is located at 1600 Smith Street, Suite 5000, 50th Floor, Houston,
Texas.
5.20 Representations and Warranties. The representations and
warranties of the Borrower contained in the Basic Documents (other than the
Project Contracts and this Agreement) were true and correct on and as of the
dates when made, and, except to the extent such representations and warranties
relate solely to an earlier date (in which case such representations and
warranties shall have been true and correct as of such earlier date) the
Borrower hereby confirms each such representation and warranty with the same
effect as if set forth in full herein. The representations and warranties of the
Borrower contained in the Project Contracts were true and correct in all
material respects on and as of the dates when made, except with respect to those
representations and warranties contained in Project Contracts acquired by the
Borrower prior to December 31, 1990, in which case such representations and
warranties shall have been true and correct in all material respects with
respect to such Project Contracts from and after December 31, 1990, and, except
to the extent such representations and warranties relate solely to an earlier
date (in which case such representations and warranties shall have been true and
correct in all material respects as of such earlier date) the Borrower hereby
confirms each such representation and warranty with the same effect as if set
forth in full herein.
5.21 Material Technology. To the best knowledge of the
Borrower after diligent inquiry, all licenses, trademarks, patents or agreements
with respect to the usage of technology (other than those relating to any
equipment supplied to the Borrower pursuant to the Equipment Supply Contract)
that the Borrower owns or has the right to obtain or use and that are necessary
for the construction, ownership, operation and maintenance of the Project are in
full force and effect and
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52
have been assigned to the Agent for the ratable benefit of the Lenders.
5.22 Sufficiency of Basic Documents. The services to be
performed, the materials to be supplied and the property interests, easements,
if any, and other rights granted or to be granted pursuant to the Basic
Documents comprise substantially all of the services, materials and property
interests required for the acquisition, development, construction, installation,
completion, operation and maintenance of the Project in accordance with all
Requirements of Law and the Basic Documents. There are no services, materials or
rights required for the construction, operation or maintenance of the Facility
in accordance with the Basic Documents and all Requirements of Law, other than
(1) those granted by or to be provided by or on behalf of the Borrower pursuant
to the Basic Documents, (2) the Governmental Approvals and other consents and
approvals listed in Schedules 2 and 5, (3) those that can reasonably be expected
to be commercially available at the Site and (4) those which the failure to
obtain could not reasonably be expected to have a material adverse effect on the
business, operations, property, condition (financial or otherwise) or prospects
of the Borrower, could not reasonably be expected to materially adversely affect
the ability of the Borrower to perform its obligations under the Basic Documents
to which it is a party.
5.23 Environmental Matters. (a) (i) There are and have been no
Hazardous Materials at, upon, under or within or discharged or emitted from the
Project, including, without limitation, the air, subsurface, soil, surface and
ground water and aquifers of the Site, except for such Hazardous Materials as
may be permitted to be maintained on the Site in accordance with any Relevant
Environmental Law or such Hazardous Materials that may be removed from the Site
in accordance with all Relevant Environmental Laws at an aggregate cost not to
exceed the amount set forth in the Construction Budget for Site preparation and
amounts to be paid by the seller of the Site; and
(ii) no Environmental Discharges have occurred at, upon,
under, within or from the Facility, except for such Environmental Discharges for
which the aggregate cost of clean up will not exceed the amount set forth in the
Construction Budget for Site preparation.
(b) No Environmental Notice has been received by the Borrower
with respect to any Adverse Environmental Event.
(c) (i) With respect to the Site and the Facility, there are
and have been no violations of any Relevant Environmental Law, except for
violations which do not constitute an Adverse Environmental Event;
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53
(ii) no outstanding order, judgment or decree which constitutes
an Adverse Environmental Event has been entered with respect to the Site, the
Facility or the Borrower: and
(iii) no other event has occurred which constitutes an Adverse
Environmental Event.
The representations set forth in this subsection 5.23
relating to conditions existing on the Site prior to the Conformed Agreement
Date shall be made only to the best knowledge of the Borrower.
5.24 Public Utility Status. (a) Neither the Borrower nor the
General Partner will, by reason of (i) the ownership of the Facility or the
operation thereof by the Borrower, or (ii) any other transaction contemplated by
this Agreement or any other Basic Document, be deemed by any Governmental
Authority having jurisdiction to be subject to financial, organizational or rate
regulation as an "electric utility", "electric corporation", "electrical
company", "public utility" or a "public utility holding company" under any
existing Applicable Law except where (x) the effect of such determination would
result only in the imposition of reporting or safety requirements which, in the
reasonable opinion of the Lender, are non-burdensome in nature and (y) in the
event that steam from the Project is supplied, directly or indirectly, to
Persons other than the Steam Host under the Steam Supply Agreement or otherwise,
the Limited Partnership shall have obtained a declaratory order or other
official assurance, in form and substance reasonably satisfactory to the Lender,
from the New Jersey Board of Regulatory Commissioners to the effect that such
sales will not result in the Facility, the owner thereof or any of such owner's
Affiliates being deemed to be, or subject to regulation as, a "public utility"
under any Applicable Law (other than regulation of the nature described in
clause (x) of this clause (m).
(b) Neither the Agents or any Lender will, by reason of (i)
the ownership of the Facility or the operation thereof by the Borrower, (ii) the
making of the Loans hereunder, (iii) the securing of the Loans by Liens on the
Project and the Assigned Contracts or (iv) any other transaction contemplated by
this Agreement or any of the other Basic Documents, be deemed by any
Governmental Authority having jurisdiction to be subject to regulation as, an
"electric utility", "electric corporation", "electrical company", "public
utility" or a "public utility holding company" under existing Applicable Law;
and neither the Agents nor any Lender will, solely by reason of the Lenders'
ownership or operation of the Facility upon the exercise of the Lenders'
remedies under the Collateral Security Documents and without regard to any other
activities of the Agents or any Lender, be deemed by any Governmental Authority
having jurisdiction to be subject to financial, organizational or rate
regulation as an "electric utility", "electric corporation", "electrical
company", "public utility" or a
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54
"public utility holding company" under any Applicable Law except where (x) the
effect of such determination would result only in the imposition of reporting or
safety requirements which, in the reasonable opinion of the Required Lenders,
are non-burdensome in nature and (y) in the event that steam from the Project is
supplied, directly or indirectly, to Persons other than the Steam Host under the
Steam Supply Agreement or otherwise, the Limited Partnership shall have obtained
a declaratory order or other official assurance, in form and substance
reasonably satisfactory to the Required Lenders, from the New Jersey Board of
Regulatory Commissioners to the effect that such sales will not result in the
Facility, the owner thereof or any of such owner's Affiliates being deemed to
be, or subject to regulation as, a "public utility" under any Applicable Law
(other than regulation of the nature described in clause (x) of this clause (m).
(c) The Facility is a Qualifying Facility; and FERC has issued
final orders granting the Borrower's application for certification as a
Qualifying Facility, which (except as such orders are subject to modification to
reflect an increase in the net generating capacity of the Facility from 120
megawatts to 134 megawatts and the ownership of the Facility by the Borrower)
orders are in full force and effect and are not the subject of any pending or
threatened administrative or judicial proceedings.
SECTION 6. CONDITIONS PRECEDENT
--------------------
6.1 Conditions to the Term Loans. The obligations of the
Lenders to make the Term Loans shall be subject to the fulfillment to the
satisfaction of each of the Agents, unless otherwise specified, of the following
conditions on or prior to the making of the Term Loans:
(a) Term Notes. The Agent shall have received on behalf of
each Lender a Term Note conforming to the requirements hereof and executed by
the Borrower.
(b) Capital Contributions. The Borrower shall have satisfied
to the satisfaction of each of the Agents the conditions set forth in Section
2(b) and 2(c) of the Capital Contribution Agreement and GE Capital shall have
made the capital contributions required to be made by it on the Second Capital
Contribution Date pursuant to the Capital Contribution Agreement.
(c) Legal Opinions. Each Agent shall have received the
following opinions of counsel, each in form and substance reasonably
satisfactory to the Required Lenders:
(i) the opinion of counsel to the Borrower and the General
Partner;
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55
(ii) the opinion of special New Jersey counsel to the
Borrower;
(iii) the opinion of special Delaware counsel to the Borrower;
(iv) the opinion of special FERC and regulatory counsel to the
Borrower; and
(v) the opinion of special permitting and environmental
counsel to the Borrower.
(d) Authorizing Actions. All partnership, corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and the other Basic Documents then contemplated by this Agreement to be in
effect, and all documents and instruments incident thereto, shall be reasonably
satisfactory in form and substance to each Agent and its counsel; and each Agent
and its counsel shall have received such counterpart originals or certified or
other copies of all such documents and instruments and of all records of
partnership and corporate proceedings in connection with such transactions, and
such incumbency and signature certificates of officers of the Borrower, the
General Partner and Coqen, as each Agent or its counsel may reasonably request.
(e) Interest Rate Hedging Obligations. The Borrower shall have
entered into agreements (such agreements, as amended, supplemented or modified
from time to time the "Interest Rate Hedging Agreements"; and all obligations of
the Borrower under such agreements, the "Interest Rate Hedging Obligations") to
fix the interest rate on 100% of the principal balance of the Tranche A Term
Loans from time to time scheduled to be outstanding, in form and substance
satisfactory to the Senior Tranche Agent.
(f) Easements. Each of the Agents shall have received the
following, each in form and substance satisfactory to it and its counsel:
(i) a fully executed and recorded easement agreement or
license agreement between the Borrower and the owner of each
of parcels I XVIII indicated on the "Easement Plan Prepared
for Coqen Technologies" prepared by GEOD Photoqrammetric
Sciences Survey Technologies dated 12-29-92 and revised
1-13-93 covering such parcels, as well as an easement
agreement between the Borrower and Coqen Technologies P.B.,
Inc. covering the parcel indicated on the "Easement Plan of
Land Prepared for Coqen Technologies" prepared by GEOD
Surveying and
<PAGE>
56
Aerial Mapping dated 1-12-93 (collectively, the "Easements");
(ii) an amendment (the "Mortgage Amendment") to the
existing mortgage from the Borrower to GE Capital (the
"Mortgage") adding the Basements to the real property
interests encumbered by such mortgage and, if requested by GE
Capital, spreading the lien of the Mortgage to the portion of
vacated Sixth Street now owned by the Borrower;
(iii) endorsements to GE Capital's existing title
insurance policies insuring the lien of the Mortgage which (x)
add the Mortgage Amendment to the description of the insured
instrument, (y) add descriptions of the Easements to the
current description of the real property interests insured by
such policies and (z) affirmatively insure GE Capital that the
Easements are contiguous to each other and to the real
property currently encumbered by the Mortgage;
(iv) two originals of each of the surveys referred to in
clause (i), above, certified to GE Capital, the Borrower and
Continental Title Insurance Company and including such
additional information as GE Capital shall request; and
(v) an estoppel letter from Camden Paperboard Corporation.
(g) Representations and Warranties. The representations and
warranties made by the Borrower or the General Partner herein, which it is a
party,or in any other Basic Document to or which are contained in any
certificate, document, financial or other statement furnished by the Borrower or
the General Partner hereunder or thereunder or in connection herewith or
therewith, shall be true and correct on and as of the Term Loan Conversion Date
as if made on and as of such date, except to the extent that such
representations and warranties relate specifically to an earlier date (in which
case such representations or warranties shall have been true and correct on and
as of such earlier date).
(h) Additional Documents. The Senior Tranche Agent shall have
received such other documents and opinions as may be reasonably requested by it.
(i) Additional Matters. All other documents and legal matters
in connection with the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to the Agents and their counsel.
<PAGE>
57
SECTION 7. AFFIRMATIVE COVENANTS
---------------------
So long as the Commitments remain in effect, any Note remains
outstanding and unpaid, any amount remains available to be drawn under any
Letter of Credit or any other amount is owing to the Agents or any Lender
hereunder or under the Collateral Security Documents, the Borrower hereby agrees
that:
7.1 Completion of Facility. The Borrower shall cause the
Project to be completed in compliance in all material respects with all
applicable national, state and local engineering, environmental, construction,
safety and electrical generation codes and standards and in compliance with the
terms of the Turnkey Contract (including, without limitation, the Completion
Budget). The Borrower shall respond, and shall cause the Turnkey Contractor to
respond, to the Independent Engineer's and the Lenders' Site Representative's
inquiries regarding the completion of the Facility.
7.2 Conduct of Business, Maintenance of Existence, Etc. The
Borrower shall at all times (i) engage solely in the business of developing,
constructing, owning and operating or owning and leasing the Project, the
performance of its obligations pursuant to the Non-Competition Agreement and the
Project Contracts, (ii) preserve and maintain in full force and effect its
existence as a limited partnership under the laws of the State of Delaware, its
qualification to do business in the States of New Jersey and Texas and in each
other jurisdiction in which the conduct of its business requires such
qualification and all of its rights, privileges and franchises necessary for the
construction, ownership and operation of the Project and (iii) obtain and
maintain in full force and effect all Governmental Approvals and other consents
and approvals required at any time in connection with the construction,
ownership or operation of the Project, except to the extent that the failure to
obtain and maintain such Governmental Approval or other consent or approval
could not reasonably be expected to (i) have a material adverse effect on the
business, operations, property, condition (financial or otherwise) or prospects
of the Borrower or (ii) materially adversely affect the Borrower's ability to
perform its obligations under the Basic Documents to which it is a party. The
General Partner will engage solely in (i) the business of being the sole general
partner of the Borrower, (ii) activities permitted pursuant to the General
Partner Term Loan Agreement and the Non-Competition Agreement and (iii) the
performance of the Borrower's obligations pursuant to the Basic Documents. In
addition, the General Partner shall preserve and maintain its existence as a
limited partnership under the laws of the State of Delaware and its
qualification to do business in the States of Texas and New Jersey and in each
other jurisdiction in which the conduct of its business requires such
qualification.
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58
7.3 Payment of Obligations. The Borrower will pay, discharge
or otherwise satisfy at or before maturity or before they become delinquent, as
the case may be, all of its Indebtedness and other obligations of whatever
nature, except for any Indebtedness or other obligations which are being
contested in good faith and by appropriate proceedings and to the extent that
the Borrower is complying with the relevant provisions of clauses (a)-(d) of
subsection 7.19 or subsection 7.20, as applicable.
7.4 Performance under Other Agreements. The Borrower shall
duly perform and observe all of the covenants, agreements and conditions on its
part to be performed and observed hereunder and under the Notes and the
Collateral Security Documents to which it is a party, and shall duly perform and
observe in all material respects all of the covenants, agreements and conditions
on its part to be performed and observed under the other Basic Documents to
which it is a party. The Borrower shall diligently enforce all of its rights
under each Assigned Contract except to the extent that the failure to enforce
such rights could not reasonably be expected to (i) have a material adverse
effect on the business, operations, property, condition (financial or otherwise)
or prospects of the Borrower or (ii) materially adversely affect the Borrower's
ability to perform its obligations under the Basic Documents to which it is a
party. The Borrower shall have the right to terminate any Assigned Contract
(other than the Project Contracts and the Capital Contribution Agreement) except
to the extent that the exercise of such right could reasonably be expected to
(i) have a material adverse effect on the business, operations, properties,
condition (financial or otherwise) or prospects of the Borrower or (ii)
materially adversely affect the Borrower's ability to perform its obligations
under the Basic Documents to which it is a party.
7.5 Insurance Coverage. Without limiting any of the other
obligations or liabilities of the Borrower under this Agreement, the Borrower
shall at all times carry and maintain or cause to be carried and maintained at
its own expense such insurance as is customarily maintained by constructors,
owners, operators, and lessees of electric generating facilities and in all
events shall carry and maintain at least the minimum insurance coverage set
forth in this subsection. The Borrower shall also carry and maintain any other
insurance that the Agents and the Required Lenders may reasonably require from
time to time. All insurance carried pursuant to this subsection shall be with
such insurers, in such amounts and in such form and with deductibles or self
insured retentions as shall be reasonably satisfactory to the Required Lenders
provided such insurance shall be available on commercially reasonable rates. All
insurance required under (a), (b), (c) and (f) below shall be on a designated
location basis and shall apply solely to the use, operation and maintenance of
the Facility.
<PAGE>
59
(a) After acceptance of the Facility, the Borrower shall
maintain or cause to be maintained all risk property and boiler & machinery
insurance, covering physical loss or damage to the Facility and transmission
lines (related to the interconnection facilities) including fire and extended
coverage, collapse, liquid damage, earthquake, flood and comprehensive boiler
and machinery (including electrical malfunction and mechanical breakdown). Such
insurance shall cover all property of the Facility. The all risk property and
boiler and machinery coverage shall not contain an exclusion for resultant
damage caused by faulty workmanship, design or materials. Coverage shall be
written on a replacement cost basis and in an amount acceptable to the Required
Landers, but in no event less than the replacement cost of the Facility. Such
policy shall contain a valid agreed amount endorsement waiving any coinsurance
penalty. The policy may be subject to deductibles not to exceed $250,000 per
occurrence. To the extent the sum of (w) the amount necessary to pay any
liability to PSE&G under the Power Purchase Agreement, (x) the Stipulated
Redemption Value (which includes the amount necessary to prepay the Term Loan),
(y) the principal of and interest on the General Partner Term Loan and (z) the
face amount of Borrower Letters of Credit exceeds the limits of coverage under
the property and boiler & machinery policy referred to above, the Borrower shall
procure a special policy known as a "Single Interest Excess of Loss Coverage" or
"Stipulated Loss Coverage" covering all the perils provided by the property and
boiler & machinery policy. Such policy shall provide limits equal to the
difference between (A) the sum of clauses (x), (y) and (z) of the immediately
preceding sentence and (B) the property and boiler & machinery limits, or as may
be mutually agreed between the Borrower and the Required Lenders.
(b) As an extension of (a) above or as a separate policy, the
Borrower shall maintain or cause to be maintained business interruption
insurance in an amount equal to 1-1/2 years' projected continuing expenses and
profit of the Borrower and contingent business interruption insurance in an
amount equal to one year projected continuing expenses and profit of the
Borrower. This extension of the policy shall include coverage for (x) business
interruption arising from loss or damage to the Facility and (y) contingent
business interruption arising from damage to the property and equipment of
customers and suppliers of the Facility, which is not covered by the insurance
specified in paragraph (a) above. Such customers and suppliers shall include but
not be limited to the purchasers of steam and electricity and the suppliers of
gas. Any such extension or policy shall also include coverage for expediting
expenses and extra expense with a sublimit of $10,000,000. Any such extension or
policy shall have a deductible not to exceed 30 days business interruption
except for expediting expense and extra expense which deductible shall not
exceed $250,000.
(c) The Borrower shall maintain comprehensive (or commercial)
general liability insurance written on an
<PAGE>
60
occurrence basis and with a combined single limit of not less than $l,OOO,OOO.
Such coverage shall include premises/operations, explosion, collapse and
underground hazards, broad form contractual, independent contractors,
products/completed operations, broad form property damage and personal injury.
Such policy shall be written on a project specific basis and shall apply solely
to the construction, use, operation and maintenance of the Facility.
(d) The Borrower shall maintain (i) Workers Compensation
insurance with statutory limits and (ii) employers liability with limits of not
less than $l,OOO,OOO including occupational disease coverage.
(e) The Borrower shall maintain comprehensive (or business)
automobile liability insurance for owned (if any), nonowned and hired vehicles
with combined single limits of not less than $500,000.
(f) The Borrower shall maintain excess (or umbrella) liability
insurance written on an occurrence basis and providing coverage limits in excess
of the insurance required to be maintained pursuant to 7.5(c), (d)(ii) and (e).
The limits of such insurance and such excess insurance (or umbrella) coverage,
when combined, shall be not less than $25,000,000. Such policy shall be
written on a project and shall apply solely to the construction, use, operation
and maintenance of the Facility.
(g) The Borrower shall maintain such insurance as the Borrower
is required to maintain pursuant to the provisions of any other Basic Document.
(h) The Borrower shall cause the Operator to obtain and
maintain in full force and effect:
(i) (y) Workers' compensation insurance written with
statutory limits and (z) employer's liability
in an amount not less than $1,000,000. The employer's
liability coverage shall not contain an occupational
disease exclusion.
(ii) Comprehensive automobile liability insurance for all
owned, nonowned and hired vehicles written in an
amount not less than $500,000.
(i) The insurance carried in accordance with this subsection
7.5 shall be endorsed as follows:
(i) the Borrower shall be the named insured and the
Agents, the Lenders and each Partner shall be an
additional named insured with respect to the insurance
required to be
<PAGE>
61
maintained pursuant to subsections 7.5(a) and (b). The
Borrower shall be the named insured and the Agents, the
Lenders and each Partner shall be an additional named
insured with respect to the insurance required to be
maintained pursuant to Sections 7.5(c), (e), (f) and
(h)(ii). The Borrower, each Partner, the Agents and the
Lenders shall be an additional insured with respect to
insurance maintained pursuant to section 7.5(h)(ii).
(ii) the interest of the Agents, the Lenders or any Partner
shall not be invalidated by any action or inaction of the
Borrower or any other Person and shall insure the Agents,
the Lenders and each Partner regardless of any breach or
violation by the Borrower or any other Person and shall
insure the Agents and the Lenders regardless of any breach
or violation by the Borrower or any other Person of any
warranties, declarations or conditions in such policies;
(iii) the insurer thereunder shall waive all rights of
subrogation against the Agents and the Lenders, any right
of setoff or counterclaim and any other right to
deduction, whether by attachment or otherwise;
(iv) such insurance shall be primary without right of
contribution of any other insurance carried by or on
behalf of the Agents with respect to its interest as such
in the Facility;
(v) if such insurance is canceled for any reason whatsoever,
including nonpayment of premium, or any substantial change
is made in the coverage which affects the interest of the
Agents and the Lenders, such cancellation or change shall
not be effective as to the Agents and the Lenders for 30
days, except for nonpayment of premium which shall be 10
days, after receipt by the Senior Tranche Agent for the
Tranche A Lenders and the Junior Tranche Agent for the
Tranche B Lenders and the Tranche C Lenders of written
notice sent by registered mail from such insurer of such
cancellation or change;
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62
(vi) any insurance carried in accordance with subsection
7.5(c), (e), (f) and (h)(ii) shall be endorsed to provide
that, inasmuch as the policy is written to cover more than
one insured, all terms, conditions, insuring agreements
and endorsements, with the exception of limits of
liability, shall operate in the same manner as if there
were a separate policy covering each insured: and
(vii) any insurance carried in accordance with subsection
7.5(a) or (b) shall include a standard lender's loss
payable endorsement in favor of the Agents and the Agent
shall be named the sole loss payee. Deductibles or self
insured retentions shall be subject to approval by the
Required Lenders.
7.6 Adjustment of Losses. The loss, if any, under any
insurance required to be carried by subsection 7.5 shall be adjusted with the
insurance companies or otherwise collected, including the filing of appropriate
proceedings, by the Borrower, subject to the approval of the Required Lenders,
as pertains to losses under subsections 7.5(a) and (b) only. All such policies
shall provide that the loss, if any, under such insurance shall be adjusted and
paid as provided in this Agreement.
7.7 Application of Payments. All payments received by any of
the Agents or the Borrower from any insurer with respect to loss or damage to
the Facility or other Collateral shall promptly be deposited in the Insurance
and Condemnation Proceeds Account for application in accordance with the
provisions of Section 4.05 of the Security Deposit Agreement.
7.8 Evidence of Insurance. On the Term Loan Conversion Date
and on an annual basis at each policy anniversary, the Borrower shall furnish
the Agents with approved certification of all required insurance. Such
certification shall be executed by each insurer or by an authorized
representative of each insurer where it is not practical for such insurer to
execute the certificate itself. Such certification shall identify underwriters,
the type of insurance, the insurance limits and the policy term, shall
specifically list the special provisions enumerated for such insurance required
by subsection 7.5 and, with respect to insurance required under subsections
7.5(a) and (b), shall be accompanied by a report of a Responsible Officer of the
General Partner stating the full insurable value of the Facility as of the
effective date of such policy or renewal thereof. Upon request, the Borrower
will furnish the Agents with copies of all insurance policies, binders and cover
notes or other evidence of such insurance relating to the Facility.
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63
7.9 Insurance Report. Concurrently with the furnishing of the
certification referred to in subsection 7.8, the Borrower shall furnish the
Agents with a report of an independent broker stating that all premiums then due
have been paid and that, in the opinion of such broker, the insurance then
carried and maintained is in accordance with the terms of subsection 7.5. The
Agents may at their sole option obtain such insurance if not provided by the
Borrower and, in such event, the Borrower shall reimburse the Agents upon demand
for the cost thereof.
7.10 No Duty of the Agents to Verify. No provision of this
Agreement or any provision of any other Basic Document shall impose on any Agent
or any Lender any duty or obligation to verify the existence or adequacy of the
insurance coverage maintained by the Borrower, nor shall any Agent or any Lender
be responsible for any representations or warranties made by or on behalf of the
Borrower to any insurance company or underwriter.
7.11 Inspection of Property; Books and Records. The Borrower
shall keep proper books of record and account in which full, true and correct
entries shall be made of all of its transactions in conformity with GAAP, and
the Borrower shall permit representatives of the Agents to visit and inspect its
properties, to examine its books of record and account and to discuss its
affairs, finances and accounts with its principal officers, engineers and
independent accountants, all at such reasonable times during business hours and
at such intervals as the Agents may request. In addition, the Independent
Engineer and representatives of the Agents shall have the right to inspect the
Project from time to time and to discuss the operation of the Facility with the
Borrower and the Operator.
7.12 Compliance with Laws. (a) The Borrower shall comply with
all laws, rules, regulations and orders, and shall from time to time obtain and
comply with all Government Approvals as shall now or hereafter be necessary
under applicable law or regulation, in connection with the construction,
operation and ownership of the Project, except any thereof the non-compliance
with which could not reasonably be expected to (i) have a material adverse
effect on the business, operations, property, condition (financial or other) or
prospects of the Borrower or the rights or interests of the Lenders or (ii)
materially adversely affect the Borrower's ability to perform its obligations
under Basic Documents to which it is a party.
(b) Notwithstanding the foregoing, the Borrower shall cause
all Hazardous Materials on the Site or relating to the Project to be handled and
disposed of in compliance with all Relevant Environmental Laws.
7.13 Financial Statements. The Borrower shall furnish or cause
to be furnished to the Agents and each Lender:
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64
(a) as soon as available, but in any event within 120 days
after the end of each fiscal year of each Reporting Participant, a copy
of the balance sheet of such Reporting Participant as of the end of
such fiscal year and the related statements of income, partners'
capital and statements of changes in partners' capital and cash flow of
such Reporting Participant for such fiscal year, setting forth, after
fiscal year 1991, in each case in comparative form the figures for the
previous fiscal year, certified without qualification or exception as
to the scope of its audit by independent public accountants of national
standing reasonably acceptable to the Agents; and
(b) as soon as available, but in any event within 60 days
after the end of each quarterly period of each fiscal year of each
Reporting Participant (other than the last quarterly period of each
such fiscal year), the unaudited balance sheet of such Reporting
Participant as of the end of such quarterly period and the related
unaudited statements of income and partners' capital and statements of
changes in partners' capital and cash flow of such Reporting
Participant for such quarterly period and for the portion of the fiscal
year then ended, setting forth, after fiscal year 1991, in each case in
comparative form the figures for the previous period, certified by the
chief executive officer or chief financial officer of such Reporting
Participant (subject to normal year-end audit adjustments);
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except for
changes approved or required by the independent public accountants certifying
such statements and disclosed therein).
7.14 Certificates: Other Information. The Borrower shall
furnish or cause to be furnished to the Agents and each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.13(a), a certificate of the independent
public accountants which certified such financial statements stating
that in making the examination necessary for the audit thereof no
knowledge was obtained of any Default or Event of Default, except as
specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 7.13(a) and 7.13(b), a certificate of a
Responsible Officer of the General Partner stating that, to the best of
his knowledge after due inquiry, each of the Borrower and the General
Partner, during the period covered by such financial statements has
observed and performed in all material respects all of its
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65
covenants and other agreements, and satisfied in all material
respects every condition, contained in this Agreement and the other
Basic Documents to be observed, performed or satisfied by it, and that
such Responsible Officer has obtained no knowledge of any Default or
Event of Default which has not been waived or cured and notice given
hereunder at any time during such period or on the date of such
certificate and no knowledge of any default or event which with the
giving of notice or the lapse of time or both would constitute a
default under any of the other Basic Documents at any time during such
period or on the date of such certificate (or, if any such Default or
Event of Default or default or event shall have occurred, a statement
setting forth the nature thereof and the steps being taken by the
Borrower to remedy the same);
(c) promptly after the same are sent, copies of all financial
statements and reports which the Borrower sends to its Partners;
(d) promptly after the filing thereof, the "Annual Returns"
(Form 5500 series) and attachments filed annually with the Internal
Revenue Service with respect to each Single Employer Plan, if any, of
the Borrower;
(e) with respect to any Single Employer Plan adopted or
amended by the Borrower or the General Partner or any Commonly
Controlled Entity on or after the Conformed Agreement Date, any
determination letters received from the Internal Revenue Service with
respect to the qualification of such Plan, as initially adopted or
amended under Section 401(a) of the Code;
(f) promptly after delivery or receipt thereof, a copy of each
material notice, demand or other communication delivered by or received
by the Borrower pursuant to any Basic Document;
(g) copies of each material Governmental Approval or other
material consent or approval obtained or made by the Borrower or the
General Partner, or obtained or made by an EPC Contractor and delivered
to the Borrower pursuant to an EPC Contract, including without
limitation, the Governmental Approvals and other consents and approvals
listed on Schedules 2 and 5;
(h) not later than 30 days prior to the end of each fiscal
year of the Borrower, a copy of the monthly operating budget (which
includes revenues and expenses), the capital expenditures budget and
the general and administrative budget (collectively, the "Operating
Budget") for the next fiscal year of the Borrower, and a copy of the
projections by the General Partner of the operating Budget and cash
flow of the Borrower for the next five succeeding fiscal years, such
Operating Budget
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66
to be approved by the Co-Agents (which approval shall not be
unreasonably withheld or delayed) and such Operating Budget and
projections to be accompanied by a certificate of a Responsible Officer
of the General Partner to the effect that such Operating Budget and
projections have been prepared in good faith on a reasonable basis and
that such officer has no reason to believe they are incorrect or
misleading in any material respect;
(i) promptly after becoming available, but in any event within
30 days after the end of each calendar month (except the last month of
each quarter), a report setting forth the power production and the
revenues of the Project during such month and setting forth any
extraordinary items incurred in connection with the Project but not
included in the Operating Budget delivered pursuant to subsection
7.14(h), together with a comparison of the projected power production
and revenues of the Project for such month;
(j) promptly after becoming available, but in any event within
30 days after the end of each calendar quarter, a report, certified by
a Responsible Officer of the General Partner, setting forth the
year-to-date power production and revenues, operating expenses, general
and administrative expenses and capital expenditures of the Borrower,
together with a comparison of the Operating Budget for such period, and
a projection of revenues and expenses for the remainder of the
Borrower's fiscal year;
(k) upon any Agent's request, quarterly and annual funds flow
statements detailed to its reasonable satisfaction;
(1) upon request by any Agent, which request shall not be made
more frequently than once in any twelve-month period, a revised plan
for the procurement of natural gas for the Facility for the next four
years demonstrating to the reasonable satisfaction of the Required
Lenders how the Borrower will comply with the provisions of subsection
7.26; and
(m) promptly, such additional financial and other information
with respect to the Borrower, the General Partner, the Turnkey
Contractor or the Project as any Agent or the Required Lenders may from
time to time reasonably request (but in the case of the Turnkey
Contractor, only to the extent such information is available to or can
reasonably be obtained by the Borrower or the General Partner).
7.15 Taxes and Claims. The Borrower shall pay and discharge
all taxes, assessments and governmental charges or levies imposed on it or on
its income or profits or on any of
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67
its property prior to the date on which penalties attach thereto, and all lawful
claims which, if unpaid, might become a Lien upon the property of the Borrower.
The Borrower shall have the right, however, to contest in good faith the
validity or amount of any such tax, assessment, charge, levy or claim by proper
proceedings timely instituted, and may permit the taxes, assessments, charges,
levies or claims so contested to remain unpaid during the period of such contest
if: (a) the Borrower diligently prosecutes such contest, (b) such contested item
(other than any such item which the Borrower, with the consent of the Required
Lenders (not to be unreasonably withheld)), deems to be unmerited and not to
require the setting aside of any reserves) is included as an expense in the
Completion Budget, and after the final completion of the Facility, the Operating
Budget and, in the reasonable opinion of the Required Lenders, after giving
effect to such expense, sufficient funds are projected to be available in the
Completion Budget to complete the Facility in accordance with subsection 7.1,
(c) during the period of such contest the enforcement of any contested item is
effectively stayed; provided, however, that this clause (c) shall apply to
contested income taxes of a Partner only if the failure to pay such tax may then
become a Lien on the Facility or any of the other Collateral or may interfere
with the operation of the Facility and (d) in the reasonable opinion of the
Required Lenders, such contest does not involve any substantial danger of the
sale, forfeiture or loss of any part of the Project, title thereto or any
interest therein and does not interfere with the operation of the Facility. The
Borrower will promptly pay or cause to be paid any valid, final judgment
enforcing any such tax, assessment, charge, levy or claim and cause the same to
be satisfied of record.
7.16 Mechanics' and Materialmen's Liens. The Borrower shall
protect and defend its interest in, and the Lenders' Liens on, the Collateral
against any Lien for the performance of work or the supply of materials filed
against the Collateral; provided, that the Borrower shall have the right to
contest in good faith any such Lien by proper proceedings timely instituted, and
may permit such Lien to exist during the period of such contest if: (a) the
Borrower diligently prosecutes such contest, (b) adequate cash reserves (in the
reasonable judgment of the Required Lenders) are set aside for such contested
item (other than any such item which the Borrower with the consent of the
Required Lenders (not to be unreasonably withheld), deems to be unmerited and
not to require the setting aside of any reserves) is included as an expense in
the Completion Budget and, of the Required Lenders,in the reasonable opinion
after giving effect to such expense, sufficient funds are projected to be
available in the Construction Budget to complete the Facility in accordance with
subsection 7.1, (c) during the period of such contest the enforcement of any
contested item and the Lien relating thereto is effectively stayed, and (d) in
the reasonable opinion of the Required Lenders, such contest does not involve
any substantial
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danger of the sale, forfeiture or loss of any part of the Project, title
thereto or any interest therein and does not interfere with the operation of
the Facility. The Borrower will promptly pay or cause to be paid any valid,
final judgment enforcing any such item, cause the Lien relating thereto to be
removed and otherwise cause such item to be satisfied of record.
7.17 Maintenance of Property. (a) The Borrower, at its
expense, shall maintain the Project in such condition that the Facility will
have the capacity and functional ability to perform, on a continuing basis
(ordinary wear and tear excepted), in normal commercial operation, the functions
and substantially all the ratings for which it was specifically designed in
accordance with the Plans and Specifications; operate, service, maintain and
repair all necessary or useful components thereof so that the condition and
operating efficiency thereof will be maintained and preserved (ordinary wear and
tear excepted) in all material respects in accordance with (i) Prudent Utility
Practice and good commercial practice for items of a similar size and nature,
(ii) such operating standards as shall be required to enforce any material
warranty claims against dealers, manufacturers, vendors, contractors and
subcontractors and (iii) the terms and conditions of all insurance policies
maintained by the Partnership or the Managing General Partner in effect at any
time with respect thereto, (iv) in compliance with all Requirements of Law
affecting the Project all requirements of the appropriate Board of Fire
Underwriters or other similar body acting in and for the locality in which the
Project is located and (v) in compliance With the terms of the Basic Documents
except to the extent that the failure to comply with the terms of the Basic
Documents could not reasonably be expected to have a material adverse effect on
the business, properties, operations, condition (financial or otherwise) or
prospects of the Borrower or the Project or on the ability of the Borrower to
perform its obligations under the Basic Documents to which it is a party.
(b) If, after any loss, destruction or damage with respect to
the Project referred to in clause (b) of the definition of "Event of Loss",
subclauses (i),the conditions specified in (ii) and (iii) of said clause (b) are
satisfied, the Borrower at all times thereafter will proceed diligently with all
work necessary to replace and/or repair such loss, destruction or damage to the
extent of the insurance proceeds or other funds received by it.
7.18 Notices. The Borrower will promptly give notice to the
Agents and the Lenders:
(a) of the occurrence of any Default, Event of Default or
Event of Loss;
(b) of the occurrence of any default or event of
default under any Project Contract;
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(c) of any litigation, investigation or proceeding affecting
the Borrower in which the amount involved is $500,000 or more or in
which injunctive or similar relief is sought;
(d) upon obtaining actual knowledge thereof, of any litigation
or proceeding affecting any Participant other than the Borrower which
if adversely determined could have a material adverse effect on the
properties, business, operations or other condition of such Participant
or on its ability to perform its obligations under any Basic Document
to which it is a party;
(e) of the following events, as soon as possible and in any
event within 10 days after the Borrower knows or has reason to know of
the following events: (i) the occurrence or expected occurrence of any
Reportable Event with respect to any Plan or any withdrawal from, or
the termination, Reorganization or Insolvency of, any Multiemployer
Plan or (ii) the institution of proceedings or the taking of any other
action by PBGC, the Borrower, any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the
terminating, Reorganization or Insolvency of, any Plan;
(f) of any loss or damage to the Collateral in excess of
$500,000;
(g) of the execution and delivery of any Additional Contract;
(h) of the receipt by the Borrower of any Environmental Notice
or of any notice of any event that creates a material likelihood of the
occurrence of an Adverse Environmental Event; and
(i) of the receipt by the General Partner or the Borrower of
any notice or declaration by any Governmental Authority which relates
to, or could result in, the Project, the owner thereof or any of the
owner's Affiliates being deemed to be, or subject to regulation as a
"public utility" under any Applicable Law.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer of the General Partner setting forth details of the
occurrence referred to therein and stating what action the Borrower proposes to
take with respect thereto and, with respect to a notice given pursuant to clause
(g), shall be accompanied by a copy of the Additional Contract. For all purposes
of clause (e) of this subsection, the Borrower shall be deemed to have all
knowledge or knowledge of all facts attributable to the administrator of such
Plan.
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7.19 Assignments of Additional Contracts; Maintenance of Liens
of the Collateral Security Documents; Mortgage. The Borrower will:
(a) after the execution and delivery of any Project Contract,
execute and deliver to the Agent an Assignment with respect to such
Project Contract and cause the other party or parties to such Project
Contract to execute and deliver to the Agent a Consent to Assignment
with respect to such Assignment;
(b) after the execution and delivery of any Additional
Contract (other than a Project Contract), and promptly upon the request
of the Agent, execute and deliver to the Agent, an Assignment with
respect to such Additional Contract and cause the other party or
parties to any Additional Contract set forth in clause (a)(i) of the
definition thereof and any Additional Contract set forth in clause
(a)(ii) of the definition thereof which has a term (including any
renewal terms) of six months or more to execute and deliver to the
Agent a Consent to Assignment with respect to such Assignment;
(c) promptly upon the request of the Agent and at the
Borrower's expense, execute and deliver, or cause the execution and
delivery of, and thereafter register, file or record in each
appropriate governmental office, any document or instrument
supplemental to or confirmatory of the Collateral Security Documents or
otherwise deemed by the Agent to be necessary or desirable for the
creation or perfection of the liens and security interests purported to
be created by the Collateral Security Documents;
(d) (i) execute, deliver and record the Mortgage and (ii) if
the Borrower shall at any time acquire any real property or leasehold
or other interest in real property not covered by the Mortgage,
promptly upon such acquisition, execute, deliver and record a
supplement to the Mortgage, satisfactory in form and substance to the
Required Lenders, subjecting such real property or leasehold or other
interest to the lien and security interest created by the Mortgage; and
(e) protect and defend its interest in the Collateral against
Liens asserted by any third Person, other than Permitted Liens, and,
subject to subsection 7.16 and the second sentence of subsection 7.15
hereof, immediately discharge any such Lien so asserted. The Borrower
shall promptly notify the Agent of any such assertion.
7.20 Agent for Service of Process. The Borrower shall appoint
and continuously retain CT Corporation System, or such other agent as shall be
reasonably acceptable to the Lender, as its agent in the State of New York for
receipt of service of process and shall pay all costs, fees, and expenses in
connection
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therewith. The Borrower has paid all fees necessary to retain CT Corporation
System or such other agent for such purposes for the forthcoming 12-month
period.
7.21 Employee Plans. For each Plan adopted by the Borrower
which is an employee pension benefit plan as defined in Section 32) of ERISA,
the Borrower shall (a) use its best efforts to seek and receive determination
letters from the Internal Revenue Service to the effect that such Plan is
qualified within the meaning of Section 401(a) of the Code: and (b) from and
after the date of adoption of any such Plan, cause such Plan to be qualified
within the meaning of Section 401(a) of the Code and to be administered in all
material respects in accordance with the requirements of ERISA and Section
401(a) of the Code.
7.22 Qualifying Facility Status. The Borrower will take all
necessary action within its control, and otherwise use its best efforts, to
ensure that the Facility continues to meet the requirements of a Qualifying
Facility.
7.23 Fiscal Year. The fiscal year of the Borrower shall be a
calendar year.
7.24 Easements. The Borrower agrees to submit to the Senior
Tranche Agent and the Junior Tranche Agent for the Required Lenders' approval
(not to be unreasonably withheld) copies of all prospective easements, licenses,
restrictive covenants or other similar agreements affecting the Site (including
all reciprocal easement agreements with parties interested in the Site or with
parties interested in adjacent property) prior to their execution in the case of
prospective agreements, together with a drawing or survey showing the location
thereof.
7.25 Storage of Materials. The Borrower shall cause all
materials supplied for, or intended to be utilized in, the construction of the
Project, but not affixed to or incorporated into the Project, to be suitably
stored on the Site or at such other location, and with adequate safeguards, as
may be reasonably required by the Agents, to protect against loss, theft, damage
or commingling with other materials.
7.26 Gas Supply Arrangements. (a) The Borrower shall use its
reasonable efforts to pursue a gas procurement policy which (i) takes into
consideration the gas purchasing policies of PSE&G so that on a long-term basis
the extent that the Project's weighted average cost of gas will exceed the
weighted average cost of gas of PSE&G is minimized and (ii) provides for
reasonable diversity in the sources of supply of natural gas to the Borrower. In
addition, prior to the execution of any Gas Purchase Agreement that has a term
of two years or more, the Borrower shall use its reasonable efforts to obtain
verification by an independent engineer of the natural gas reserves of any
supplier with whom the Borrower proposes to enter into a Gas
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72
Purchase Agreement (or any group of Gas Purchase Agreements from the same or
related suppliers) representing more than 5% of the projected annual gas
requirements of the Facility; provided, however, that the Borrower need not
obtain independent verification of the natural gas reserves of any supplier if
(x) such supplier has an investment grade rating and (y) the Gas Purchase
Agreement to which such supplier is a party contains a "keep-whole" provision
reasonably acceptable to the Required Lenders with respect to the supplier's
failure to deliver the nominated quantity of gas.
(b) In connection with the obligation set forth in subsection
7.26(a) above, at the end of each Annual Period, the Borrower shall (x) review
the gas procurement policy pursued during such Annual Period to ascertain if
such policy tracked the gas procurement policy of PSE&G and (y) review the gas
procurement policy for the succeeding Annual Period to ascertain what
adjustments, if any, will be necessary to cause the Borrower to comply with the
obligation set forth in subsection 7.26(a) above. A summary of the results of
such review and proposed adjustments, if any, shall be provided to the Agents in
partial satisfaction of subsection 7.26(a) above, together with any supporting
data or explanation of the methodology used which the Agents may reasonably
request.
SECTION 8. NEGATIVE COVENANTS
------------------
So long as the Commitments remain in effect, any Note remains
outstanding and unpaid, any amount remains available to be drawn under any
Letter of Credit or any other amount is owing to the Agents or any Lender
hereunder or under the Collateral Security Documents, the Borrower agrees that:
8.1 Merger, Sale of Assets, Purchases, Etc. The Borrower shall
not merge into or consolidate with any other Person, change its form of
organization or its business, or liquidate or dissolve itself (or suffer any
liquidation or dissolution), or sell, lease, transfer or otherwise dispose of
all or any material part of the Project or any substantial portion of the
Borrower's other assets (including, without limitation, the Site) other than
sales of electric power and sales of steam. The Borrower will not purchase or
acquire any assets other than (x) the purchase of assets in connection with the
completion, operation and/or maintenance of the Project, (y) Permitted
Investments and (z) as may be permitted by Section 15 of the Capital
Contribution Agreement.
8.2 Indebtedness; Guarantee Obligations. The Borrower shall
not create, incur, assume or suffer to exist any Indebtedness or Guarantee
Obligations, except (i) Indebtedness in respect of the Notes, the Letters of
Credit and other Obligations and (ii) any Indebtedness related to or included in
a Permitted Lien.
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8.3 Distributions, Etc. The Borrower shall not, without the
prior written consent of the Required Lenders, make any distributions to the
Partners or to any other Person in respect of any partnership interest in the
Borrower or any payments of management fees to any Partner, whether in cash or
other property, or redeem, purchase or otherwise acquire any interest of any
Partner in the Borrower, or permit any Partner to withdraw any capital from the
Borrower, excluding, however, (i) the Development Fee, (ii) the fee referred to
in clauses (c) and (d) of subsection 8.13 and (iii) distributions to partners
permitted by the provisions of the Amended and Restated Security Deposit
Agreement.
8.4 Liens. The Borrower shall not create or suffer to exist
any Lien on any of its properties or assets, other than Permitted Liens.
8.5 Nature of Business. The Borrower shall not engage in any
business other than the development, construction and operation of the Project
in accordance with the Non-Competition Agreement and the Basic Documents. The
General Partner shall not engage in any business other than the business of
being the managing general partner of the Borrower, activities permitted
pursuant to the General Partner Term Loan Agreement and the NonCompetition
Agreement and the performance of the Borrower's obligations pursuant to the
Basic Documents.
8.6 Amendment of Contracts, Etc. The Borrower will not,
without the prior written consent of the Required Lenders, agree to (a) the
cancellation, suspension or termination of any Basic Document or any other
contract referred to in subsection 8.19 (except upon the expiration of the
stated term thereof), (b) the assignment of the rights or obligations of any
party to any Basic Document or any such other contract except (x) as
contemplated by this Agreement, the Collateral Security Documents or the
Assignment relating to such other contract or (y) as permitted without the
consent of the Borrower by the terms of such Basic Document or such other
contract, or (c) any amendment, supplement or modification of, or waiver or
consent with respect to any of the provisions of, any Basic Document, the
Midlantic Agreements or any such other contract to which the Borrower or the
General Partner is a party or with respect to which the consent of the Borrower
or the General Partner is required.
8.7 Investments. The Borrower shall not make any investments
(whether by purchase of stock, bonds, notes or other securities, loan, advance
or otherwise) other than Permitted Investments and the entering into of the
Interest Rate Hedging Agreement.
8.8 Qualifying Facility. The Borrower shall not take any
action which would cause the Facility to cease to be a Qualifying Facility.
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8.9 Leases. The Borrower shall not enter into, or be or become
liable under, any agreement for the lease, hire or use of any real property or
of any personal property, except for leases of real or personal property which
are not Capital Leases, the aggregate annual rental under which shall not,
without the prior written consent of the Required Lenders (such consent not to
be unreasonably withheld), exceed $200,000 in any fiscal year of the Borrower.
8.10 Change of Office. The Borrower shall not change the
location of its chief executive office or principal place of business or the
office where it keeps its records concerning the Project and all contracts
relating thereto from that existing on the date of this Agreement and specified
in subsection 5.19, unless the Borrower shall have given the Agents at least 30
days' prior written notice thereof and all action necessary or advisable in the
Agent's opinion to protect and perfect the liens and security interests with
respect to the right, title, estate and interest of the Borrower in and to the
Collateral created by the Collateral Security Documents to which the Borrower is
a party shall have been taken.
8.11 Change of Name. The Borrower shall not change its name
except on at least 60 days' prior written notice to the Agents.
8.12 Compliance with ERISA. The Borrower shall not (a)
terminate any Single Employer Plan so as to result in any material liability to
PBGC, (b) engage in or permit any Affiliate to engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan which would subject the Borrower to any material tax, penalty
or other liability, (c) incur or suffer to exist any material "accumulated
funding deficiency" (as defined in Section 302 of ERISA), whether or not waived,
involving any Plan subject to Section 412 of the Code or Part 3 of Title I(b) of
ERISA, (d) allow or permit to exist any event (including a Reportable Event) or
condition which represents a material risk of incurring a material liability to
PBGC, or (e) permit the present value of all benefits vested under all Single
Employer Plans subject to Title IV of ERISA, based on those assumptions used to
fund the Plans, as of any valuation date with respect to such Plans to exceed
the value of the assets of the Plans allocable to such benefits by a material
amount.
8.13 Transactions with Affiliates and Others. The Borrower
shall not, directly or indirectly, purchase, acquire, exchange or lease any
property or services from, or sell, transfer or lease any property to, or borrow
any money from, or enter into any management or similar fee arrangement with,
any Affiliate or any officer, director or employee of the Borrower or the
General Partner, except for (a) the transactions contemplated by the Basic
Documents, (b) transactions in the ordinary course of business and upon fair and
reasonable terms no less favorable than the Borrower could obtain, or could
become entitled to, in
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an arm's length transaction with a Person which is not an Affiliate, (c) a
management agreement pursuant to which the General Partner would receive an
aggregate annual fee not to exceed 1.5% of the gross revenues of the Facility
and (d) the gas management fee described in that certain letter delivered to
the Agent on April 1, 1993.
8.14 Alterations of the Site or Project. The Borrower will
not, without the prior consent of the Required Lenders, alter, remodel, add to,
reconstruct, improve or demolish any part of the Project or Site or any other
Collateral covered by the Collateral Security Documents, except as contemplated
by or in accordance with the Plans and Specifications, in any manner that would
materially impair the value of the security provided by the Collateral Security
Documents.
8.15 Changes in Plans and Budgets. The Borrower shall not
modify or supplement in any material respect the Completion Budget or the Plans
and Specifications then in effect, without the prior written consent of the
Required Lenders.
8.16 Change Orders. The Borrower shall not direct or permit
the performance of any work pursuant to any revision (of whatever nature or
form) of an EPC Contract or any change orders or change bulletins or other
instruments or understandings relating thereto unless in each case the Borrower
shall have received the prior written approval of the Required Lenders.
8.17 Capital Expenditures. The Borrower shall not directly or
indirectly make or commit to make any expenditure in respect of the purchase or
other acquisition (including installment purchases or financing leases) of fixed
or capital assets (excluding normal replacements and maintenance which are
properly charged to current operations), except for expenditures appearing in
the Operating Budget.
8.18 Sale and Leaseback. The Borrower shall not enter into any
arrangement with any Person providing for the leasing by the Borrower of real or
personal property which has been or is to be sold or transferred by the Borrower
to such Person or to any other Person to whom funds have been or are to be
advanced by such Person on the security of such property or rental obligations
of the Borrower.
8.19 Approval of Significant Additional Contracts. Without the
prior written consent of the Required Benders, the Borrower shall not enter into
any of the following types of contracts:
(a) any Additional Contract which is a Project Contract;
(b) any contract (other than an EPC Contract, any contract
relating to site monitoring, inspection or quality control services
and any contract relating to support
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services to be provided by Persons which are not Affiliates of the
Borrower) relating to the engineering of, the procurement of
services, equipment, supplies or other materials for, or the
construction of, the Facility to be entered into by the Borrower; and
(c) Additional Contracts (other than Project Contracts) for
the transmission or sale by the Borrower of the Facility's steam or
electric output pursuant to which the failure of the Borrower to
perform could subject the Borrower to material damages.
8.20 Gas Purchase Agreements. The Borrower shall not enter
into any Gas Purchase Agreement (a) with any of its Affiliates on terms that are
less favorable than terms available with non-affiliated Persons or (b) which
provides for the payment of burdensome liquidated damages by the Borrower. In
addition, the Borrower shall not enter into any Gas Purchase Agreement with a
term (including any renewal terms) of six months or more (1) if the price which
the Borrower is obligated to pay for gas thereunder is fixed for a period of six
months or more unless the Borrower can demonstrate to the Required Lenders
reasonable satisfaction that PSE&G has entered into a gas purchase agreement or
agreements (i) for a term coincidental with such Gas Purchase Agreement and (ii)
with respect to a quantity of gas which bears the same proportion to PSE&G's
total gas requirements for the period of such agreements as the quantity of gas
subject to such Gas Purchase Agreement bears to the Facility's total gas
requirements for the period of such Gas Agreement and (iii) which otherwise
contains the same terms and provisions of such Gas Purchase Agreement, (2) which
contains any material restrictions on assignment by the Borrower or which (3)
contains any provision that would result in the termination, cancellation or
suspension of such Gas Purchase Agreement upon the exercise by the Agent of any
of its remedies hereunder or under the Collateral Security Documents or upon the
sale of the Facility.
SECTION 9. EVENTS OF DEFAULT
-----------------
If any of the Events of Default listed below in this Section 9
shall occur and be continuing, the Agents may, and upon the written request of
the Required Lenders shall, (i) declare the entire unpaid principal amount of
the Loans and the then outstanding Notes, all interest accrued and unpaid
thereon, and all other Obligations (including, without limitation, obligations
in respect of the Letters of Credit, although contingent and unmatured) to be
forthwith due and payable, whereupon such amounts shall become and be forthwith
due and payable, without presentment, demand, protest, or notice of any kind,
all of which are hereby expressly waived by the Borrower; and/or (ii) demand
that the Borrower discharge any or all the obligations supported by the Letters
of Credit by paying or prepaying any amount due or to become due in respect of
such obligations; and/or (iii) foreclose on any or all of the Collateral; and/or
(iv) proceed to enforce all other remedies available to it under applicable law.
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Notwithstanding the foregoing, if an Event of Default referred to in paragraph
(f) or (g) below shall occur, automatically and without notice the actions
described in clause (i) above shall be deemed to have occurred. All payments
under this Section 9 on account of the undrawn Letters of Credit shall be made
by the Borrower directly to a cash collateral account established by the Agent
for such purpose for application to the Borrower's reimbursement obligations as
drafts are presented under the Letters of Credit, with the balance, if any, to
be applied to the Borrower's obligations under this Agreement and the Notes as
the Agent shall determine with the approval of the Senior Tranche Agent, the
Junior Tranche Agent and the Required Lenders.
Such Events of Default are the following:
(a) (i) any principal of any Term Loan shall not be paid in
full when due or (ii) any interest on any Term Loan or any other amount
payable to the Agents, the Lenders or the Letter of Credit Issuer under
the Basic Documents shall not be paid when due and shall remain unpaid
for five or more Business Days; or
(b) Any representation or warranty made by the Borrower herein
or by the Borrower or the General Partner in any Basic Document (other
than any Project Contract) to which the Borrower or the General Partner
is a party, or any representation, warranty or statement in any
certificate, financial statement or other document furnished to the
Agents or the Lenders by the Borrower or the General Partner hereunder
or by the Borrower or the General Partner under any Basic Document
(other than any Project Contract), shall prove to have been false or
misleading as of the time made or deemed made; or
(c) The Borrower or the General Partner shall fail to perform
or observe any of its Covenants contained in this Agreement (other than
those referred to in paragraphs (a) and (b) above) or in any other
Basic Document (other than any Project Contract) to which it is a party
and such failure shall continue unremedied for a period of 30 days
after written notice thereof from any Agent or any Lender to the
Borrower: provided, however, that if such default is susceptible to
cure, such 30 day period shall be extended for such additional period
of time (not to exceed 60 days) during which the Borrower or the
General Partner, as the case may be, shall be diligently using its best
efforts to cure such default; or
(d) The Borrower, with respect to any Indebtedness or
Guarantee Obligation, the principal amount of which exceeds $500,000,
shall (i) default in any payment of principal of or interest on any
such Indebtedness (other than the Notes and the Letters of Credit) or
Guarantee Obligation beyond the period of grace (not to exceed 30
days), if any, provided in the instrument or agreement under which such
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Indebtedness or Guarantee Obligation was created, or (ii) default in
the observance or performance of any other agreement or condition
relating to any such Indebtedness or Guarantee Obligation or contained
in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect
of which default or other event or condition is to cause, or to permit
the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) or the beneficiary or beneficiaries
of such Guarantee Obligation (or a trustee or agent on behalf of such
beneficiary or beneficiaries) to cause, with the giving of notice if
required or the passage of time, or both, such Indebtedness to become
due prior to its stated maturity or such Guarantee Obligation to become
payable; or
(e) (i) Any Participant, other than the Borrower, shall fail
to perform or observe in any material respect any of its covenants or
obligations contained in any of the Basic Documents (other than the
covenants and obligations referred to in paragraphs (a), (b), (c) and
(d) above and other than any default by the Counterparty under the
Interest Rate Hedging Agreement) within the grace period, if any,
provided for in such Basic Documents, which failure shall continue
unremedied for a period of 30 days after notice by any Agent or any
Lender to the Borrower or (ii) (x) any material provision of any Basic
Document, once such document has been executed and delivered, shall at
any time for any reason cease to be valid and binding or in full force
and effect (other than as a result of any action by any Agent or any
Lender) or any party thereto (other than any Agent or any Lender) shall
so assert in writing, (y) any material provision of any Basic Document
shall be declared to be null and void (other than as a result of any
action by any Agent or any Lender) or (z) any Participant shall deny
that it has any further liability or obligation under any Basic
Document to which it is a party; provided that it shall not be an Event
of Default under this subsection 9(e) if, (1) within 30 days after the
occurrence of any of the foregoing events with respect to any Project
Contract (other than the Steam Supply Agreement, the Power Purchase
Agreement or the Gas Service Agreement), the Borrower shall have
submitted a plan to the Agents to execute and deliver a document in
substitution for such Project Contract, which plan shall be reasonably
satisfactory in form and substance to the Required Lenders, and (2)
within 90 days after the occurrence of any of the foregoing events with
respect to any Project Contract (other than the Steam Supply Agreement,
the Power Purchase Agreement or the Gas Service Agreement), such
Project Contract shall have been replaced with another document (x)
which is executed and delivered by parties acceptable to the Required
Lenders, (y) which has terms and conditions similar to, and in the
reasonable opinion of the Required benders, at least as favorable to
the Project and the Lenders as, the substituted Project Contract and
(z)
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which shall have been assigned to the Agent to the same extent as the
substituted Project Contract in all material respects; or
(f) The Borrower or the General Partner shall (i) apply for or
consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its property, (ii) admit in writing its inability,
or be generally unable, to pay its debts as such debts become due,
(iii) make a general assignment for the benefit of its creditors, (iv)
commence a voluntary case under the Federal Bankruptcy Code (as now or
hereafter in effect), (v) file a petition seeking to take advantage of
any other law relating to bankruptcy, insolvency, reorganization,
winding up, or composition or readjustment of debts, (vi) fail to
controvert in a timely and appropriate manner, or acquiesce in writing
to, any petition filed against such Person in an involuntary case under
the Bankruptcy Code, or (vii) take any partnership or corporate action
for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced without the
application or consent of the Borrower or the General Partner in any
court of competent jurisdiction, seeking (i) its liquidation,
reorganization, dissolution, winding-up, or the composition or
readjustment of debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Borrower or the General
Partner under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts or
(iii) a warrant of attachment, execution or similar process against all
or a substantial part of the assets of any of the Borrower, the General
Partner and such proceeding or case shall continue undismissed, or any
order, judgment or decree approving or ordering any of the foregoing
shall be entered and continue unstayed and in effect, for a period of
60 or more days, or any order for relief against such Person shall be
entered in an involuntary case under the Federal Bankruptcy Code (as
now or hereafter in effect); or
(h) A judgment or judgments for the payment of money in excess
of $l,000,000 shall be rendered against the Borrower and such judgment
or judgments shall remain in effect and unstayed and unbonded for a
period of 60 or more consecutive days; or
(i) Any Collateral Security Document, once executed and
delivered, shall cease to provide the Lenders the liens, priority and
security interests intended to be created thereby on all items of
collateral other than items of Collateral which, individually or in the
aggregate, are not material, or shall cease, for any reason, to be in
full force and effect (other than as a result of any action by any
Agent or any Lender and other than with respect to such
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80
immaterial items of Collateral) or any party thereto (other than any
Agent or any Lender) shall so assert in writing; provided that it shall
not be an Event of Default under this subsection 9(i) if, within 90
days after the occurrence of any of the foregoing events with respect
to any Assignment or Consent to Assignment (other than the Assignment
or Consent to Assignment relating to the Steam Supply Agreement, the
Power Purchase Agreement, the Gas Service Agreement or the Turnkey
Contract), the Project Contract to which such Assignment or Consent to
Assignment relates has been replaced in accordance with subsection 9(e)
and the Assignment or Consent to Assignment, as the case may be, shall
have been replaced with an assignment or consent to assignment, as the
case may be, (i) duly executed by the appropriate parties to the
substituted Project Contract and (ii) substantially in the form of the
Assignment or Consent to Assignment which it replaced; or
(j) The General Partner shall at any time cease to be the
managing general partner of the Borrower, or, except as contemplated by
the General Partner Term Loan Agreement, shall transfer, sell, assign,
mortgage, pledge or otherwise dispose of its equity interest in the
Borrower without the Required Lenders' prior written consent; or
(k) Robert McNair or his wife or children shall fail to own
and control, directly or indirectly, a beneficial interest of at least
8.2% in the Borrower until the expiration of seven years after the
Second Capital Contribution Date and (ii) thereafter, Robert McNair or
his wife or children or an entity with a net worth equal to at least
$100,000,000 shall fail to own and control, directly or indirectly, a
beneficial interest of at least 8.2% in the Borrower: or
(l) The Borrower shall abandon the Project or otherwise cease
to diligently pursue the development or construction of the Project for
a period longer than 30 consecutive days: or
(m) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist
with respect to any Plan, or (iii) a Reportable Event shall occur with
respect to, or proceedings shall commence to have a trustee appointed,
or a trustee shall be appointed, to administer or to terminate any
Single Employer Plan, which Reportable Event or institution of
proceedings is, in the reasonable opinion of the Required Lenders,
likely to result in the termination of such Plan for purposes of Title
IV of ERISA, or (iv) any Single Employer Plan shall terminate under
Section 4041(c) of ERISA, or (v) the Borrower or any Commonly
Controlled Entity shall, or is, in the reasonable opinion of the
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81
Required Lenders, likely to incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan, or (vi) any other event or condition shall occur or
exist with respect to a Plan: and in each case in clauses (i) through
(vi) above, such event or condition, together with all other such
events or conditions, if any, could subject the Borrower to any tax,
penalty or other liabilities in the aggregate material in relation to
the business, operations, property or financial or other condition of
the Borrower; or
(n) The Borrower shall fail to pay, Satisfy or otherwise
obtain a release of any bond or lien for the performance of work or the
supply of materials filed against the Facility within 20 days of the
Borrower's becoming aware of the filing thereof unless, if any such
Lien arose in connection with a claim referred to in subsection 7.16,
the Borrower shall be diligently contesting the same in accordance
with, and subject to, subsection 7.16; or
(o) At any time after execution and delivery of the Mortgage,
the Borrower shall sell, transfer, assign or convey the Mortgaged
Premises (as defined in the Mortgage) or any part thereof or interest
therein (by operation of law or otherwise) or the Borrower shall
further mortgage, pledge or otherwise encumber the Mortgaged Premises
or any part thereof or any interest therein or create or suffer to
exist any lien, charge or other encumbrance on the Mortgaged Premises
or any part thereof, whether superior or subordinate to the lien of the
Mortgage, whether recourse or nonrecourse, except for Permitted Liens;
or
(p) There shall be any material encroachment affecting all or
any part of the Mortgaged Premises (as defined in the Mortgage) which
has occurred without the approval of the Required Lenders and which is
not removed or corrected within 60 days after the earlier of (i) the
Borrower's receipt of notice of the existence of such encroachment from
any Agent or any Lender or (ii) the Borrower's discovery thereof; or
(q) At any time any beneficial ownership interests in the
Borrower shall be levied upon, attached or seized pursuant to a court
order and such order is not vacated or stayed within 20 days of entry
of such order; or
(r) Any right, title or interest of the Borrower in and to the
Site shall be levied upon, attached or seized pursuant to a court order
and such order is not vacated or stayed within 20 days of entry of such
order; or
(s) The Borrower shall cease to have good and marketable title
to the Site and the Project, in each case, free and clear of all Liens
other than Permitted Liens.
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82
Upon the occurrence of and during the continuance of any Event
of Default, all remedies available to the Agents under this Agreement or any
Collateral Security Document or by statute or by rule of law may be exercised by
the Agents at any time and from time to time whether or not the Loans shall be
due and payable, and whether or not the Agents shall have instituted any
foreclosure or other action for the enforcement of any of the Basic Documents.
For the purpose of carrying out the provisions and exercising the rights, powers
and privileges granted by this paragraph, the Borrower hereby irrevocably
constitutes and appoints the Agents its true and lawful attorney-in-fact to
execute, acknowledge and deliver any instruments and to do and to perform any
acts such as are referred to in this paragraph in the name and on behalf of the
Borrower. This power of attorney is a power coupled with an interest and cannot
be revoked.
SECTION 10. THE AGENTS AND RELATIONS AMONG LENDERS, ETC.
--------------------------------------------
10.1 Appointment of Agents, Powers and Immunities. Each Lender
hereby irrevocably appoints and authorizes the Agent to act as its agent
hereunder and under the other Basic Documents with such powers as are expressly
delegated to the Agent by the terms of this Agreement and the other Basic
Documents, together with such other powers as are reasonably incidental thereto.
Each Tranche A Lender hereby irrevocably appoints and authorizes the Senior
Tranche Agent to act as its agent hereunder and under the other Basic Documents
with such powers as are expressly delegated to the Senior Tranche Agent by the
terms of this Agreement and the other Basic Documents, together with such other
powers as are reasonably incidental thereto. Each Tranche B Lender and each
Tranche C Lender hereby irrevocably appoints and authorizes the Junior Tranche
Agent to act as its agent hereunder and under the other Basic Documents with
such powers as are expressly delegated to the Junior Tranche Agent by the terms
of this Agreement and the other Basic Documents, together with such other powers
as are reasonably incidental thereto. The Agents shall not have any duties or
responsibilities except those expressly set forth in this Agreement or in any
other Basic Document, or be a trustee for any bender. Notwithstanding anything
to the contrary contained herein, the Agents shall not be required to take any
action which is contrary to this Agreement or any other Basic Document or
applicable law. Neither the Agents nor any Lender nor any of their respective
affiliates shall be responsible to any other Lender or any other Agent for any
recitals, statements, representations or warranties made by the Borrower
contained in this Agreement or any other Basic Document or in any certificate or
other document referred to or provided for in, or received by any Lender under,
this Agreement or any other Basic Document, for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, the
Notes, the other Basic Documents or any other document referred to or provided
for herein or therein or for any failure by the Borrower to perform its
obligations hereunder or
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83
thereunder. The Agents may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Neither the Agents nor
any of their directors, officers, employees or agents shall be responsible for
any action taken or omitted to be taken by it or them hereunder or under any
other Basic Document or in connection herewith or therewith, except for its or
their own gross negligence or wilful misconduct.
10.2 Reliance bv Agent. Each Agent shall be entitled to rely
upon any certificate, notice or other document (including any cable, telegram,
telecopy or telex) believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel, independent accountants and other experts
selected by such Agent. As to any matters not expressly provided for by this
Agreement, each Agent shall not be required to take any action or exercise any
discretion, but each Agent shall be required to act or to refrain from acting
upon instructions of the Required benders and shall in all cases be fully
protected in acting, or in refraining from acting, hereunder or under any other
Basic Document in accordance with the instructions of the Required Lenders, and
such instructions of the Required Lenders and any action taken or failure to act
pursuant thereto shall be binding on all of the benders.
10.3 Defaults. No Agent shall be deemed to have knowledge or
notice of the occurrence of a Default or an Event of Default unless such Agent
has received notice from a Lender or the Borrower referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"Notice of Default". In the event that an Agent receives such a notice of the
occurrence of a Default or an Event of Default such Agent shall give notice
thereof to the other Agents and the Landers. Each Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably directed
by the Required Lenders; provided that, unless and until such Agent shall have
received such directions, such Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the
Affected Lenders.
10.4 Rights as Lenders. With respect to its commitment to make
Loans, each Agent shall have the same rights and powers hereunder as any Lender
and may exercise the same as though it were not acting as an Agent and the term
"Lender" or "Lenders" shall, unless the context otherwise indicates, include
each Agent in its individual capacity. Each Agent and its affiliates may
(without having to account therefor to any Lender) extend credit (on a secured
or unsecured basis) to and generally engage in any kind of lending, trust or
other business with the Borrower or any of its affiliates, as if it were not
acting as an Agent.
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84
10.5 Indemnification. Without limiting the obligations of the
Borrower under subsections 11.5 and 11.6 hereof, the Lenders agree to indemnify
each Agent, ratably in accordance with the aggregate principal amount of the
Loans held by such Lender or, if no Loans are then outstanding, the respective
amounts of their Commitments, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
or any kind or nature whatsoever which may at any time (including, without
limitation, at any time following the payment of principal of and/or interest on
the Loans) be imposed on, incurred by or asserted against any Agent in any way
relating to or arising out of this Agreement or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby
(including the costs and expenses which the Borrower is obligated to pay under
subsections 11.5 and 11.6 hereof) or the enforcement of any of the terms hereof
or thereof or of any such other documents, provided that no Lender shall be
liable for any of the foregoing to the extent they arise from any Agent's gross
negligence or wilful misconduct. Each Agent shall be fully justified in refusing
to take or to continue to take any action hereunder unless it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action.
10.6 Non-Reliance on Agent and Other Lenders. Each Lender
represents that it has, independently and without reliance on any Agent, or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of the financial condition and affairs of
the Borrower and its own decision to enter into this Agreement and agrees that
it will, independently and without reliance upon any Agent or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own appraisals and decisions in taking or not taking
action under this Agreement. Neither any Agent nor any Lender shall be required
to keep informed as to the performance or observance by the Borrower under this
Agreement or any other document referred to or provided for herein or to make
inquiry of, or to inspect the properties or books of, the Borrower. Except for
notices, reports and other documents and information expressly required to be
furnished to the Lenders by the Agents hereunder, neither any Agent nor any
Lender shall have any duty or responsibility to provide any Lender with any
credit or other information concerning the Borrower, or any affiliate of the
Borrower, which may come into the possession of such Agent or such Lender or any
of its or their affiliates.
10.7 Resignation or Removal of Agents. Subject to the
appointment and acceptance of a successor Agent as provided below, each Agent
may resign at any time by giving notice thereof to the Lenders and the Borrower,
and such Agent may be removed at any time with or without cause by the Required
Lenders. Upon any such resignation or removal, the Required Lenders shall have
the right to appoint a successor Agent for such Agent. If no
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85
successor Agent shall have been appointed by the Required Lenders and shall have
accepted such appointment within 30 days after such retiring Agent's giving of
notice of resignation or the Required Lenders' removal of such retiring Agent,
then such retiring Agent may, on behalf of the Lenders, appoint a successor
Agent,which shall be (i) a bank with an office (or having an affiliate with an
office) in New York, New York having a combined capital and surplus of not less
than $500,000,000 and (ii) an Eligible Assignee. Upon the acceptance of any
appointment as an Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of such retiring Agent, and such retiring Agent shall be
discharged from its duties and obligations hereunder. After any retiring Agent's
resignation or removal hereunder as an Agent, the provisions of this Section 10
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as an Agent.
10.8 Authorization. Each Agent is hereby authorized by the
Lenders to execute, deliver and perform each of the Basic Documents to which
such Agent (whether as "Agent", "Grantee" or "Mortgagee") is or is intended to
be a party and each Lender agrees to be bound by all of the agreements of each
Agent contained in the Basic Documents.
SECTION 11. MISCELLANEOUS
-------------
11.1 Amendments and Waivers. No provision of this Agreement or
of any other Basic Document to which an Agent is a party may be amended,
supplemented, modified or waived, except in accordance with the terms of this
subsection 11.1. With the written consent of the Required Lenders, the Borrower
and the Agents may, from time to time, enter into written amendments,
supplements or modifications hereto for the purpose of adding any provisions to
this Agreement or the Notes or any other Basic Document to which any Agent is a
party or changing in any manner the rights of any Agent or of the Borrower
hereunder or thereunder, and the Agents, with the consent of the Required
Lenders, may execute and deliver to the Borrower a written instrument waiving,
on such terms and conditions as the Agent may specify in such instrument, any of
the requirements of this Agreement or the Notes or any other Basic Document to
which any Agent is a party or any Default or Event of Default and its
consequences. Any such waiver and any such amendment, supplement or modification
shall be binding upon the Borrower, the Lenders and all future holders of the
Notes; provided, however, that no such waiver and no such amendment, supplement
or modification shall (a) extend the maturity of any Note, or reduce the rate or
extend the time of payment of interest thereon, or reduce the principal amount
thereof, or change the terms or amounts of the Agency Fees and Letter of Credit
Fees, or amend, modify or waive any provision of this subsection, or reduce the
percentage specified in the definition of Required Lenders or release any
Collateral or amend any provision hereof which would result in
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86
borrowings or payments by the Borrower hereunder on a basis other than pro rata
among all the Lenders, in each case without the written consent of all the
Lenders or (b) amend, modify or waive any provision of Section 10 without the
written consent of the then Agents. Any such waiver and any such amendment,
supplement or modification shall apply equally to each of the Lenders and shall
be binding upon the Borrower, the Lenders, the Agents and all future holders of
the Notes.
11.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing, by telecopier or,
if available, by telex and, unless otherwise expressly provided herein, shall be
deemed to have been duly given or made when delivered by hand, or when deposited
in the mail, first class postage prepaid, or in the case of transmission by
telecopier, when confirmation of receipt is obtained, or in the case of telex
notice, when sent, answerback received, addressed as follows in the case of the
Borrower and the Agents and as set forth in Schedule 8 in the case of the
Lenders, or to such other address as may be hereafter notified by the respective
parties hereto and any future holders of the Notes:
The Borrower: Camden Cogen L.P.
c/o Cogen Technologies
1600 Smith Street
Suite 5000, 50th Floor
Houston, Texas 77002
Attention: Robert C. McNair
Telecopy: (713) 951-7747
The Senior
Tranche Agent: General Electric Capital Corporation
1600 Summer Street, Sixth Floor
Stamford, Connecticut 06905
Attention: Compliance Officer, Energy
Projects
-- Transportation and Industrial
Financing Corporation
Telecopy: (203) 357-4329
The Junior
Tranche Agent: General Electric Capital Corporation
1600 Summer Street, Sixth Floor
Stamford, Connecticut 06905
Attention: Compliance Officer, Energy
Projects
-- Transportation and Industrial
Financing Corporation
Telecopy: (203) 357-4329
The Agent: General Electric Capital Corporation
1600 Summer Street, Sixth Floor
<PAGE>
87
Stamford, Connecticut 06905
Attention: Compliance Officer, Energy
Projects
-- Transportation and Industrial
Financing Corporation
Telecopy: (203) 357-4329
11.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of any Agent or the Lenders, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
11.4 Survival. All representations and warranties made in this
Agreement and in any document, certificate or statement delivered pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement and the Notes.
11.5 Expenses. Whether or not any Loan is made or any of the
other transactions contemplated by this Agreement are consummated, the Borrower
shall pay (i) the fees and expenses set forth in the Letter Agreement, (ii) all
other expenses incurred by the Agents in connection with the Project (including
without limitation, to oversee the performance of, and progress by, contractors
performing work on the Project under the direction of the Borrower), including,
without limitation, all fees and expenses of the Lenders' Site Representative
and the Independent Engineer, and all expenses incurred in connection with
obtaining reports relating to the environmental condition of the Site or permits
relating to the Facility and (iii) all direct expenses of the Agent to protect
and perfect the Lenders' liens on the Collateral, including without limitation,
all title and conveyancing charges, recording and filing fees and taxes,
mortgage taxes, insurance premiums (including title insurance premiums), and
surveyors' and appraisers' fees, and will reimburse the Agents and the Lenders
for all expenses paid by any of them of the nature described in this subsection
11.5 which have been or may be incurred by the Agents or any Lender with respect
to any and all of the transactions contemplated herein.
11.6 Indemnification. The Borrower agrees to pay, indemnify
and hold each Agent, each Lender and their respective affiliates, directors and
officers harmless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including without limitation at
any time following the payment of the Notes) be imposed on, incurred by or
asserted against any such Person in any way relating to or arising out of this
Agreement or the other
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88
Basic Documents, or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby (all of the
foregoing, collectively, the "indemnified liabilities"), provided, that the
Borrower shall have no obligation hereunder to any such Person with respect to
indemnified liabilities arising from (i) the gross negligence or willful
misconduct of any such Person, (ii) legal proceedings commenced against any such
Person by any security holder or creditor of any such Person arising out of and
based upon rights afforded any such security holder or creditor solely in its
capacity as such, or (iii) legal proceedings commenced against any such Person
by any Permitted Assignee or Transferee. The agreements in this subsection shall
survive repayment of the Notes and all other amounts payable hereunder.
11.7 Successors and Assigns; Transferees; Transferred
Interests. (a) This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Agents, the Lenders, all future holders of the Notes and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of the Lenders.
(b) (i) Each Lender may at any time assign to one or more
Eligible Assignees (a "Permitted Assignee") a portion of any of its interests,
rights and obligations under this Agreement (including, without limitation, a
portion of its Term Loans and, subject to subsection 3.7, interests in the
Borrower Letters of Credit): provided, however, no Lender shall make any
assignment of its interests, rights and obligations under this Agreement, if
after giving effect to such assignment, there would be more than ten Lenders.
(ii) The parties to each such assignment shall execute and
deliver to the Affected Agent, for its acceptance and recording in the Register
referred to in paragraph (iii) of this subsection 11.7, an assignment
substantially in the form of Exhibit C (an "Transfer Assignment and
Acceptance"), together with any Note or Notes subject to such assignment. Upon
its receipt of an Assignment and Acceptance executed by an assigning Lender and
a Permitted Assignee, together with any Note or Notes subject to such assignment
and the written consent to such assignment, if required, such Affected Agent
shall, if such Assignment and Acceptance has been completed, (x) accept such
Assignment and Acceptance, (y) record the information contained therein in the
Register and (z) give prompt notice thereof to the Borrower. Within five
Business Days after notice of execution and delivery of such assignment, the
Borrower, at its own expense, shall execute and deliver to such Affected Agent
in exchange for the assigning Lender's surrendered Note or Notes a new Note or
Notes to the order of such Permitted Assignee in an amount reflecting the
portion of the Term Loans transferred to it pursuant to such assignment and a
new Note or Notes to the order of the assigning Lender in an amount reflecting
the portion of the Term Loans retained by it hereunder. Such new Note or Notes
shall be in an aggregate principal amount equal to the aggregate
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89
principal amount of such surrendered Note or Notes, shall be dated the date of
such surrendered Note or Notes and shall otherwise be in substantially the form
of Exhibits A-l, A-2 or A-3 hereto, as the case may be. Cancelled Notes shall be
returned to the Borrower. Upon (x) the execution, delivery and recording of such
assignment, (y) delivery of an executed copy thereof to the Borrower and (z)
payment by the Permitted Assignee of the purchase price specified therein, (1)
such Permitted Assignee shall be a Lender party hereto and, to the extent
provided in such assignment (but in no event in excess of the amount assigned),
shall have the rights and obligations of a Lender hereunder and (2) the
assigning Lender shall, to the extent provided in such assignment with respect
to the interests, rights and obligations of such Lender so assigned, be released
from its obligations under this Agreement.
(iii) The Senior Tranche Agent and the Junior Tranche Agent
shall maintain at its address referred to in subsection 11.2 hereof a copy of
each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders and the principal amount
of the Term Loans held by each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive in the absence of manifest error,
and the Borrower, the Agents and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(c) The Borrower acknowledges that each Lender may at any time
sell, assign, transfer, grant participations in, or otherwise dispose of a
portion of its Loans or, subject to subsection 3.8, any of its right, title and
interest therein, in Borrower Letters of Credit or in this Agreement and the
Collateral Security Documents (collectively, "Participations") to one or more
Eligible Assignees (such Eligible Assignees being herein called "Transferees"):
provided, however, that (i) such Lender's obligations under this Agreement and
under any Collateral Security Document shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) the Transferees shall be entitled to the benefit of
the provisions contained in subsections 4.6, 4.8, 4.9 and 4.10 hereof, and (iv)
the Borrower shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
under any Collateral Security Documents.
(d) The Borrower authorizes each Lender to disclose to any
prospective Permitted Assignee pursuant to paragraph (b) of this subsection 11.7
or prospective Transferee pursuant to paragraph (c) of this subsection 11.7 all
financial or other necessary information in such Lender's possession concerning
the Borrower, any Partner or the Project which has been delivered to such Lender
by or on behalf of the Borrower pursuant to this Agreement or any other Basic
Document or which has been delivered
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90
to such Lender by or on behalf of the Borrower or any Affiliate of the Borrower
in connection with such Lender's credit evaluation of the Borrower and the
Project prior to or after entering into this Agreement, provided, however, that
if any such information furnished to such Lender is marked in writing as being
confidential information, such Lender shall use reasonable efforts to preserve
the confidentiality of such information.
11.8 Severability. Any provision hereof which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof and without affecting the validity or enforceability
of any provision in any other jurisdiction.
11.9 Headings. The headings of the various sections and
paragraphs of this Agreement are for convenience of reference only, do not
constitute a part hereof and shall not affect the meaning or construction of any
provision hereof.
11.10 Counterparts. This Agreement may be executed by one or
more of the parties hereto on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
11.11 The Lenders Sole Beneficiaries. All conditions of the
obligations of the Lenders to make Loans and to take participating interests in
Letters of Credit hereunder are imposed solely and exclusively for the benefit
of the Lenders and their assigns and no other Person shall have standing to
require satisfaction of such conditions in accordance with their terms or be
entitled to assume that the Lenders will refuse to make Loans and to take
participating interests in Letters of Credit in the absence of strict compliance
with any or all of such conditions and no Person shall, under any circumstances,
be deemed to be a beneficiary of such conditions, any or all of which may be
freely waived in whole or in part by the Lenders at any time if in their sole
discretion it deems it advisable to do so. Inspections and approvals of Plans
and Specifications, the Project and the workmanship and materials used therein
impose no responsibility or liability of any nature whatsoever on the Agents,
the Lenders, the Lenders' Site Representative or the Independent Engineer, and
no Person shall, under any circumstances, be entitled to rely upon such
inspections and approvals by the Agents, the Lenders, the Lenders' Site
Representative or the Independent Engineer for any reason. The Lenders are
obligated hereunder solely to make Loans and to take participating interests in
Letters of Credit if and to the extent required by this Agreement.
11.12 Maximum Interest Rate. Anything to the contrary
notwithstanding, no Lender shall charge, take or receive and the Borrower shall
not be obligated to pay to any Lender, any amounts constituting interest on the
Loans in excess of the maximum rate permitted by applicable law.
<PAGE>
91
11.13 Governing Law. This Agreement and the Notes and the
rights and obligations of the parties under this Agreement and the Notes shall
be governed by, and construed and interpreted in accordance with, the law of the
State of New York.
11.14 Submission to Jurisdiction; Waivers. (A) The Borrower
hereby irrevocably and unconditionally:
(i) Submits for itself and its property in any legal action or
proceeding relating to this Agreement or any other Basic Document, or
for recognition and enforcement of any judgment in respect thereof, to
the non-exclusive general jurisdiction of the courts of the State of
New York, the courts of the United States of America for the Southern
District of New York, and Appellate Courts from any thereof;
(ii) Consents that any such action or proceeding may be
brought in such courts, and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in any
inconvenient court and agrees not to plead or claim the same;
(iii) Agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower at its address set forth in subsection 11.2 or
at such other address of which the Agents shall have been notified
pursuant thereto; and
(iv) Agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction.
<PAGE>
92
(B) The Borrower, each Agent and each Lender hereby
irrevocably and unconditionally waive trial by jury in any legal action or
proceeding referred to in paragraph (a) above.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
CAMDEN COGEN L.P.
By: Cogen Technologies Camden GP
Limited Partnership, a
Delaware limited partnership,
its general partner
By: Cogen Technologies Camden, Inc.,
a Texas corporation
general partner
By: /s/ signature goes here
-------------------------------------
Title: Vice President
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent,
By: /s/Michael J. Tzougrakis
-------------------------------------
Title: Manager - Operations
GENERAL ELECTRIC CAPITAL CORPORATION,
as Senior Tranche Agent
By: /s/Michael J. Tzougrakis
-------------------------------------
Title: Manager - Operations
GENERAL ELECTRIC CAPITAL CORPORATION,
as Junior Tranche Agent
By: /s/Michael J. Tzougrakis
-------------------------------------
Title: Manager - Operations
GENERAL ELECTRIC CAPITAL CORPORATION,
as Tranche A Lender
By: /s/Michael J. Tzougrakis
-------------------------------------
Title: Manager - Operations
<PAGE>
93
GENERAL ELECTRIC CAPITAL CORPORATION,
as Tranche B Lender
By: /s/ Michael J. Tzougrakis
-------------------------------------
Title: Manager - Operations
GENERAL ELECTRIC CAPITAL CORPORATION,
as Tranche C Lender
By: /s/ Michael J. Tzougrakis
-------------------------------------
Title: Manager - Operations
GENERAL ELECTRIC CAPITAL CORPORATION,
as Letter of Credit Issuer
By: /s/ Michael J. Tzougrakis
-------------------------------------
Title: Manager - Operations
<PAGE>
AMENDMENT NO. 1
----------------
AMENDMENT NO. 1 dated as of December 22, 1993 (the "Amendment") to the
Amendment and Restatement, dated as of April 1, 1993, of the Construction and
Term Loan Agreement, dated as of February 4, 1992 (as amended, modified or
otherwise supplemented, the "Credit Agreement") among (i) Camden Cogen L.P., a
Delaware limited partnership (the "Borrower"), of which Cogen Technologies
Camden GP Limited Partnership, a Delaware limited partnership, is the sole
general partner, (ii) the lenders from time to time parties thereto (the
"Lenders"), (iii) The Bank of Tokyo Trust Company, a banking corporation
organized and existing under the laws of the State of New York, as Senior
Tranche Agent, (iv) The Toronto-Dominion Bank Trust Company, a New York trust
company, as Agent and (v) General Electric Capital Corporation, a New York
corporation ("GE Capital"), as Junior Tranche Agent, Tranche B Lender and as
issuer of the Letters of Credit.
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, the parties hereto desire to amend certain provisions of the
Credit Agreement as provided herein;
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
Credit Agreement shall have such defined meanings when used herein.
2. Amendment of Subsection 1.1. Subsection 1.1 is hereby amended by:
(a) adding thereto the following definitions in the proper
alphabetical order:
(i) "Co-Agents": the collective reference to the Senior
Tranche Agent and the Tranche A Co-Agent.
(ii) "Tranche A Co-Agent": The Toronto-Dominion Bank Trust
Company, as Tranche A co-agent for the Lenders as appointed pursuant
to subsection 10.1 hereof.
(b) deleting in the definition of "Affected Agent" the phrase
"and/or Tranche C" appearing therein;
<PAGE>
2
(c) in the definition of "Affected Lenders":
(i) deleting the phrase" and, with respect to the Tranche C
Loans, the Tranche C Loans" appearing therein; and
(ii) replacing the second comma in the second line thereof
with the word "and";
(d) amending and restating the definition of "Agents" as follows:
""Agents" the collective reference to any of the Agent, the
Co-Agents, the Senior Tranche Agent or the Junior Tranche Agent, and their
respective successors and assigns";
(e) deleting in the definition of "Base Rate" the phrase "Bankers
Trust Company" and inserting in lieu thereof the phrase "The Bank of Tokyo Trust
Company";
(f) in the definition of "Basic Documents":
(i) deleting the phrase "Partnership Agreement", appearing
therein; and
(ii) inserting the phrase ": provided that Basic Documents
shall include the Partnership Agreement for the purposes of (A) the definition
of "Requirement of Law" and (B) Section 5 hereof."
(g) deleting in clause (v) of the definition of "Eligible
Assignee" the phrase "or Tranche C Lender" appearing therein;
(h) deleting in the definition of "Fixed Charge Coverage Ratio"
the phrase "(net of any amounts payable by the Counterparty to the Borrower
under any Interest Rate Hedging Agreement during such period) to be made during
such period" appearing in clause (b) thereof and inserting in lieu thereof the
phrase "to be made during such period (1) plus any amounts due to the
Counterparty by the Borrower during such period under any Interest Rate Hedging
Agreement (2) less any amounts due to the Borrower by the Counterparty during
such period under any Interest Rate Hedging Agreement."
(i) in the definition of "Installment Payment Date":
(i) deleting the phrase "and, with respect to the Tranche C
Term Loans, the Tranche C Term Notes" appearing therein: and
<PAGE>
3
(ii) replacing the first comma in the fourth line thereof
with the word "and";
(j) deleting in the definition of "Intercreditor Agreement" the
phrase ", the Tranche C Lenders" appearing therein;
(k) deleting in the definition of "Interest Rate" the phrase "and
the Tranche C Term Loans" appearing in clause (c) thereof;
(1) deleting in the definition of "Lenders" the phrase ", the
Tranche C Lenders";
(m) deleting in the definition of "Letter of Credit", the
phrase ", the City of Camden Letter of Credit, the Tender Bond" appearing
therein;
(n) deleting the definition of "Midlantic";
(o) deleting the definition of "Midlantic Agreements";
(p) in the definition of "Permitted Liens":
(i) inserting the word "and" before the phrase "(vi) Liens
created by the PSE&G Subordinated Mortgage"; and
(ii) deleting the phrase "; and (vii) Liens created by the
Midlantic Agreements" appearing therein.
(q) deleting in the definition of "Project Contracts" the phrase
"and the Operation and Maintenance Agreement" and inserting in lieu thereof
the phrase ", the Operation and Maintenance Agreement and any gas supply
contract with a term of two years or more or representing, on an annualized
basis, greater than 50% of the Project's annual fuel supply";
(r) in the definition of "Security Agent,"
(i) deleting the phrase "Midlantic National Bank" and
inserting in lieu thereof the phrase "The Toronto-Dominion Bank Trust
Company"; and
(ii) inserting the phrase "or trust company" after the
phrase "any bank" appearing therein.
(s) amending and restating in the definition of "Security Deposit
Agreement" as follows:
"'Security Deposit Agreement': the Second Amended and
Restated Security Deposit Agreement, dated as of December 22, 1993,
among the Borrower, the Senior
<PAGE>
4
Tranche Agent, the Tranche A Co-Agent, the Junior Tranche Agent, the Agent,
GE Capital as General Partner Term Lender, Project Lender of Credit Issuer,
Senior Debt Service Reserve Letter of Credit Issuer, Senior Debt Service
Letter of Credit Issuer, Junior Debt Service Letter of Credit Issuer and
Limited Partner, the General Partner, the Security Agent and the Tranche A
and Tranche B Lenders, as the same may be amended, supplemented or
otherwise modified from time to time."
(t) deleting the definition of "Tender Bond".
(u) in the definition of "Term Loan":
(i) deleting the phrase "and the Tranche C Term Loans"; and
(ii) replacing the first comma in the second line thereof
with the word "and";
(v) in the definition of "Term Loan Conversion Date":
(i) replacing the second comma in the third line thereof
with the word "and"; and
(ii) deleting the phrase "and the Tranche C Term Notes";
(w) in the definition of "Term Notes":
(i) replacing the comma in the second line thereof with the
word "and"; and
(ii) deleting the phrase "and the Tranche C Term Notes";
(x) deleting the definitions "Tranche C Lender", "Tranche C Term
Loans" and "Tranche C Term Notes" in their entirety;
3. Amendment of Subsection 2.2. Subsection 2.2 is hereby amended
by:
(i) deleting the phrase: "and a new promissory note in respect of
the Tranche C Term Loan made by such Lender substantially in the form of
Exhibit A-3 with appropriate insertions (individually, a "Tranche C Term
Note"; collectively, the "Tranche C Term Notes")" appearing in clause (a)
thereof;
(ii) deleting clause (d) thereof in its entirety;
(iii) replacing the comma appearing in the second line of clause
(e) thereof with the word "and":
<PAGE>
5
(iv) deleting the phrase "and Tranche C Term Note" appearing
in clause (e) thereof.
4. Amendment of Subsection 3.1(a). Subsection 3.1(a) is hereby
amended by:
(i) deleting the phrase "(i)" appearing in the second line
thereof; and
(ii) deleting clause (ii) thereof in its entirety.
5. Amendment of Subsection 3.1(b). Subsection 3.1(b) is hereby
amended and restated as follows:
"(b) The Letter of Credit Issuer agrees that the Senior
Tranche Agent shall request the Borrower, and the Borrower shall
request the Letter of Credit Issuer to issue, and the Letter of Credit
Issuer shall, on the date of Amendment No. 1 hereto, issue a letter of
credit in the form attached as Exhibit A to Amendment No. 1 hereto or
on terms and conditions satisfactory to it and the Senior Tranche
Agent (the "Senior Debt Service Reserve Letter of Credit") to the
Senior Tranche Agent, for the ratable benefit of the Tranche A Term
Lenders in the amount of $4,835,552.00."
6. Amendment of Subsection 3.2. Subsection 3.2 is hereby amended
by deleting such subsection in its entirety and inserting in lieu thereof,
the following:
"The Borrower agrees to (A) reimburse the Letter of Credit
Issuer (i) for any payment made by it under any Borrower Letter of
Credit immediately upon the making of such payment by the Letter of
Credit Issuer, (ii) three Business Days after demand, for and to the
extent of any payment made by it under the Senior Debt Service Reserve
Letter of Credit in the form attached as Exhibit A to Amendment No. 1
hereto pursuant to paragraph 3 or 4 of the Drawing Certificate
attached thereto (the "Reserve Drawing Certificate") and (iii) on the
Tranche A Term Loan Maturity Date, for and to the extent of any
payment made by it under the Senior Debt Service Reserve Letter of
Credit pursuant to paragraph 5 of the Reserve Drawing Certificate and
(B) to pay interest on the unreimbursed portion of any such payment
payable under the foregoing clause (A) (i) or A(ii) until
reimbursement in full thereof at a rate per anum equal to 1.5% above
the Base Rate."
7. Amendment of Subsection 3.7. Subsection 3.7 is hereby amended
by inserting the phrase ", in its sole discretion," after the phrase "and
each Tranche A Lender" appearing in the second line thereof.
8. Amendment of Subsection 3.8. Subsection 3.8 is hereby amended
by inserting the phrase ", in its sole
<PAGE>
6
discretion," after the phrase "Term Lender" appearing in the second line
thereof.
9. Amendment of Subsection 4.1(a). Subsection 4.1(a) is hereby
amended and restated as follows:
"The Borrower agrees to pay to the Senior Tranche Agent an
administrative agent's fee on April 1, 1994, and annually, in advance,
on each anniversary of such date thereafter (the "Administrative
Agency Fees") in the amount set forth in the Letter Agreement. The
Borrower agrees to pay to the Security Agent a security agent's fee on
April 1, 1994 and annually on each anniversary of such date thereafter
(the "Security Agency Fees") in the amount set forth in the Letter
Agreement. The Administrative Agency Fees and the Security Agency Fees
are referred to herein as the "Agency Fees". No fees shall be payable
by the Borrower to the Tranche A Co-Agent or the Agent."
10. Amendment of Subsection 4.2(a). Subsection 4.2(a) is hereby
amended by:
(a) deleting the phrase "and Tranche C Term Loans" appearing in
clauses (i) and (ii) thereof; and
(b) amending and restating clause (iii) thereof as follows:
"(iii) If (i) the Fixed Charge Coverage Ratio as of any two
consecutive calendar quarters is less than 1.2 to 1.0 or (ii) if
any Event of Default has occurred and is continuing, any amount
in the Partnership Required Payments Reserve Account shall be
applied on the next succeeding Installment Payment Date (x) to
prepay the Tranche A Term Loans pro rata with respect to the
remaining scheduled repayments to be made on the Tranche A Term
Notes together with any amounts payable pursuant to subsection
4.9 in respect of the Tranche A Term Loans, and (y) upon the
payment in full of the Tranche A Term Loans and any other amounts
owing under the Tranche A Term Notes and any amounts payable
pursuant to subsection 4.9, to prepay the Tranche B Term Loans
pro rata with respect to the remaining scheduled repayments to be
made on the Tranche B Term Notes together with any amounts
payable pursuant to Subsection 4.9 in respect of the Tranche B
Term Loans and the Yield Maintenance Premium on the principal
amount of the Tranche B Term Loans prepaid."
11. Amendment of Subsection 4.2(b). Subsection 4.2(b) is hereby
amended by deleting the last sentence thereof and inserting in lieu thereof
the sentence "Optional prepayments shall be made pro-rata among the Tranche
A Term Loans and the
<PAGE>
7
Tranche B Term Loans based on total principal outstanding and then applied
based on inverse order of maturity."
12. Amendment of Subsection 4.3. Subsection 4.3 is hereby amended
by deleting the phrase "and Tranche C Term Loans" appearing in clause (a)
(iii) and (b) thereof.
13. Amendment of Subsection 4.5. Subsection 4.5 is hereby amended
by:
(i) inserting at the beginning of 4.5 the phrase "Except as set
forth in Section 4.2(a) (iii),":
(ii) deleting the phrase "and the Tranche C Loans" appearing
therein;
(iii) deleting the phrase "and the Tranche C Lenders" appearing
therein;
(iv) deleting the phrase "account no. 50-205-776 at Bankers Trust
Company, New York, New York, ABA Number: 0210-0103-3" appearing in the
twentieth line thereof and inserting in lieu thereof the phrase
"account no. 97770477 Att: LAD as The Bank of Tokyo Trust Company, New
York, New York ABA Number: 0260-0968-7".
(v) inserting the phrase "Senior Tranche" before the word "Agent"
appearing in the twelfth line thereof; and
(vi) inserting the phrase "Tranche A" before the word "Lenders"
appearing in the thirteenth line thereof.
14. Amendment of Subsection 4.7. Subsection 4.7 is hereby amended
by deleting the phrase ", Tranche C Term Loans".
15. Amendment of Subsection 5.15. Subsection 5.15 is hereby
amended by inserting the phrase ", rights or interests of the Lenders
hereunder" after the phrase "the Project" appearing in the sixteenth line
thereof;
16. Amendment of Subsection 7.3. Subsection 7.3 is hereby amended
by:
(i) deleting the reference to "7.19" appearing therein and
substituting in lieu thereof a reference to "7.15"; and
(ii) deleting the reference to "7.20" appearing therein and
substituting in lieu thereof a reference to "7.16".
17. Amendment of Subsection 7.5. Subsection 7.5(i) (v) is hereby
amended by deleting the phrase "and the Tranche C Lenders" appearing
therein.
<PAGE>
8
18. Amendment of Subsection 7.14(g). Subsection 7.14(g) is hereby
amended by inserting the phrase "a copy of each Contract and" immediately
preceding the phrase "copies of each material Governmental Approval"
appearing therein.
19. Amendment of Subsection 7.14(h). Subsection 7.14(h) is hereby
amended by:
(a) deleting the phrase "Required Lenders" and inserting in lieu
thereof, the phrase "the Co-Agents;
(b) Deleting the word "three" and inserting in lieu thereof, the
word "five"; and
(c) inserting at the end thereof, the following:
"In connection with any such approval process, in the event the
Co-Agents engage the services of an independent consulting engineer to
review the Operating Budget, they will require such independent
consulting engineer to review such Operating Budget with the Borrower
prior to making any related recommendations to the Co-Agents and to
follow standard industry practice in making such recommendations."
20. Amendment of Subsection 7.18(b). Subsection 7.18(b) is hereby
amended by inserting the phrase "or other Assigned Contract" after the
phrase "Project Contract" appearing therein.
21. Amendment to Subsection 8.6. Subsection 8.6 is hereby amended
by inserting at the end of such subsection, the following:
"The Partnership Agreement will not be amended, supplemented or
modified, if any such amendment, supplement or modification has a
material adverse affect on the Senior Obligees' (as defined in the
Intercreditor Agreement) rights under the Letter Agreement, dated as
of the date of Amendment No. 1 hereto, between GE Capital and BOTT, as
Senior Tranche Agent, or the Assignment and Security Agreement, the
Borrower or the rights of the Tranche A Lenders to enforce their
remedies hereunder."
22. Amendment of Section 9. Section 9 is hereby amended by:
(a) deleting the phrase "Agents" appearing (i) in the second line
of the first paragraph thereof, (ii) in the fourth line of the last
paragraph thereof, (iii) in the sixth line of the last paragraph
thereof and (iv) in the eleventh line of the last paragraph thereof
and inserting in lieu thereof, the phrase "the Agent, the Senior
Tranche Agent, the Tranche A Co-Agent or the Junior/Tranche Agent";
<PAGE>
9
(b) inserting the phrase "as the case may be," immediately below
the phrase "its true and lawful attorney in-fact" appearing in the
eleventh line of the last paragraph thereof; and
(c) inserting at the end of the last paragraph thereof, the
following:
"The Tranche A Lenders and the Tranche B Lenders shall severally
have the right to cure any Event of Default, and upon cure in
full of such Event of Default, such Event of Default shall no
longer be an Event of Default hereunder. The Borrower shall
immediately reimburse the Tranche A Lenders or the Tranche B
Lenders, as the case may be, for the amount of any funds expended
to cure any Event of Default in the payment of principal,
interest or other amounts due hereunder or for the reasonable
cost of curing any other Event of Default hereunder, plus
interest thereon at the Default Rate."
(d) inserting at the end thereof, as a new final paragraph, the
following paragraph:
"Notwithstanding any provision in any of the Basic Documents,
references to the Intercreditor Agreement appearing in the Basic
Documents shall be of no force and effect with respect to the manner
in which the Borrower is required to perform its obligations under the
Basic Documents, but to the contrary, provided the Borrower has
complied with the terms of the Basic Documents as if the term
"Intercreditor Agreement" had not appeared therein, the Borrower will
be deemed to have complied fully with its obligations under the Basic
Documents."
23. Amendment of Subsection 9(e). Subsection 9(e) is hereby
amended by:
(a) inserting the phrase "(other than the Counterparty with
respect to the Interest Rate Hedging Agreement)" after the phrase "any
Agent or any Lender" appearing in the fifteenth line thereof;
(b) inserting the phrase "(other than the Counterparty with
respect to the Interest Rate Hedging Agreement)" after the phrase "any
Agent or any Lender" appearing in the sixteenth line thereof; and
(c) inserting the phrase "(other than the Counterparty with
respect to the Interest Rate Hedging Agreement)" after the phrase "any
Agent or any Lender" appearing in the nineteenth line thereof;
<PAGE>
10
24. Amendment of Subsection 9(j). Subsection 9(j) is hereby
amended by inserting the phrase "(or any successor or assign which is (a)
an affiliate of GE Capital or (b) satisfactory to the Required Lenders)"
after the phrase "General Partner" appearing therein.
25. Amendment of Subsection 10.1. Subsection 10.1 is hereby
amended by:
(a) deleting the phrase "and each Tranche C Lender" appearing
therein; and
(b) inserting after the phrase "as are reasonably incidental
thereto." appearing in the eleventh line thereof, the following
sentence:
"Each Tranche A Lender hereby irrevocably appoints and authorizes
the Tranche A Co-Agent to act as its agent hereunder and under
the other Basic Documents with such powers as are expressly
delegated to the Tranche A Co-Agent by the terms of this
Agreement and the other Basic Documents, together with such other
powers as are reasonably incidental thereto."
26. Amendment of Subsection 11.2. Subsection 11.2 is hereby
amended by:
(a) deleting the address of the Senior Tranche Agent appearing
therein and inserting in lieu thereof, the following:
"The Bank of Tokyo Trust Company
1251 Avenue of the Americas
Project Finance, 12th Floor
New York, New York 10116-3138
Attention: Manager, Project Finance
Telecopy: (212) 782-6442"
(b) deleting the address of the Agent appearing therein and
inserting in lieu thereof, the following:
"The Toronto-Dominion Bank Trust Company
c/o The Toronto-Dominion Bank
909 Fannin, Suite 1700
Houston, Texas 77010
Attention: Manager Credit Administration
Telecopy: (713) 652-2647
with a copy to:
The Toronto-Dominion Bank
31 West 52nd Street
New York, New York 10019
Attention: Director Utilities Project Finance
Telecopy: (212) 262-1929"
<PAGE>
11
27. Amendment to Subsection 11.5. Subsection 11.5 is hereby
amended by inserting at the end thereof, the following:
"The Borrower will pay the reasonable expenses of any independent
consulting engineer engaged by the Co-Agents to advise the Co-Agents
and the Tranche A Lenders with respect to its annual review of the
Operating Budget pursuant to subsection 7.14 (h) hereof."
28. Amendment and Restatement to Schedule 8. Schedule 8 is hereby
amended and restated as follows:
"The Bank of Tokyo Trust Company
1251 Avenue of the Americas
Project Finance, 12th Floor
New York, New York 10116-3138
Attention: Manager, Project Finance
Telecopy: (212) 782-6442
The Toronto-Dominion Bank
909 Fannin, Suite 1700
Houston, Texas 77010
Attention: Manager Credit Administration
Telecopy: (713) 652-2647
with a copy to:
The Toronto-Dominion Bank
31 West 52nd Street
New York, New York 10019
Attention: Director Utilities
and Project Finance
Telecopy: (212) 262-1929"
29. Completion Budget. Attached hereto as Exhibit B is the
Completion Budget in form and substance satisfactory to the parties hereto.
30. Limited Effect. Except as expressly amended hereby, all of
the provisions of the Credit Agreement shall continue to be, and shall
remain, in full force and effect in accordance with their terms.
31. Counterparts. This Amendment may be executed in any number of
counterparts, all of which together shall constitute one and the same
instrument.
32. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
<PAGE>
12
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed and delivered by their proper and duly authorized officers as of the
date first above written.
THE TORONTO-DOMINION BANK TRUST
COMPANY, as Agent
By: /s/ KATHY LYNN
-----------------------------
Title:
THE TORONTO-DOMINION BANK, as
Tranche A Lender
By: /s/ KATHY LYNN
-----------------------------
Title:
THE BANK OF TOKYO TRUST COMPANY, as
Senior Tranche Agent and Tranche
A Lender
By: /s/ ROBERT O. DEVINING
-----------------------------
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION, as Original Agent,
Tranche B Lender and Letter of
Credit Issuer
By: /s/ MICHAEL J. TZOUPUCKIN
-----------------------------
Title:
<PAGE>
CAMDEN COGEN L.P.
By: Cogen Technologies Camden
GP Limited Partnership,
a Delaware limited partnership,
its general partner
By: Cogen Technologies
Camden, Inc., a
Texas corporation,
its general partner
By: /s/
-----------------------------
Title:
<PAGE>
- --------------------------------------------------------------------------------
COGEN TECHNOLOGIES CAMDEN GP LIMITED PARTNERSHIP,
a Delaware Limited Partnership
-------------------------------------------
TERM LOAN AGREEMENT
$36,500,000
Dated as of the Conformed Agreement Date
-------------------------------------------
GENERAL ELECTRIC CAPITAL CORPORATION,
as Lender
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-------------------
Page
----
SECTION 1. DEFINITIONS .................................................... 1
1.1 Certain Defined Terms............................................ 1
Adverse Environmental Event ...................................... 1
Agreement .................
Amended and Restated Partnership Agreement ....................... 1
Applicable Eurocurrency Reserve Requirements ..................... 1
Assignees' Ratio ................................................. 1
Borrowing Date ................................................... 2
Called Principal ................................................. 2
Collateral ....................................................... 2
Collateral Security Documents .................................... 2
Commitment Fee ................................................... 2
Commonly Controlled Entity ....................................... 2
Construction Loan Agreement ...................................... 2
Convert .......................................................... 2
Default .......................................................... 3
Discounted Value ................................................. 3
EBDIT ............................................................ 3
Environmental Notice ............................................. 3
Eurodollar Base Rate ............................................. 3
Eurodollar Interest Period ....................................... 3
Eurodollar Loan .................................................. 4
Eurodollar Rate .................................................. 4
Event of Default ................................................. 4
Event of Loss .................................................... 4
Fixed Charge Coverage Ratio ...................................... 6
Fixed Eurocurrency Reserves Requirements ...................... 6
Fixed Interest Rate .............................................. 6
Fixed Rate Loan .................................................. 6
Floating Eurocurrency Reserves Requirements ...................... 7
Floating Rate .................................................... 7
Floating Rate Loan ............................................... 7
Fourth Anniversary Date .......................................... 7
GE Capital's Ratio ............................................... 7
General Partner Term Loan Required Payments
Reserve Account ................................................. 7
Insolvency ....................................................... 7
Insolvent ........................................................ 8
Installment Payment Date ......................................... 8
Interest Payment Date ............................................ 8
LIBOR ............................................................ 8
LIBOR (Reference Banks) .......................................... 8
Limited Partner .................................................. 9
Limited Partnership .............................................. 9
Multiemployer Plan ............................................... 9
Notice of Borrowing .............................................. 9
-i-
<PAGE>
Page
-----
Obligations ....................................................... 9
Operative Documents ............................................... 9
Participations .................................................... 9
Partners .......................................................... 9
Partnership Agreement ............................................. 9
Permitted Assignee ................................................ 10
Permitted Investments ............................................. l0
Permitted Liens .... .............................................. 10
Plan .............................................................. 11
Prime Rate ........................................................ 11
Project Documents ................................................. 11
Project Limited Partner ........................................... 11
Reorganization .................................................... 11
Reportable Event .................................................. 12
Requirement of Law ................................................ 12
Second Anniversary Date ........................................... 12
Security Agent .................................................... 12
Security Deposit Agreement ........................................ 12
Settlement Date ................................................... 12
Single Employer Plan .............................................. 12
Special Event ..................................................... 12
Term Loan ......................................................... 12
Term Loan Borrowing Certificate ................................... 13
Term Loan Commitment .............................................. 13
Term Loan Maturity Date ........................................... 13
Term Loan Period .................................................. 13
Term Note ......................................................... 13
Transaction Documents ............................................. 13
Transferee ........................................................ 13
Treasury Rate ..................................................... 13
Treasury Yield .................................................... 13
Yield-Maintenance Premium ......................................... 13
1.2 Other Definitional Provisions .................................... 14
SECTION 2. AMOUNT AND TERMS OF
TERM LOAN COMMITMENT ............................................. 14
2.1 Term Loan Commitment ............................................. 14
2.2 Procedure for Borrowing with Respect to Term Loans ............... 14
2.3 Disbursement of Term Loans ....................................... 15
2.4 Term Note ........................................................ 15
2.5 Use of Proceeds .................................................. 16
SECTION 3. PROVISIONS RELATING TO ALL EXTENSIONS
OF CREDIT: FEES AND PAYMENTS ..................................... 16
3.1 Commitment Fee ................................................... 16
3.2 Commitment Reductions; Optional and Mandatory Prepayments ........ 17
3.3 Interest Rates and Payment Dates ................................. 19
3.4 Conversion of Loans .............................................. 19
3.5 Making of Payments ............................................... 19
3.6 Computation of Interest and Fees ................................. 20
3.7 Inability to Determine Eurodollar Rate ........................... 20
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3.8 Increased Costs ................................................. 21
3.9 Indemnity ....................................................... 23
3.10 Taxes ........................................................... 23
3.11 Limitation of Liability.......................................... 24
SECTION 4. REPRESENTATIONS AND WARRANTIES .................................. 24
4.1 Financial Statements ............................................. 24
4.2 Partnership Existence and Business; Partners ..................... 25
4.3 Compliance with Law .............................................. 26
4.4 Power and Authorization; Enforceable Obligations ................. 26
4.5 No Legal Bar ..................................................... 27
4.6 No Proceeding or Litigation ..................................... 28
4.7 No Default or Event of Loss ...................................... 28
4.8 Ownership of Property; Liens ..................................... 28
4.9 Taxes ............................................................ 29
4.10 Federal Regulations ............................................. 29
4.11 ERISA ........................................................... 30
4.12 Investment Company Act .......................................... 30
4.13 Collateral Security Documents ................................... 30
4.14 Full Disclosure ................................................. 31
4.15 Principal Place of Business, Etc. ............................... 31
4.16 Representations and Warranties .................................. 31
4.17 Environmental Matters ........................................... 32
4.18 Public Utility Status ........................................... 32
SECTION 5 CONDITIONS PRECEDENT ............................................. 33
5.1 Conditions to each Borrowing Date ................................ 33
SECTION 6. AFFIRMATIVE COVENANTS ........................................... 37
6.1 Conduct of Business, Maintenance of Existence, Etc. .............. 37
6.2 Payment of Obligations ........................................... 38
6.3 Performance under Other Agreements ............................... 38
6.4 Insurance Coverage ............................................... 38
6.5 Inspection of Property; Books and Records ........................ 38
6.6 Compliance with Laws ............................................. 38
6.7 Financial Statements ............................................. 39
6.8 Certificates; Other Information .................................. 39
6.9 Taxes and Claims ................................................. 40
6.10 Mechanics' and Materialmen's Liens .............................. 41
6.11 Maintenance of Property ......................................... 41
6.12 Notices ......................................................... 42
6.13 Maintenance of Liens of the Collateral Security
Documents ....................................................... 43
6.14 Agent for Service of Process .................................... 43
6.15 Employee Plans .................................................. 43
6.16 Fiscal Year ..................................................... 43
6.17 Qualifying Facility Status ...................................... 43
SECTION 7. NEGATIVE COVENANTS .............................................. 44
7.1 Merger, Sale of Assets, Purchases, Etc. ......................... 44
7.2 Indebtedness; Guarantee Obligations ............................. 44
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7.3 Distributions, Etc. .............................................. 44
7.4 Liens ............................................................ 44
7.5 Nature of Business ............................................... 44
7.6 Amendment of Contracts, Etc. ..................................... 45
7.7 Investments ...................................................... 45
7.8 Leases ........................................................... 45
7.9 Change of Office ................................................. 45
7.10 Change of Name .................................................. 46
7.11 Compliance with ERISA ........................................... 46
7.12 Transactions with Affiliates and Others ......................... 46
7.13 Capital Expenditures ............................................ 46
7.14 Sale and Leaseback .............................................. 47
SECTION 8. EVENTS OF DEFAULT ............................................... 47
SECTION 9. MISCELLANEOUS ................................................... 52
9.1 Amendments and Waivers ........................................... 52
9.2 Notices .......................................................... 53
9.3 No Waiver; Cumulative Remedies ................................... 53
9.4 Survival ......................................................... 54
9.5 Expenses ......................................................... 54
9.6 Indemnification .................................................. 54
9.7 Successors and Assigns; Transferees; Transferred
Interests ....................................................... 54
9.8 Severability ..................................................... 56
9.9 Headings ......................................................... 56
9.10 Counterparts .................................................... 56
9.11 The Lender Sole Beneficiary ..................................... 56
9.12 Governing Law ................................................... 57
9.13 Submission to Jurisdiction; Waivers ............................. 57
9.14 Maximum Interest Rate ........................................... 58
SCHEDULES
Schedule 1 Pro Forma Fixed Charge Coverage Calculation
EXHIBITS
Exhibit A Form of Term Note
B Form of Opinion of Counsel to the Borrower
and the General Partner
C Form of Term Loan Borrowing Certificate
D Form of Notice of Borrowing
F Form of Security Deposit Agreement
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<PAGE>
TERM LOAN AGREEMENT, dated as of the Conformed Agreement Date, among (i)
COGEN TECHNOLOGIES CAMDEN GP LIMITED PARTNERSHIP, a Delaware limited partnership
(the "Borrower"), of which Cogen Technologies Camden, Inc., a Texas corporation,
is the sole general partner (the "General Partner"), and (ii) GENERAL ELECTRIC
CAPITAL CORPORATION, a New York corporation ("GE Capital" or the "Lender").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower desires that the Lender provide term financing for
the purposes specified herein, and the Lender is willing to provide such
financing subject to and upon the terms and conditions set forth herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Certain Defined Terms. Unless otherwise defined herein, terms used
but not defined herein shall have their respective meanings in the Construction
Loan Agreement (as hereinafter defined) (after giving effect to any waiver or
amendment thereof with the consent of the Lender) and the following terms shall
have the following meanings (such definitions to be equally applicable to both
singular and plural forms of the terms defined):
"Adverse Environmental Event": any event relating to any Relevant
Environmental Law the occurrence of which creates a material likelihood that the
ability of the Borrower to perform its obligations under the Transaction
Documents to which it is a party would be materially and adversely affected.
"Agreement": this Term Loan Agreement, as amended, supplemented or
otherwise modified from time to time.
"Amended and Restated Partnership Agreement": as defined in
the Capital Contribution Agreement.
"Applicable Eurocurrency Reserve Requirements": with respect to
any Eurodollar Interest Period, the sum of (a) the product of (i) GE Capital's
Ratio and (ii) (l.OO-Fixed Eurocurrency Reserve Requirements) and (b) the
product of (i) Assignees' Ratio and (ii) (l.OO-Floating Eurocurrency Reserve
Requirements).
"Assignees' Ratio": with respect to each Eurodollar Interest Period, the
quotient of (i) the
<PAGE>
2
aggregate principal amount of all assignments of GE Capital's Term Loan
Commitment and all Participations granted by GE Capital, in each case, to any
banks which, as of the first day of such Eurodollar Interest Period, are members
of the Federal Reserve System and are required by any regulation of the Board of
Governors of the Federal Reserve System or any other Governmental Authority
having jurisdiction to maintain reserve requirements prescribed for eurocurrency
funding, divided by (ii) $36,500,000.
"Borrowing Date": any Business Day or Working Day, as the case may be,
during the Term Loan Period, specified in the notice pursuant to subsection 2.2
as the date on which the Borrower requests the Lender to make a Term Loan
hereunder.
"Called Principal": the principal of the Term Note that is to be prepaid
pursuant to subsection 3.2(b).
"Collateral": the collective reference to all real and personal
property, tangible and intangible, and the proceeds thereof, subjected from time
to time to the Liens created by the Collateral Security Documents.
"Collateral Security Documents": the collective reference to the
Assignment and Security Agreement, the Cogen Pledge Agreement and from and after
the date of execution and delivery thereof, the Security Deposit Agreement and
any other agreement or instrument hereafter specifically identified in writing
by the Borrower and the Lender to be a "Collateral Security Document".
"Commitment Fee": as defined in subsection 3.1.
"Commonly Controlled Entity": an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group which includes the Borrower and which is
treated as a single employer under Section 414 of the Code.
"Construction Loan Agreement": the Construction and Term Loan
Agreement, dated as of the Conformed Agreement Date, among the Limited
Partnership, the lenders parties thereto and GE Capital, as agent for such
lenders and issuer of the letters of credit referred to therein, as the same may
be amended, supplemented or otherwise modified from time to time.
"Convert": the conversion of a Term Loan (or a portion thereof) which
is a Floating Rate Loan into a Fixed Rate Loan pursuant to subsection 3.4.
<PAGE>
3
"Default": any of the events specified in Section 8, whether or not any
requirement for the giving of notice, the lapse of time, or both, or for the
happening of any other condition, has been satisfied.
"Discounted Value": with respect to the Called Principal, the amount
calculated by discounting all remaining scheduled payments with respect to such
Called Principal from their respective scheduled due dates to the Settlement
Date with respect to such Called Principal, in accordance with accepted
financial practice and at a discount factor (applied on a quarterly basis) equal
to the Treasury Yield with respect to such Called Principal.
"EBDIT": for any period, net income before deductions for depreciation
expense, amortization expense, interest expense and income taxes.
"Environmental Notice": any written complaint, order, citation or other
written communication from any Governmental Authority affecting or relating to
(a) the Collateral or (b) the Borrower or any activity or operations at any time
conducted by the Borrower, in either case, with regard to the occurrence,
presence of, exposure to or threatened occurrence, presence of or exposure to
Environmental Discharges, Hazardous Materials or any other environmental matter,
the circumstances of which might result in or constitute a violation of any
Relevant Environmental Law.
"Eurodollar Base Rate": LIBOR or LIBOR (Reference Banks), as applicable.
"Eurodollar Interest Period": with respect to each Eurodollar Loan:
(a) initially, the period from and including the Borrowing
Date with respect to such Eurodollar Loan to but excluding the
numerically corresponding day in the immediately succeeding month; and
(b) thereafter, each period from and including the day
following the last day of the next preceding Eurodollar Interest Period
applicable to such Eurodollar Loan to but excluding the numerically
corresponding day in the immediately succeeding month:
provided that the foregoing provisions are subject to the following:
(A) if any Eurodollar Interest Period would otherwise end on
a day which is not a Working Day,
<PAGE>
4
such Eurodollar Interest Period shall be extended to the next succeeding
Working Day unless the result of such extension would be to extend such
Eurodollar Interest Period into another calendar month, in which event
such Eurodollar Interest Period shall end on the immediately preceding
Working Day:
(B) any Eurodollar Interest Period that would otherwise extend
beyond the Term Loan Maturity Date, shall end on the Term Loan Maturity
Date or, if such day shall not be a Working Day, on the preceding
Working Day; and
(C) any Eurodollar Interest Period that begins on the day following
the last Working Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end of
such Eurodollar Interest Period) shall end on the last Working Day of a
calendar month.
"Eurodollar Loan": a Term Loan (or portion thereof), at such time as
such Term Loan (or portion thereof) is made or maintained at an interest rate
baaed on the Eurodollar Rate.
"Eurodollar Rate": with respect to each Eurodollar Loan for each
Eurodollar Interest Period applicable thereto, the rate per annum (rounded
upwards to the nearest whole multiple of l/lOOth of one percent) equal to the
quotient of (a) the Eurodollar Base Rate, divided by (b) the Applicable
Eurocurrency Reserve Requirements.
"Event of Default": any of the events specified in Section 8; provided
that any requirement for the giving of notice, the lapse of time, or both, or
for the happening of any other condition, has been satisfied.
"Event of Loss": (a) the actual or constructive total loss of the
Facility, excluding any loss which occurs prior to the delivery of the principal
components of the Facility to the Site, or the condemnation, confiscation or
seizure of, or requisition of title to all or substantially all of the Project,
or the requisition by any Governmental Authority for a period exceeding six
months of the use of all or substantially all of the Project; (b) the loss,
destruction or damage of, or condemnation, confiscation or seizure of, or
requisition of title to, or requisition by any Governmental Authority of the use
of, such portion of the Project as shall render the Facility unable to operate
at substantially its designed level of output or as a Qualifying Facility,
unless (in a situation in which clauses (a) and (c) are not applicable) (i) no
<PAGE>
5
Event of Default shall have occurred and be continuing at the time of
occurrence of any of the events specified above in this clause (b), (ii)
in the reasonable opinion of the Lender, it is feasible to restore,
rebuild or replace the affected portion of the Project and (iii) in the
reasonable opinion of the Lender, sufficient funds are or will be
available to the Borrower or the Limited Partnership (1) to restore,
rebuild or replace the affected portion of the Project so that the
Facility will be able to operate at substantially its designed level of
output and to operate as a Qualifying Facility within 18 months after
the occurrence of such Event of Loss and (2) to pay all scheduled
installments of principal of and interest on the Term Note until such
restoration, rebuilding or replacement is completed; (c) in the
reasonable opinion of the Lender, the Facility, the owner thereof or any
of such owner's Affiliates is subject to being deemed by any
Governmental Authority having jurisdiction to be, or is subject to
regulation as, an "electric utility", "electric corporation",
"electrical company", "public utility" or a "public utility holding
company" under any law, rule or regulation of any Governmental
Authority, except where (i) the effect of such determination would
result only in the imposition of reporting or safety requirements which,
in the reasonable opinion of the Lender, are non-burdensome in nature
and (ii) in the event that steam from the Project is supplied, directly
or indirectly, to Persons other than the Steam Host under the Steam
Supply Agreement or otherwise, the Limited Partnership shall have
obtained a declaratory order or other official assurance, in form and
substance reasonably satisfactory to the Lender, from the New Jersey
Board of Public Utility Commissioners to the effect that such sales will
not result in the Facility, the owner thereof or any of such owner's
Affiliates being deemed to be, or subject to regulation as, a "public
utility" under any Applicable Law (other than regulation of the nature
described in clause (i) of this clause (c)); (d) a change shall have
occurred after the date hereof in any applicable law or regulation or in
the interpretation thereof by any Governmental Authority charged with
the administration or interpretation thereof which, in the reasonable
opinion of the Lender, would make any of the Project Contracts subject
to cancellation, suspension or termination, which cancellation,
suspension or termination, in the reasonable opinion of the Lender,
could reasonably be expected to have a material adverse effect on the
economic viability of the Project; or (e) an event of force majeure or
other event or condition shall exist which permits or requires any party
to any of the Project Contracts to cancel, suspend or terminate its
performance thereunder in accordance with the terms
<PAGE>
6
thereof or which could excuse any such party from liability for non-performance
thereunder, unless (i) the parties to such Project Contract shall have
effectively waived the condition giving rise to such right or requirement with
respect to such cancellation, suspension, termination or release from liability,
or (ii) in the reasonable opinion of the Lender, such cancellation, suspension,
termination or release from liability could not reasonably be expected to have a
material adverse effect on the economic viability of the Project.
"Fixed Charge Coverage Ratio": for any period of determination, the
ratio of:
(a) the EBDIT of the Limited Partnership for the immediately
preceding four consecutive quarterly periods to
(b) the sum of (i) the aggregate amount of Tranche A
Distributions to be made pursuant to Section 4.3(a) of the Amended
and Restated Partnership Agreement during such periods (without
giving effect to the proviso thereto), plus (ii) the sum of (x) the
aggregate amount of interest payable on the Term Loans during such
periods and (y) the aggregate amount of scheduled repayments to be
made on the Term Note during such periods.
"Fixed Eurocurrency Reserves Requirements": with respect to any
Eurodollar Interest Period for any Eurodollar Loan, the aggregate of the rates
(expressed as a decimal) of reserve requirements current on the date two Working
Days prior to the Borrowing Date (including, without limitation, basic,
supplemental, marginal and emergency reserves under any regulations of the Board
of Governors of the Federal Reserve System or other Governmental Authority
having jurisdiction with respect thereto), as in effect on the Borrowing Date,
dealing with reserve requirements prescribed for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of such Board)
required to be maintained by a member bank of such system.
"Fixed Interest Rate": with respect to a Term Loan (or portion
thereof) which is a Fixed Rate Loan, a rate of interest equal to the sum of
(i) the Treasury Rate as in effect on the Borrowing Date, plus (ii) 500 basis
points.
"Fixed Rate Loan": a Term Loan (or portion thereof), at such time
as such Term Loan (or portion
<PAGE>
7
thereof) is made or maintained at the Fixed Interest Rate.
"Floating Eurocurrency Reserves Requirements": with respect to any
Eurodollar Interest Period for any Eurodollar Loan, the aggregate of the rates
(expressed as a decimal) of reserve requirements current on the date two Working
Days prior to the beginning of such Eurodollar Interest Period (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board of Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect thereto), as now and
from time to time hereafter in effect, dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of such Board) required to be maintained by a
member bank of such System.
"Floating Rate": with respect to a Term Loan (or portion thereof)
which is a Floating Rate Loan, a rate of interest equal to (a) (i) the Prime
Rate, plus (ii) 300 basis points or (b) with respect to any Eurodollar Interest
Period, (i) the Eurodollar Rate for such Eurodollar Interest Period, plus
(ii) 425 basis points.
"Floating Rate Loan": a Term Loan (or portion thereof), at such
time as such Term Loan (or portion thereof) is made or maintained at the
Floating Rate.
"Fourth Anniversary Date" as defined in subsection 3.1.
"GE Capital's Ratio": with respect to each Eurodollar Interest
Period, the quotient of (i) a number equal to $36,500,000 minus the aggregate
principal amount of all assignments of GE Capital's Term Loan Commitment and all
Participations granted by GE Capital, in each case, to any banks which, as of
the first day of such Eurodollar Interest Period, are members of the Federal
Reserve System and are required by any regulation of the Board of Governors of
the Federal Reserve System or any other Government Authority having jurisdiction
to maintain reserve requirements prescribed for eurocurrency funding, divided by
(ii) $36,500,000.
"General Partner Term Loan Required Payments Reserve Account": the
Required Payments Reserve Account established pursuant to the Security Deposit
Agreement.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within
<PAGE>
8
the meaning of such term as used in Section 4245 ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Installment Payment Date": the first Business Day of the month
commencing with the second month after the Second Capital Contribution Date to
and including the first day of each calendar month and the Term Loan Maturity
Date.
"Interest Payment Date": (a) each Installment Payment Date and with
respect to that portion of the Term Loan, if any, which may be outstanding as a
Eurodollar Loan, the last day of each Eurodollar Interest Period with respect
thereto, commencing with the first such day to occur after the Borrowing Date
and ending on the Term Loan Maturity Date and (b) each day of any payment or
prepayment of any Term Loan.
"LIBOR": with respect to any Eurodollar Interest Period, the rate per
annum determined on the basis of the offered rates for deposits in Dollars for
such Eurodollar Interest Period which appear on the Reuters Screen LIB0 Page as
of 11:00 a.m., London time, on the day that is two Working Days prior to the
beginning of such Eurodollar Interest Period. If at least two such offered rates
appear on the Reuters Screen LIB0 Page, the rate in respect of such Eurodollar
Interest Period will be the arithmetic mean of such offered rates. If fewer
than two offered rates appear, the rate in respect of such Eurodollar Interest
Period will be determined as if the parties had specified "LIBOR (Reference
Banks)" as the Eurodollar Base Rate.
"LIBOR (Reference Banks)": with respect to any Eurodollar Interest
Period, a rate per annum equal to the arithmetic mean of the rates quoted by
Bankers Trust Company and Chemical Bank (or if either Bankers Trust Company or
Chemical Bank shall cease to exist, Barclays Bank plc shall be substituted for
the bank which ceased to exist, or if both Bankers Trust Company and Chemical
Bank shall cease to exist, Barclays Bank plc and National Westminster Bank plc
shall be substituted for such banks) in New York City at approximately 11:00
a.m., New York City time, on the first day of such Eurodollar Interest Period
for loans in Dollars to prime banks in the London interbank market for a period
equal to the number of days in such Eurodollar Interest Period and in an amount
substantially equal to the amount of the Eurodollar Loan to be outstanding
during such Eurodollar Interest Period.
<PAGE>
9
"Limited Partner": Cogen Technologies Limited Partners
Joint Venture, a Texas general partnership.
"Limited Partnership": Camden L.P., a Delaware limited
partnership, of which the Borrower is the sole general partner.
"Midlantic": Midlantic National Bank, a national banking
association.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Notice of Borrowing": a notice in substantially the form of
Exhibit D hereto.
"Obligations" : all the unpaid principal amount of, and
interest on, the Term Note and all other obligations and liabilities of the
Borrower to the Lender, whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, this Agreement, the Term Note, any other
Transaction Document (other than the Partnership Agreement and the Amended and
Restated Partnership Agreement) or any other document executed and delivered in
connection therewith or herewith, whether on account of principal, interest,
fees, indemnities, costs, expenses (including, without limitation but subject to
the terms of the Letter Agreement, all fees and disbursements of counsel to the
Lender) or otherwise.
"Operative Documents": the collective reference to the Amended
and Restated Partnership Agreement, the Capital Contribution Agreement, the
Security Deposit Agreement, the Construction Loan Agreement, the Recognition
Agreements and the Project Documents.
"Participations": as defined in subsection 9.7(c).
"Partners": collectively, the General Partner and the
Limited Partner.
"Partnership Agreement": the collective reference to (a) the
certificate of limited partnership of the Borrower, dated July 26, 1991, filed
by the General Partner with the Secretary of State of the State of Delaware on
August 12, 1991, and (b) the Agreement of Limited Partnership of the Borrower,
dated as of July 26, 1991 between the General Partner, as general partner, and
the Limited Partner, as limited partner, as amended by the Amendment thereto
dated as of December 1, 1991, in each case as further amended, supplemented or
<PAGE>
10
otherwise modified from time to time in accordance with the provisions of
subsection 7.6.
"Permitted Assignee": as described in subsection 9.7(b).
"Permitted Investments": (a) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition, (b) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with the Lender or with any domestic commercial bank of
recognized stature having capital and surplus in excess of $500,000,000, (c)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (a) and (b) above entered into with
any financial institution meeting the qualifications specified in clause (b)
above, and (d) commercial paper issued by the Lender or the parent corporation
of the Lender, and commercial paper rated at least A-2 or the equivalent thereof
by Standard & Poor's Corporation or at least P-2 or the equivalent thereof by
Moody's Investors Service, Inc. and in each case maturing within six months
after the date of acquisition.
"Permitted Liens": (i) Liens created by the Collateral Security
Documents; (ii) Liens in favor of the agent under the Construction Loan
Agreement created by the Collateral Security Documents (as defined in the
Construction Loan Agreement); (iii) Liens in favor of any Person (other than the
General Partner, the Limited Partner or any Affiliate of any such Person) which
arise in the ordinary course of business of the Borrower (including, without
limitation, materialmen's, mechanics', workers', repairmen's and employees'
Liens and similar Liens which arise in connection with any tax, assessment,
governmental charge or levy) but not (unless otherwise permitted by this
Agreement) in connection with any Indebtedness or Guarantee Obligation and which
do not in the aggregate materially impair the use and value of the Borrower's
property or assets in the conduct of its business or impair the rights or
interests of the Lender with respect to the Collateral; provided that if any
such Lien arose in connection with any tax, assessment, governmental charge or
levy or any claim referred to in subsection 6.9 or any charge or claim of a
mechanic or a materialman, the Borrower shall be diligently contesting the same
in accordance with, and subject to, the provisions of subsection 6.9 or
<PAGE>
11
6.10, as the case may be: (iv) Liens arising out of judgments or awards which
are bonded or with respect to which at the time an appeal or proceeding for
review is being prosecuted in good faith and for the payment of which adequate
reserves shall have been provided; (v) mineral rights, utility easements, any
other easements and any covenants running with the land relating to any real
property of the Borrower or any similar deed restrictions the existence and use
of any of which do not materially interfere with the use and enjoyment of the
Collateral; (vi) liens in favor of Midlantic granted pursuant to the Midlantic
Agreements; (vii) liens in favor of PSE&G granted pursuant to the PSE&G
Subordinated Mortgage; and (viii) prior to the Second Capital Contribution Date,
Liens created by or pursuant to the Term Loan Agreement, dated as of February
15, 1990, among Cogen Technologies Linden, Ltd. and GE Power Funding, including,
without limitation, the mortgage entered into between the Limited Partnership
and GE Power Funding and the respective collateral assignments made by the
Borrower and the General Partner in connection therewith.
"Plan": at any particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Prime Rate": the rate of interest publicly announced by Citibank, N.A.
in New York, New York from time to time as its prime rate. The prime rate is not
intended to be the lowest rate of interest charged by Citibank, N.A. in
connection with extensions of credit to debtors.
"Project Documents": as defined in the Amended and Restated Partnership
Agreement.
"Project Limited Partner": GE Capital or any of its designees or
assignees that have been admitted to the Limited Partnership as a limited
partner of the Limited Partnership pursuant to subsections 10.1 and 14 of the
Amended and Restated Partnership Agreement, and any other Person properly
holding a limited partnership interest pursuant to the Amended and Restated
Partnership Agreement, and admitted to the Limited Partnership as a limited
partner of the Limited Partnership and shown as such on the books and records of
the Partnership, when acting in such capacity.
"Reorganization": with respect to any Multiemployer Plan, the condition
that such Plan is in
<PAGE>
12
reorganization within the meaning of such term as used in Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty-day notice period is
waived under subsections .13, .14, .16, .18, .19, or .20 of PBGC Reg. 2615.
"Requirement of Law": as to any Person, (a) the Certificate of
Incorporation and By-Laws or partnership agreement or other organizational or
governing documents of such Person, (b) any law, treaty, rule or regulation, or
determination of an arbitrator or a court or other Governmental Authority (other
than any Relevant Environmental Law), in each case applicable to or binding upon
such Person or any of its properties or to which such Person or any of its
properties is subject and the violation of which, or which determination, could
reasonably be expected to (i) have a material adverse effect on the business,
operations, properties, condition (financial or otherwise) or prospects of such
Person or (ii) materially adversely affect the ability of such Person to perform
its obligations under the Transaction Documents to which it is a party and (c)
any Relevant Environmental Law.
"Second Anniversary Date": as defined in subsection 3.1.
"Security Agent": Midlantic National Bank or any bank acting as
successor security agent under the Security Deposit Agreement.
"Security Deposit Agreement": the Amended and Restated Security Deposit
Agreement to be entered into among the Limited Partnership, the Borrower, GE
Capital, the Lender and the Security Agent, substantially in the form of Exhibit
F, as amended, supplemented or otherwise modified from time to time.
"Settlement Date": with respect to the Called Principal, the date on
which such Called Principal is to be prepaid pursuant to subsection 3.2(b).
"Single Empolyer Plan": any Plan which is covered by Title IV of ERISA,
but which is not a Multiemployer Plan.
"Special Event": as defined in the Amended and Restated Partnership
Agreement.
"Term Loan": the term loan pursuant to subsection 2.1.
<PAGE>
13
"Term Loan Borrowing Certificate": a certificate of the
Borrower substantially in the form of Exhibit C.
"Term Loan Commitment": the Lender's obligation to make the
Term Loan pursuant to subsection 2.1 in an aggregate amount not to exceed the
amount set forth therein, as such amount shall be reduced from time to time
pursuant to the provisions hereof.
"Term Loan Maturity Date": the first day of the calendar month
which is seventeen years after the Second Capital Contribution Date.
"Term Loan Period": the period from and including the Second
Capital Contribution Date to but not including the Fourth Anniversary Date.
"Term Note": as defined in subsection 2.4(a).
"Transaction Documents": the collective reference to this
Agreement, the Term Note, the Partnership Agreement, the Amended and Restated
Partnership Agreement and the Collateral Security Documents.
"Transferee": as defined in subsection 9.7(c).
"Treasury Rate": as of any date of determination,
the rate on ten year United States Treasury notes as reported in Federal
Statistical Release H.15(519) Selected Interest Rates, or any successor
publication of the Federal Reserve Board, for such date.
"Treasury Yield": with respect to the Called Principal, the
yield to maturity implied by the Treasury Constant Maturity Series yields
reported (for the latest day for which such yields shall have been so reported
as of the Business Day next preceding the Settlement Date with respect to such
Called Principal) in Federal Reserve Statistical Release H.15(519) Selected
Interest Rates (or any successor publication of the Federal Reserve Board) for
actively traded U.S. Treasury securities having a constant maturity equal to the
remaining weighted average life to final maturity (calculated in accordance with
accepted financial practice) of such Called Principal as of such Settlement
Date. Such implied yield shall be determined (a) by calculating the remaining
weighted average life to final maturity of such Called Principal rounded to the
nearest quarter-year and (b) if necessary, by linear interpolation between
Treasury Constant Maturity Series yields.
"Yield-Maintenance Premium": a premium equal to the sum of
(i) the excess, if any, of the Discounted
<PAGE>
14
Value of the Called Principal over such Called Principal and (ii) any loss
or expense resulting from the prepayment of such Called Principal. The
Yield-Maintenance Premium shall in no event be less than zero.
1.2 Other Definitional Provisions. (a) All terms defined in
this Agreement shall have the defined meanings when used in the Term Note or in
any certificate or other document made or delivered pursuant hereto.
(b) As used herein and in any certificate or other document
made or delivered pursuant hereto, accounting terms not defined in
subsection 1.1, and accounting terms partly defined in subsection 1.1 to the
extent not defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section,
schedule and exhibit references are to this Agreement unless otherwise
specified.
(d) Terms defined in this Agreement by reference to any other
agreement, document or instrument shall have the meanings assigned to them in
such agreement, document or instrument whether or not such agreement, document
or instrument is then in effect.
SECTION 2. AMOUNT AND TERMS OF
TERM LOAN COMMITMENT
--------------------
2.1 Term Loan Commitment. Subject to and upon the terms and
conditions set forth herein, the Lender agrees to make Term Loans to the
Borrower during the Term Loan Period in an aggregate amount not to exceed (i)
the lesser of $36,500,000 and (ii) the excess of (A) $185,500,000 over (B) the
sum of (x) the Term Loan (as defined in the Construction Loan Agreement) and any
refinancing thereof plus (y) the aggregate amount of GE Capital's capital
contributions to the Limited Partnership pursuant to Section 2(a) of the Capital
Contribution Agreement plus (z) the stated amounts of any outstanding Letters of
Credit, as reduced from time to time pursuant to subsection 3.2, provided,
however, that amounts in excess of $21,500,000 may only be borrowed to finance
the payment of the Non-Competition Fee.
2.2 Procedure for Borrowing with Respect to Term Loans. When
the Borrower desires the Lender to make a Term Loan pursuant to subsection 2.1,
the Borrower shall give the Lender an irrevocable Notice of Borrowing to be
received by the Lender prior to 12:00 Noon, New York City time, at least two
Business Days (in the case of a Fixed Rate Loan or
<PAGE>
15
Floating Rate Loan that is not a Eurodollar Loan) and four Working Days (in the
case of a Eurodollar Loan) prior to the Borrowing Date, specifying (i) the
amount to be borrowed, (ii) the Borrowing Date and (iii) whether such Term Loan
is to be a Fixed Rate Loan or a Floating Rate Loan (and if a Floating Rate Loan,
whether such Term Loan is to be a Eurodollar Loan) or a combination thereof and,
if a combination thereof, the amount allocable to each. Each Term Loan shall be
in a minimum amount of $2,000,000. No more than one Term Loan shall be made in
each fiscal quarter of the Borrower. The Borrowing Date shall be a Working Day
if a Term Loan is to be a Eurodollar Loan and a Business Day if such Term Loan
is to be a Fixed Rate Loan or a Floating Rate Loan that is not a Eurodollar
Loan.
2.3 Disbursement of Term Loans. Not later than 12:00 Noon, New
York City time, on the Borrowing Date specified in the Notice of Borrowing, if
the conditions precedent to the making of Term Loans set forth in subsection 5.1
have been satisfied, the Lender will, with respect to the portion of each Term
Loan (a) which represents (1) the amount of the Commitment Fee, if any, and (2)
the aggregate amount of any fees and expenses referred to in subsection 9.5,
transfer such amount to the Lender in such manner as the Lender may deem
advisable, (b) which represents loan proceeds to be applied to the
Non-Competition Fee, transfer such amount directly to GE Power Funding in
accordance with GE Power Funding's written instructions and (c) which is in
excess of the amounts referred to in clauses (a) and (b) above, transfer such
amount to the Borrower by wire transfer in accordance with the instructions set
forth in the Notice of Borrowing.
2.4 Term Note. (a) During the Term Loan Period, a Term Loan
made by the Lender pursuant to subsection 2.1 shall be evidenced by a promissory
note of the Borrower, substantially in the form of Exhibit A with appropriate
insertions (the "Term Note"), payable to the order of the Lender. The Term Note
shall (i) be dated the Borrowing Date (ii) represent the Borrower's obligation
to pay the aggregate unpaid principal amount of a Term Loan made by the Lender,
(iii) bear interest for the period from the date thereof until paid in full on
the unpaid principal amount thereof from time to time outstanding at the
applicable interest rate per annum provided in, and payable as specified in,
subsection 3.3, (iv) be entitled to the benefits of this Agreement and the
Collateral Security Documents and (v) be stated to mature in consecutive monthly
installments of principal payable on each Installment Payment Date occurring
after the Borrowing Date. The amortization schedule for the Fixed Rate Loan will
be based on the assumption that the interest rate applicable to a Term Loan (or
such portion thereof that is a Fixed Rate Loan) is the Fixed Interest Rate and
will be calculated so that there wi11 be equal quarterly
<PAGE>
16
installments of principal and interest during the remaining maturity of a Term
Loan. The amortization schedule for the Floating Rate Loan(s) will be based on
the assumption that the interest rate for Term Loans (or such portion thereof
that is a Floating Rate Loan) is 10.50% and will be calculated in accordance
with the immediately preceding sentence.
(b) The Lender is hereby authorized to record the date, type
and amount of the Term Loans made by the Lender and the date and amount of each
payment or prepayment of principal of the Term Loans made by the Borrower, the
date of conversion of any Floating Rate Loan to a Fixed Rate Loan, and in the
case of a Floating Rate Loan, the interest rate with respect thereto and, if
applicable, the Eurodollar Interest Period, and in the case of a Fixed Rate
Loan, the Fixed Interest Rate with respect thereto, on the schedules annexed to
and constituting a part of the Term Note, and any such recordation shall
constitute prima facie evidence of the accuracy of the information so recorded;
provided that the failure by the Lender to make any such endorsement shall not
affect the obligations of the Borrower hereunder or under the Term Note in
respect of the Term Loans made by the Lender hereunder.
2.5 Use of Proceeds. The proceeds of the Term Loans may be
used by the Borrower to pay the Non-Competition Fee and for the purposes
specified in subsections 7.3 and 7.7 and for other legitimate business purposes.
SECTION 3. PROVISIONS RELATING TO ALL EXTENSIONS
OF CREDIT; FEES AND PAYMENTS
----------------------------
3.1 Commitment Fee. The Borrower agrees to pay to the Lender a
commitment fee, computed at the rate of (a) 1/2 of 1% on the daily unused amount
of the Term Loan Commitment during the period from but excluding the Second
Capital Contribution Date to but excluding the date which is two years after the
Second Capital Contribution Date (the "Second Anniversary Date") and (b) 1% on
the daily unused amount of the Term Loan Commitment during the period from and
including the Second Anniversary Date to but excluding the date which is four
years after the Second Capital Contribution Date (the "Fourth Anniversary
Date"), in each case payable quarterly in arrears on the last day of each March,
June, September and December and on the Second Anniversary Date and the Fourth
Anniversary Date or such earlier date as the Term Loan Commitment shall
terminate as provided herein, commencing on the first of such dates to occur
after the Second Capital Contribution Date. Such Commitment Fee shall not accrue
on the amount, if any, by which the Term Loan Commitment is reduced from time to
time pursuant to subsection 3.2.
<PAGE>
17
3.2 Commitment Reductions; Optional and Mandatory Prepayments
(a) At any time and from time to time during the Term Loan Period, the Borrower
may terminate or reduce the Term Loan Commitment upon a written notice thereof
to the Lender. The Borrower shall pay the Term Loans in consecutive quarterly
installments of principal on each Installment Payment Date occurring after the
Borrowing Date. The amortization schedule for a Fixed Rate Loan will be based on
the assumption that the interest rate applicable to the Term Loans (or such
portion thereof that is a Fixed Rate Loan) is the Fixed Interest Rate and will
be calculated so that there will be equal quarterly installments of principal
and interest during the remaining maturity of the Term Loans. The amortization
schedule for a Floating Rate Loan will be based on the assumption that the
interest rate for the Term Loan (or such portion thereof that is a Floating Rate
Loan) is 10.50% and will be calculated in accordance with the immediately
preceding sentence. On each Installment Payment Date, the Term Loan Commitment
shall automatically be reduced by the aggregate principal amount of payments
made in respect of the Term Loans on such Installment Payment Date.
(b) (i) The Borrower may from time to time prepay a Fixed Rate
Loan, in whole or in part, together with interest thereon to the date of
prepayment, plus the Yield-Maintenance Premium on the principal amount prepaid.
At any time and from time to time after the date which is three years after the
Borrowing Date of a Floating Rate Loan, the Borrower may prepay a Floating Rate
Loan, in whole or in part, together with interest thereon to the date of
prepayment, plus, if such prepayment is made on or prior to the date which is
seven years after the Borrowing Date, the following premium (expressed as a
percentage of the amount prepaid):
Year Premium
---- -------
4 4%
5 3%
6 2%
7 1%
Optional prepayments pursuant to this subsection 3.2(b) shall be made upon at
least two Working Days' prior written irrevocable notice to the Lender,
specifying the date and amount of such prepayment. If any such notice is given,
the Borrower will make the prepayment specified therein and such prepayment
shall be due and payable on the date specified therein, together with interest
accrued thereon to the date of prepayment. Optional prepayments shall be applied
to the installments of principal of the Term Loan in the inverse order of
maturity.
(ii) The Borrower may request the Security Agent to transfer to
the Lender the cash available in the General
<PAGE>
18
Partner Term Loan Required Payments Account to be applied towards any prepayment
of the Term Loan specified in paragraph (i) above, provided, that any such
prepayment shall be without premium or penalty and shall be applied pro rata to
the remaining scheduled repayments to be made on the Term Note.
(c) If the Lender has delivered a notice in writing to the
Borrower declaring that a Declared Event of Loss has occurred, (i) the Term Loan
Commitment shall terminate forthwith and (ii) the Borrower shall prepay in full,
without premium or penalty, the unpaid principal amount then outstanding on the
Term Note together with accrued interest thereon to the date of prepayment and
shall pay any unpaid Commitment Fee, if any, and other fees accrued hereunder to
the date of prepayment, on the earlier of (x) the date occurring 90 days after
the date of receipt of such notice from the Lender and (y) the date on which
insurance proceeds are received by the Borrower or the Limited Partnership with
respect to such Event of Loss; provided, that with respect to any such Event of
Loss that arises out of the loss, destruction or damage of the Facility, the
date specified in clause (x) above shall be extended for an additional period
(not to exceed 90 days) if, in the reasonable opinion of the Lender, insurance
proceeds sufficient to cover the amounts specified in clause (ii) above will be
received within such additional period.
(d) If a Special Event occurs and is continuing and the
Borrower exercises its option pursuant to subsection 14.2 of the Amended and
Restated Partnership Agreement to purchase the Limited Partnership Interest (as
defined in the Amended and Restated Partnership Agreement) within the time
period specified therein, on the date on which the Borrower exercises such
option, it shall prepay in full, without premium or penalty, the unpaid
principal amount then outstanding on the Term Note together with accrued
interest thereon to the date of prepayment and shall pay any unpaid Commitment
Fee, if any, and other fees accrued hereunder to the date of prepayment.
(e) If (i) the Fixed Charge Coverage Ratio as at the end of
any two consecutive calendar quarters is less than 1.2 to 1.0 or (ii) if an
Event of Default has occurred and is continuing, any amount in the General
Partner Term Loan Required Payments Reserve Account shall be applied to prepay
the Term Loan pro rata with respect to the remaining scheduled repayments to be
made on the Term Note.
(f) Payments and prepayments made pursuant to this subsection
3.2 may not be reborrowed.
<PAGE>
19
3.3 Interest Rates and Payment Dates. (a) (i) A Fixed Rate
Loan shall bear interest at a rate per annum equal to the Fixed Interest Rate.
(ii) A Floating Rate Loan that is not a Eurodollar Loan shall
bear interest at a rate per annum equal to the rate set forth in clause (a) of
the definition of Floating Rate.
(iii) A Eurodollar Loan shall bear interest for each
Eurodollar Interest Period at a rate equal to the rate set forth in clause (b)
of the definition of Floating Rate.
(b) If all or a portion of the principal amount of the Term
Loan made hereunder shall not be paid when due (whether at the stated maturity,
by acceleration or otherwise), any such overdue principal amount shall bear
interest at a rate per annum which is 2% above the rate which would otherwise be
applicable pursuant to subsection 3.3(a)(i), (ii) or (iii) from the date of such
non-payment until paid in full (as well after as before judgment).
(c) Interest on the aggregate unpaid principal amount of the
Term Loans shall be payable in arrears on each Interest Payment Date.
3.4 Conversion of Loans. The Borrower may on any Business Day,
upon notice given to the Lender not later than 12:00 Noon (New York City time)
on the third Business Day prior to the date of the proposed conversion, Convert
Floating Rate Loans into Fixed Rate Loans (a "Conversion"); provided that (a)
each Conversion shall be in an aggregate principa1 amount of not less than
$5,000,000 or an integral multiple of $l,OOO,OOO in excess thereof (or such
lesser amount as shall equal the then aggregate outstanding amount of the
Floating Rate Loans), (b) no Conversion into Fixed Rate Loans shall be permitted
when a Default or an Event of Default has occurred and is continuing and (c) any
Conversion of a portion of the Floating Rate Loans shall be made pro rata among
the Floating Rate Loans. Each such notice of a Conversion shall be and shall,
within the restrictions specified above, specify (i) the date of such
Conversion, and (ii) the Floating Rate Loans (or portion thereof) to be
Converted.
3.5 Making of Payments. All payments due hereunder or under
the Term Note on account of principal, interest, fees, and any other obligation
incurred hereunder shall be paid to the Lender by wire or electronic transfer
for deposit to the credit of its account no. 50-205-776 at Bankers Trust
Company, New York, New York, ABA Number: 0210-0103-3 or such other account as
the Lender may from time to time specify to the Borrower, in freely transferable
Dollars and in immediately available funds without set-off or
<PAGE>
20
counterclaim. All payments hereunder shall be made without any presentment of
the Term Note to the Borrower, but upon payment in full of the Term Note, the
holder thereof shall cancel it and return it to the Borrower. If any payment
hereunder (other than payments on a Eurodollar Loan) becomes due and payable on
a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension. If
any payment on a Eurodollar Loan becomes due and payable on a day other than a
Working Day, the maturity thereof shall be extended to the next succeeding
Working Day unless the result of such extension would be to extend such payment
into another calendar month, in which event such payment shall be made on the
immediately preceding Working Day.
3.6 Computation of Interest and Fees.
(a) Interest in respect of a Eurodollar Loan and all fees
hereunder shall be calculated on the basis of a 360-day year for the actual days
elapsed. Interest in respect of a Fixed Rate Loan shall be calculated on the
basis of a 365/366-day year for the actual days elapsed.
(b) The Lender shall as soon as practicable notify
the Borrower of each determination of a Floating Rate or Fixed Interest Rate.
The determination of either of such rates by the Lender pursuant to any
provision of this Agreement shall be conclusive and binding on the Borrower in
the absence of manifest error.
3.7 Inability to Determine Eurodollar Rate. In the event that
the Lender shall have determined (which determination shall be conclusive and
binding upon the Borrower) that by reason of circumstances affecting the
interbank eurodollar market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate applicable for any Eurodollar Interest Period
with respect to (a) a proposed Floating Rate Loan or (b) the continuation of a
Eurodollar Loan beyond the expiration of the then current Eurodollar Interest
Period therefor, the Lender shall give notice of such event to the Borrower.
Within 30 days following the date of such notice by the Lender, the Lender and
the Borrower shall enter into negotiations in good faith with a view to agreeing
to an alternative basis acceptable to the Borrower and the Lender for
determining the interest rate (the "Substitute Eurodollar Rate") which shall be
applicable during such Eurodollar Interest Period for the Floating Rate Loan to
which such Eurodollar Interest Period applies and which shall reflect the cost
to the Lender of funding such Floating Rate Loan for such Eurodollar Interest
Period from alternate sources. At the expiration of 30 days from the giving of
such notice by the Lender, the Substitute Eurodollar Rate agreed to by the
Lender and the Borrower
<PAGE>
21
shall take effect with respect to such Eurodollar Interest Period from the
beginning of such Eurodollar Interest Period. If the Lender and the General
Partner are unable to agree on the Substitute Eurodollar Rate on or prior to
such 30th day, the Prime Rate shall automatically be applicable to such Floating
Rate Loan effective from the beginning of such Eurodollar Interest Period.
3.8 Increased Costs. (a) Notwithstanding any other provisions of
this Agreement, if any Applicable Law or any change therein or in the
interpretation or the application thereof by any Governmental Authority charged
with interpretation or administration thereof shall make it unlawful for the
Lender to make or maintain a Eurodollar Loan as contemplated by this Agreement,
the Lender shall give written notice thereof to the Borrower and the obligation
of the Lender hereunder to make a Eurodollar Loan shall forthwith be suspended
so long as such Applicable Law, interpretation or application shall continue,
and if the Term Loan (or any portion thereof) is a Eurodollar Loan, the Term
Loan shall be converted automatically to a Term Loan bearing interest at the
Substitute Eurodollar Rate (as determined in accordance with subsection 3.7) on
the next succeeding Interest Payment Date or within such earlier period as may
be required by law. If any such conversion of a Eurodollar Loan is made on a day
which is not the last day of a Eurodollar Interest Period, the Borrower shall
pay to the Lender upon the Lender's request, such amount or amounts as may be
necessary to compensate the Lender for any loss or expense sustained or incurred
by the Lender in respect of the Eurodollar Loan as a result of such conversion,
including but not limited to any interest or fees payable by the Lender to
lenders of funds obtained by it in order to make or maintain the Eurodollar Loan
hereunder, and shall pay to the Lender the Eurodollar Rate on such Eurodollar
Loan to the date of such automatic conversion. A certificate as to any
additional amounts payable pursuant to the foregoing sentence submitted by the
Lender to the Borrower shall be conclusive absent manifest error.
(b) In the event that any Applicable Law or any change therein
or in the interpretation or application thereof by any Governmental Authority
charged with the administration or interpretation thereof, or compliance by the
Lender with any request or directive (whether or not having the force of law)
received from any central bank or monetary authority or other Governmental
Authority:
(i) does or shall subject the Lender to any tax of any kind
whatsoever or change therein with respect to this Agreement, the Term
Note or a Eurodollar Loan hereunder, or the performance by the Lender of
its obligations hereunder, or change the basis of taxation of payments
to the Lender of principal, commitment fees,
<PAGE>
22
interest, or any other amount payable hereunder (except for changes in
the rate of tax on the overall net income of the Lender); or
(ii) does or shall impose, modify or hold applicable or change
any reserve (including, without limitation, basic, supplemental,
marginal and emergency reserves), special deposit, compulsory loan or
similar requirement against assets held by, deposits or other
liabilities in or for the account of, advances or loans by, or other
credit extended by, or any other acquisition of funds by (including,
without limitation, all eurocurrency funding by and all Eurocurrency
liabilities), any office of the Lender which are not otherwise included
in the determination of the Eurodollar Rate; or
(iii) does or shall impose on the Lender any other condition,
or change therein;
and the result of any of the foregoing is to increase the cost to the Lender of
making, committing to make, renewing or maintaining a Eurodollar Loan or to
reduce any amount receivable thereunder, then, in any such case, the Borrower
shall promptly pay to the Lender, upon its demand, such additional amount which
will compensate the Lender for such additional cost or reduced amount receivable
which the Lender deems to be material as determined by the Lender with respect
to this Agreement, the Term Note or the Eurodollar Loan hereunder.
(c) In the event that the adoption of any Applicable Law, rule,
regulation or guideline regarding capital adequacy, or any change therein or in
the interpretation or application thereof by any Governmental Authority charged
with the administration or interpretation thereof or compliance by the Lender
with any request or directive regarding capital adequacy (whether or not having
the force of law) from any central bank or Governmental Authority including,
without limitation, the issuance of any final rule, regulation or guideline,
does or shall have the effect of reducing the rate of return on the Lender's
capital as a consequence of its obligations hereunder to a level below that
which the Lender could have achieved but for such adoption, change or compliance
(taking into consideration the Lender's policies with respect to capital
adequacy) by any material amount, then from time to time, within 15 days after
demand by the Lender, the Borrower shall pay to the Lender such additional
amount or amounts as will compensate the Lender for such reduction.
(d) If the Lender becomes entitled to claim any additional amounts
pursuant to this subsection 3.8, it shall promptly notify the Borrower thereof.
A certificate as to
<PAGE>
23
any additional amounts payable pursuant to this subsection 3.8 submitted by the
Lender to the Borrower shall be conclusive absent manifest error. The covenants
contained in this subsection 3.8 shall survive the termination of this Agreement
and payment of the Term Note.
(e) In the event that the Borrower shall receive a
certificate with respect to additional amounts payable pursuant to subsection
3.8(a) or (b) in respect of a Eurodollar Loan, the Borrower shall have the
option, exercisable by notice to the Lender at least three Working Days prior to
the next succeeding Interest Payment Date, to convert the then outstanding
Eurodollar Loan to a loan bearing interest at the Substitute Eurodollar Rate (as
determined in accordance with subsection 3.7) on such next succeeding Interest
Payment Date. Should such option be exercised, the Lender agrees that in the
event that such additional amounts pursuant to this subsection 3.8 would at any
time no longer be payable with respect to a Eurodollar Loan, the Lender shall
promptly notify the Borrower thereof and as soon as practicable thereafter, the
outstanding loan bearing interest at the Substitute Eurodollar Rate shall be
converted to a Eurodollar Loan.
3.9 Indemnity. The Borrower agrees to indemnify the Lender and
to hold the Lender harmless from any loss or expense which the Lender may
sustain or incur as a consequence of (a) default by the Borrower in payment when
due of the principal amount of or interest on a Eurodollar Loan, (b) default by
the Borrower in making a borrowing after the Borrower has given a notice in
accordance with subsection 2.2 or (c) default by the Borrower in making any
prepayment after the Borrower has given a notice in accordance with subsection
3.2 or (d) a prepayment by the Borrower of a Eurodollar Loan on a day which is
not the last day of a Eurodollar Interest Period, including, but not limited to,
any lost yield on such Eurodollar Loan at the applicable interest rates provided
for herein, but excluding any lost opportunity costs. This covenant shall
survive termination of this Agreement and payment of the Term Note.
3.10 Taxes. All payments made by the Borrower under this
Agreement and the Term Note shall be made free and clear of, and without
reduction for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority excluding net income taxes and franchise taxes based upon
net income of the United States of America or any political subdivision or
taxing authority thereof or therein (including Puerto Rico) and net income taxes
and franchise taxes based upon net income of the country in which the Lender is
organized or in which its Eurodollar lending office is located or any
<PAGE>
24
political subdivision or taxing authority thereof or therein (such non-excluded
taxes being called "Indemnified Taxes"). If any Indemnified Taxes are required
to be withheld from any amounts payable to the Lender hereunder or under the
Term Note, the amounts so payable to the Lender shall be increased to the extent
necessary to yield to the Lender (after payment of all Indemnified Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement and the Term Note. Whenever any Indemnified
Tax is paid by the Borrower, as promptly as possible thereafter, the Borrower
shall send to the Lender, a certified copy of an original official receipt
showing payment thereof. If the Borrower fails to pay any Indemnified Taxes when
due to the appropriate taxing authority or fails to remit to the Lender the
required receipts or other required documentary evidence, the Borrower shall
indemnify the Lender for any incremental taxes, interest or penalties that may
become payable by the Lender as a result of any such failure.
3.11 Limitation of Liability. The Lender agrees that the
liability of the Borrower under this Agreement, the Term Note and the
other Obligations shall be limited to the Collateral and the rights and remedies
of the Lender against the Collateral pursuant to the Collateral Security
Documents; provided, however, that the Lender shall have full recourse to the
Borrower and all of its assets in an amount equal to 10% of the then outstanding
Obligations. In no event shall the Borrower or any Partner or any officer,
director, partner or Affiliate thereof be personally liable or obligated for the
Obligations. Nothing herein shall limit the full recourse of the Lender to the
Collateral pursuant to the Collateral Security Documents or be deemed to
constitute a waiver of liability, if any, of any Person for damages for fraud or
for any knowing misrepresentation made by such Person herein or in any other
Transaction Document or in any certificate or other document delivered pursuant
hereto or thereto.
SECTION 4. REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Lender to enter into this Agreement and
to make the Term Loans, the Borrower represents and warrants to the Lender that
as of the date hereof and as of each Borrowing Date:
4.1 Financial Statements. (a) The unaudited balance sheet of
the Borrower as of November 30, 1991 and the related unaudited statements of
income, partners' capital and changes in partners' capital and cash flow for the
period then ended on such date, heretofore furnished to the Lender and certified
by a Responsible Officer of the General Partner, are complete and correct in all
material respects
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and fairly present the financial condition of the Borrower on such date and the
results of its changes in partners' capital and cash flow for the period then
ended, in conformity with GAAP applied on a consistent basis. All liabilities,
direct and contingent, of the Borrower on such date required to be disclosed
pursuant to GAAP are disclosed in such financial statements.
(b) Since November 30, 1991, except as previously disclosed to the
Lander, no material adverse change has occurred in (i) the properties, business,
operations, condition (financial or otherwise) or prospects of the Borrower or
(ii) the Borrower's ability to perform its obligations under this Agreement, the
Term Note and the other Transaction Documents to which it is a party, and,
except as contemplated by this Agreement, the Construction Loan Agreement, the
Midlantic Agreements, the PSE&G Subordinated Mortgage and the Amended and
Restated Partnership Agreement, no additional Indebtedness has been incurred by
the Borrower.
4.2 Partnership Existence and Business; Partners. (a) The Borrower is a
limited partnership duly organized and validly existing under the laws of the
State of Delaware, and is duly qualified to do business in the States of New
Jersey and Texas, the only jurisdictions in which the conduct of its business or
the ownership or lease of its assets requires such qualification. The
Certificate of Limited Partnership of the Borrower has been duly filed in the
office of the Secretary of State of Delaware and no other filing, recording,
publishing or other act is necessary or appropriate in connection with the
existence or the business of the Borrower except those which have been duly made
or performed. The Borrower is the sole general partner of the Limited
Partnership, and is engaged solely in: (i) the business of being the general
partner of the Limited Partnership, (ii) activities permitted pursuant to this
Agreement and (iii) the performance of the Limited Partnership's obligations
pursuant to the Basic Documents.
(b) The General Partner is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and is duly
qualified to do business in the States of New Jersey and Texas, the only
jurisdictions in which the conduct of its business or the ownership or lease of
its assets requires such qualification. The General Partner is the sole general
partner of the Borrower.
(c) The only partners of the Borrower on the date of execution and
delivery of this Agreement are the General Partner, as the sole general partner,
and the Limited Partner, as the sole limited partner.
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26
(d) The Borrower has one Subsidiary, which Subsidiary is the
Limited Partnership. The General Partner has only one Subsidiary, which
Subsidiary is the Borrower.
4.3 Compliance with Law. Each of the Borrower and the General
Partner is in compliance with all Requirements of Law.
4.4 Power and Authorization; Enforceable Obligations. (a) The
Borrower has full power and authority and the legal right to own its properties
and to conduct its business as now conducted and proposed to be conducted by it,
to execute, deliver and perform this Agreement, the Term Note and the other
Transaction Documents to which it is or is to become a party, to take all action
as may be necessary to complete the transactions contemplated thereunder, and to
act as the managing general partner of the Limited Partnership. The Borrower
has taken all necessary partnership and legal action to authorize the borrowings
hereunder on the terms and conditions of this Agreement, the Term Note and the
other Transaction Documents to which it is a party, to grant the liens and
security interests provided for in the Collateral Security Documents to which it
is a party and to authorize the execution, delivery and performance of this
Agreement, the Term Note and the other Transaction Documents to which it is or
is to become a party and to grant the Liens provided for therein. No consent or
authorization of, filing with, or other act by or in respect of any other Person
(including the General Partner) is required in connection with the borrowings
hereunder or with the execution, delivery or performance by the Borrower or the
validity or enforceability as to the Borrower of this Agreement, the Term Note
and the other Transaction Documents except the filings and recordings necessary
to perfect the Liens created by the Collateral Security Documents. Each of this
Agreement, the Term Note and the other Transaction Documents to which the
Borrower is a party has been duly executed and delivered by the Borrower and
constitutes, and each of the other Transaction Documents to which the Borrower
is to become a party will upon execution and delivery thereof by the Borrower
and the other parties thereto (if any) constitute, a legal, valid and binding
obligation of the Borrower enforceable against the Borrower in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors generally and by general principles of equity. Except as previously
disclosed in writing to the Lender, neither the Partnership Agreement, the
Amended and Restated Partnership Agreement, once executed and delivered by the
parties thereto, or any of the Collateral Security Documents to which the
Borrower is a party has been amended or modified except in accordance with
subsection 7.6, and all such documents are, or upon execution and delivery
thereof, will be in full force and effect.
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(b) The General Partner has full power and authority and the
legal right to own its properties and to conduct its business as now conducted
and proposed to be conducted by it, to execute, deliver and perform the
Collateral Security Documents to which it is or is to become a party, to take
all action as may be necessary to complete the transactions contemplated
thereunder, and to act as the general partner of the Borrower. The General
Partner has taken all necessary corporate and legal action to authorize the
execution, delivery and performance of the Collateral Security Documents to
which it is or is to become a party and to grant the Liens provided for therein.
No consent or authorization of, filing with, or other act by or in respect of
any other Person (including, without limitation, any stockholder of the General
Partner) is required in connection with the execution, delivery or performance
by the General Partner or the validity or enforceability as to the General
Partner of the Collateral Security Documents to which it is a party. Each of the
Partnership Agreement and the other Collateral Security Documents to which the
General Partner is a party has been duly executed and delivered by the General
Partner and constitutes, and each of the other Collateral Security Documents to
which the General Partner is to become a party will upon execution and delivery
thereof by the General Partner and the other parties thereto (if any)
constitute, a legal, valid and binding obligation of the General Partner
enforceable against the General Partner in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity.
(c) The Partnership Agreement has been duly authorized,
executed and delivered by each of the Partners and constitutes a valid and
legally binding obligation of each of the Partners enforceable in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general principles of equity.
4.5 No Legal Bar. The execution, delivery and performance of
this Agreement, the Term Note and the other Transaction Documents, the creation
of the Liens provided for in the Collateral Security Documents, the borrowings
by the Borrower hereunder, and the use of the proceeds thereof, (a) will not
violate any Requirement of Law applicable to the Borrower or the General
Partner, (b) will not violate or result in any breach of, or constitute any
default under, any Contractual Obligation of the Borrower or the General
Partner, except to the extent that the failure to comply therewith could not
reasonably be expected to (i) have a material adverse effect on the business,
operations, property, condition (financial or otherwise) or prospects of
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28
the Borrower or the General Partner, as the case may be, or (ii) materially
adversely affect the ability of the Borrower or the General Partner to perform
its obligations under the Transaction Documents to which it is a party, and (c)
will not result in, or require, the creation or imposition of any Lien on any of
the properties or revenues of the Borrower or the General Partner pursuant to
any Requirement of Law or Contractual Obligation, except for Permitted Liens. No
approvals or consents of any trustee or any holder of any indebtedness,
obligations or securities of the Borrower or the General Partner are required in
connection with the execution, delivery and performance by the Borrower or the
General Partner of any Transaction Document to which it is or is to become a
party, except such as have been duly obtained and are in full force and effect.
4.6 No Proceeding or Litigation. Except as previously
disclosed in writing by the Borrower to the Lender, no litigation, investigation
or proceeding of or before any arbitrator or Governmental Authority is pending
or, to the best knowledge of the Borrower, threatened against the Borrower or
the General Partner, or against any of their respective properties, rights,
revenues or assets (a) which could reasonably be expected to have a material
adverse effect on the properties, business, operations, condition (financial or
otherwise) or prospects of the Borrower or the General Partner, (b) which could
reasonably be expected to impair the value of the security granted to the Lender
pursuant to the Collateral Security Documents or (c) which could reasonably be
expected to have a material adverse effect on the ability of the Borrower or the
General Partner to perform its obligations under any Transaction Document to
which it is a party.
4.7 No Default or Event of Loss. Neither the Borrower nor the
General Partner is in default under or with respect to any Contractual
Obligation in any respect which could reasonably be expected to (i) have a
material adverse effect on the business, operations, property, condition
(financial or otherwise) or prospects of the Borrower or the General Partner or
(ii) materially adversely affect the ability of the Borrower or the General
Partner to perform its obligations under the Transaction Documents to which it
is a party. No Default or Event of Default has occurred and is continuing. No
Event of Loss has occurred which has not been notified in writing to the Lender
pursuant to subsection 6.12.
4.8 Ownership of Property. The Borrower has good title in fee
simple to all its real property, and good title to all its other property, free
and clear of all liens other than Permitted Liens. No mortgage or financing
statement or other instrument or recordation covering all or any part of such
property which has been executed by, or with
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29
the permission of, the Borrower or the General Partner is on file in any
recording office, except such as has been filed in favor of the Lender or as
evidences Permitted Liens.
4.9 Taxes. (a) The General Partner has filed or caused to be
filed all tax returns which are required to be filed by it or by the Borrower,
and has paid or caused to be paid all taxes shown to be due and payable on such
returns or on any assessments made against it or the Borrower or any of its or
the Borrower's property and all other taxes, fees or other charges imposed on it
or the Borrower or any of its or the Borrower's property by any Governmental
Authority, except taxes, fees and other charges not yet due and payable or which
are being contested in accordance with the provisions of subsection 6.9.
(b) Except for (i) transfer taxes and registration,
recordation and other miscellaneous fees payable in connection with the
recordation of any Collateral Security Document and the filing of financing
statements required to perfect the Lender's rights under the Collateral Security
Documents, if any, which shall have been paid in full by the Borrower on or
before the Borrowing Date to the extent required hereunder, and (ii) other taxes
or fees, if any, which are indemnified against by the Borrower pursuant to
subsection 3.8 and which shall have been paid in full by the Borrower on or
before the Borrowing bate hereunder to the extent then required and (iii) taxes
imposed with respect to the Lender by the jurisdiction in which the Lender is
organized, doing business or in which an office of the Lender is located or any
political subdivision or taxing authority thereof or therein, to the best
knowledge of the Borrower, neither the execution and delivery of this Agreement,
the Term Note or any other Transaction Document, nor the consummation of any of
the transactions contemplated hereby or thereby, will result in any tax, levy,
impost, duty, charge or withholding imposed by the United States or any agency
or taxing authority thereof, or any political subdivision or taxing authority
thereof or therein, on or with respect to such execution, delivery or
consummation, or upon or with respect to the Lender.
4.10 Federal Regulations. Neither the Borrower nor the General
Partner is engaged or will engage in the business of extending credit for the
purpose of "purchasing" meanings of each of the quoted terms under Regulations
G, U and X of the Board of Governors of the Federal Reserve System as now and
from time to tine hereafter in effect. No part of the proceeds of the Term Loan
will be used for "purchasing" or "carrying" any "margin stock" as so defined or
for any purpose which violates, or which would be inconsistent with, the
provisions of the Regulations of such Board of Governors.
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30
4.11 ERISA. No Reportable Event has occurred during the immediately
preceding six-year period with respect to any Plan, and each Plan has complied
and has been administered in all material respects with applicable provisions of
ERISA and the Code. The present value of all benefits under each Single Employer
Plan maintained by the Borrower or any Commonly Controlled Entity (based on
those assumptions used to fund such Plan) did not, as of the last annual
valuation date applicable thereto, exceed the value of the assets of such Plan
allocable to such benefits. Neither the Borrower nor any Commonly Controlled
Entity has during the immediately preceding six-year period had a complete or
partial withdrawal from any Multiemployer Plan, and neither the Borrower nor any
Commonly Controlled Entity would become subject to liability under ERISA if the
Borrower or any Commonly Controlled Entity were to withdraw completely from all
Multiemployer Plans as of the most recent valuation date applicable thereto.
Neither the Borrower nor any Commonly Controlled Entity has received notice
that any Multiemployer Plan is in Reorganization or Insolvency nor, to the best
knowledge of the Borrower, is any such Reorganization or Insolvency reasonably
likely to occur. The present value (determined using actuarial and other
assumptions which are reasonable in respect of the benefits provided and the
employees participating) of the liability of the Borrower and each Commonly
Controlled Entity for post retirement benefits to be provided to their current
and former employees under Plans which are welfare benefit plans (as defined in
Section 3 (l) of ERISA) does not, in the aggregate, exceed the assets under all
such Plans allocable to such benefits.
4.12 Investment Company Act. Neither the Borrower nor the General
Partner is an "investment company" or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
4.13 Collateral Security Document. (a) Upon execution and delivery
thereof, the Collateral Security Documents will be effective to create, in favor
of the Lender, legal, valid and enforceable liens on and security interests in
all right, title, estate and interest of the Borrower or the General Partner, as
the case may be, in and to all items of collateral (other than those items of
Collateral which, individually or in the aggregate, are not material) and all
necessary and appropriate recordings and filings will have been duly effected in
all appropriate public offices so that the liens and security interests created
by the Collateral Security Documents Will constitute perfected first liens
(other than as to the Permitted Liens) on and prior (other than as to the
Permitted Liens) perfected security interests in all right, title, estate and
interest of the Borrower or the General Partner, as the case may be, in and to
all items of Collateral (other than those items of Collateral which,
individually or in the aggregate, are not
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31
material) described therein (other than any item of Collateral as to which a
security interest cannot be perfected by filing, recording, registering), prior
and superior to all other Liens, existing or future, except Permitted Liens.
The recordings and filings shown on the applicable schedules to such Collateral
Security Documents, the registration on the books of the Limited Partnership of
the pledge effected by the Assignment and Security Agreement and the
registration on the books of the Borrower of the pledge effected by the Cogen
Pledge Agreement are all the recordings, filings and other action necessary and
appropriate in order to establish, protect and perfect the Lender's lien on and
security interest in the right, title, estate and interest of the Borrower in
and to all items of Collateral (other than those items of Collateral which,
individually or in the aggregate, are not material).
4.14 Full Disclosure. No representation, warranty or other statement
made by the Borrower or the General Partner in any Transaction Document or in
any certificate, written statement or other document furnished to the Lender by
or on behalf of the Borrower or the General Partner, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. There is no fact known
to the Borrower (except for general conditions affecting the cogeneration
industry) which the Borrower has not disclosed to the Lender in writing prior to
the date hereof which materially adversely affects, or which could reasonably be
expected in the future to materially adversely affect, the properties, business,
operations or financial condition of the Borrower or the General Partner or the
ability of the Borrower or the General Partner to perform its obligations under
any Transaction Document to which it is or is to become a party.
4.15 Principal Place of Business, Etc. The principal place of business
and chief executive office of the Borrower, and the office where the Borrower
keeps its records concerning the Collateral and all contracts relating thereto,
is located at 1600 Smith Street, Suite 5000, 50th Floor, Houston, Texas.
4.16 Representations and Warranties. The representations and warranties
of the Borrower contained in the Transaction Documents (other than this
Agreement) were true and correct on and as of the dates when made, and, except
to the extent such representations and warranties relate solely to an earlier
date (in which case such representations and warranties shall have been true and
correct as of such earlier date), the Borrower hereby confirms each such
representation and warranty with the same effect as if set forth in full herein.
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4.17 Environmental Matters. (a) (i) There are and have been no Hazardous
Materials at, upon, under or within or discharged or emitted from any property
of the Borrower, including, without limitation, the air, subsurface, soil,
surface and ground water and aquifers of any property (including, without
limitation, the Collateral) of the Borrower except for such Hazardous Materials
as may be permitted to be maintained thereon in accordance with any Relevant
Environmental Law and have been maintained in accordance with all Relevant
Environmental Laws; and
(ii) no Environmental Discharges have occurred at, upon, under, within or
from any property (including, without limitation, the Collateral) of the
Borrower.
(b) no Environmental Notice has been received by the Borrower with respect
to any Adverse Environmental Event.
(c) (i) With respect to any property (including, without limitation, the
Collateral) of the Borrower there are and have been no violations of any
Relevant Environmental Law, except for violations which do not constitute an
Adverse Environmental Event:
(ii) no outstanding order, judgment or decree which constitutes an Adverse
Environmental Event has been entered with respect to the Borrower or any
property (including, without limitation, the Collateral) of the Borrower; and
(iii) no other event has occurred which constitutes an Adverse
Environmental Event. The representations set forth in this subsection 4.17
relating to conditions existing on any property (including, without limitation,
the Collateral) of the Borrower prior to the acquisition of such property by the
Borrower shall be made only to the beet knowledge of the Borrower.
4.18 Public Utility Status. (a) Neither the Limited Partnership nor the
Borrower will, by reason of (i) the ownership of the Facility or the operation
thereof by the Limited Partnership, or (ii) any other transaction contemplated
by this Agreement or any other Basic Document, be deemed by any Governmental
Authority having jurisdiction to be subject to financial, organizational or rate
regulation as an "electric utility", "electric corporation", "electrical
company", "public utility" or a "public utility holding company" under any
existing Applicable Law, except where (x) the effect of such determination would
result only in the imposition of reporting or safety requirements which, in the
reasonable opinion of the Lender, are non-burdensome in nature and (y) in the
event that steam from the Project is supplied, directly or indirectly, to
Persons other than the
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33
Steam Host under the Steam Supply Agreement or otherwise, the Limited
Partnership shall have obtained a declaratory order or other official assurance,
satisfactory to the Lender,in form and substance reasonably from the PUC to the
effect that such sales will not result in the Facility, the owner thereof or any
of such owner's Affiliates being deemed to be, or subject to regulation as, a
"public utility" under any Applicable Law (other than regulation of the nature
described in clause (x) of this clause (ii).
(b) The Lender will not, by reason of (i) the ownership of the Facility or
the operation thereof by the Limited Partnership, (ii) the making of the Term
Loan hereunder, (iii) the securing of the Term Loan by the Assignment and
Security Agreement, the Cogen Pledge Agreement and, from and after the date of
the execution and delivery thereof, the Security Deposit Agreement or (iv) any
other transaction contemplated by this Agreement or any of the other Basic
Documents, be deemed by any Governmental Authority having jurisdiction to be,
or to be subject to regulation as, an "electric utility", "electric
corporation", "electrical company", "public utility" or a "public utility
holding company" under existing Applicable Law; and the Lender will not solely
by reason of the exercise of the Lender's remedies under the Collateral Security
Documents and without regard to any other activities of the Lender, be deemed by
any Governmental Authority having jurisdiction to be subject to financial,
organizational or rate regulation as an "electric utility", "electric
corporation", "electrical company", "public utility" or a "public utility
holding company" under any Applicable Law.
(c) The Facility is a Qualifying Facility; and FERC has issued final orders
granting the Limited Partnership's application for certification as a Qualifying
Facility, which (except as such orders are subject to modification to reflect an
increase in the net generating capacity of the Facility from 120 megawatts to
134 megawatts and the ownership of the Facility by the Limited Partnership)
orders are in full force and effect and are not the subject of any pending or
threatened administrative or judicial proceedings.
SECTION 5. CONDITIONS PRECEDENT
--------------------
5.1 Conditions to each Borrowing Date. The agreement of the Lender to
make a Term Loan on each Borrowing Date (including the initial Term Loan) is
subject to the satisfaction of the following conditions precedent:
(a) Term Note. The Lender shall have received the Term Note, conforming to
the requirements of
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34
subsection 2.4(a), and duly executed and delivered by the Borrower.
(b) Agreement. The Lender shall have received a counterpart of this
Agreement, duly executed and delivered by the Borrower.
(c) Construction Loan Agreement. All obligations of the Limited Partnership
under the Construction Loan Agreement shall have been paid in full or otherwise
discharged.
(d) Capital Contribution Agreement. The Lender shall have received
counterparts of the Capital Contribution Agreement, duly executed and delivered
by the respective parties thereto.
(e) Amended and Restated Partnership Agreement. The Lender shall have
received a true and complete copy of the Amended and Restated Partnership
Agreement, duly executed and delivered by the General Partner, the Initial
Limited Partner (as defined therein) and GE Capital.
(f) Legal Opinion. The Lender shall have received the opinion of counsel to
the Borrower and the General Partner, dated the Borrowing Date, substantially in
the form of Exhibit B.
(g) Authorizing Actions. All partnership, corporate and other proceedings in
connection with the transactions contemplated by this Agreement and the other
Transaction Documents, and all documents and instruments incident thereto, shall
be reasonably satisfactory in form and substance to the Lender and its counsel;
and the Lender and its counsel shall have received such counterpart originals or
certified or other copies of all such documents and instruments and of all
records of partnership and corporate proceedings in connection with such
transactions, and such incumbency and signature certificates of officers of the
Borrower and the General Partner, as the Lender or its counsel may reasonably
request.
(h) Good Standing Certificates. The Lender shall have received copies dated
as of a recent date from the Secretary of State or other appropriate authority
of such jurisdiction, evidencing the good standing of the General Partner in
Texas and New Jersey and the legal existence of the Borrower in Delaware, and
New Jersey.
(i) Financial Statements. The Lender shall have received from the Borrower
the financial statements referred to in subsection 4.1(a).
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35
(j) Insurance Coverage. The Lender shall have received binders for, it
(including,or other evidence satisfactory to of insurers,if requested by the
Lender, certificates independent brokers and the Borrower) of, the maintenance
of and payment of premiums with respect to insurance required to be maintained
by the Borrower pursuant to the provisions of this Agreement and any other
Transaction Document in effect on the Borrowing Date.
(k) Liens. No Liens, other than Permitted Liens (as such term is defined in
the Construction Loan Agreement), shall exist on any properties or assets of
the Limited Partnership.
(l) Assignment and Security Agreement and Cogen Pledge Agreement. The Lender
shall have received the Assignment and Security Agreement and the Cogen Pledge
Agreement, duly executed and delivered by the Borrower.
(m) Perfection of Liens and Security Interests. All filings, recordings and
other actions that are necessary or desirable in order to establish, protect,
preserve and perfect the Lender's lien on and perfected security interest in all
right, title, estate and interest of the Borrower in and to all Collateral
covered by the Collateral Security Documents entered into on or prior to such
Borrowing Date, prior and superior to all other Liens, existing or future,
except Permitted Liens, shall have been duly made or taken and all fees, taxes
and other charges relating to such filings and recordings and other actions
shall have been paid by the Borrower. The Lender shall have received
authenticated copies or other evidence of all filings, recordings and other
actions obtained or made in order to create and perfect such first lien on and
perfected security interest in the right, title, estate and interest of the
Borrower in and to all Collateral covered by such Collateral Security Documents.
(n) Conditions to Capital Contribution Agreement. The conditions precedent
to the making by GE Capital of its capital contribution to the Limited
Partnership on the Second Capital Contribution Date, shall have been satisfied
or waived by the parties thereto with the consent of the Lender on or prior to
the Second Capital Contribution Date and GE Capital (x) shall have made the
capital contributions to be made by it on the Second Capital Contribution Date
pursuant to the Capital Contribution Agreement or (y) shall have breached its
obligation to make such contributions.
(o) Completion Certificate. The Lender shall have received a counterpart of
the Completion Certificate.
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36
(p) Security Deposit Agreement. The Lender shall have received a copy of the
Security Deposit Agreement, duly executed by the Limited Partnership, the
Borrower, GE Capital, the Lender and the Security Agent.
(q) Representations and Warranties. The representations and warranties made
by the Borrower or the General Partner herein, in any other Transaction Document
to which it is a party, or in any Basic Document to which it is a party, or
which are contained in any certificate, document, financial or other statement
furnished by the Borrower or the General Partner hereunder or thereunder or in
connection herewith or therewith, shall be true and correct on and as of such
Borrowing Date as if made on and as of such date, except to the extent that such
representations and warranties relate specifically to an earlier date (in which
case such representations or warranties shall have been true and correct on and
as of such earlier date).
(r) No Default, Event of Default or Event of Loss. No Default or Event of
Default shall be in existence on such Borrowing Date, or shall occur after
giving effect to the Term Loan to be made on such Borrowing Date. No Declared
Event of Loss shall be in existence on the Borrowing Date. Satisfaction of this
condition with respect to any particular Default, Event of Default or Event of
Loss shall not constitute satisfaction of this condition with respect to any
other Default, Event of Default or Event of Loss, including, without limitation,
a subsequent Default, Event of Default or Event of Loss which arises out of
identical or similar circumstances.
(s) Borrowing Certificate. The Lender shall have received from the Borrower
the Term Loan Borrowing Certificate, dated the Borrowing Date.
(t) Notice of Borrowing. The Lender shall have received from the Borrower
the Notice of Borrowing referred to in subsection 2.2.
(u) Fixed Charge Coverage Ratio. The Lender shall have received, within 15
Business Days prior to the initial Borrowing Date or within 5 Business Days
prior to any subsequent Borrowing Date, pro forma financial statements of the
Limited Partnership, reasonably acceptable to the Lender, calculated in
accordance with Schedule 1, that show the Limited Partnership's projections of
its net income for each year remaining before the Term Loan Maturity Date.
Except as provided in the next succeeding sentence, the Fixed Charge Coverage
Ratio, after giving effect to the Term Loan to be made on such Borrowing Date,
as calculated from such pro forma financial statements, shall be projected to be
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37
at least equal to 1.35 to 1.00 for each year remaining before the Term Loan
Maturity Date. If on the Second Capital Contribution Date (A) the sum of (x) the
initial principal amount of the Term Loan (as defined in the Construction Loan
Agreement) and (y) the capital contributions made to the Limited Partnership on
the Initial Capital Contribution Date and the Second Capital Contribution Date
are lees than or equal to $136,000,000 and (B) there are no other Term Loans
outstanding and no other Term Loans will be made on such date, then the
condition set forth in the preceding section of this clause (u) shall not apply
to the Term Loan to be made on such date if the proceeds are to be applied to
the payment of the Non-Competition Fee.
(v) Additional Documents. The Lender shall have received such other
documents and opinions as may be reasonably requested by it.
(w) Additional Matters. All other documents and legal matters in
connection with the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to the Lender and its counsel.
SECTION 6. AFFIRMATIVE COVENANTS
---------------------
So long as the Term Loan Commitment remains in effect, the Term Note remains
outstanding and unpaid or any other amount is owing to the Lender hereunder or
under the Collateral Security Documents, the Borrower hereby agrees that:
6.1 Conduct of Business, Maintenance of Existence, etc. The Borrower shall
at all time (i) engage solely in the business of being the sole general partner
of the Limited Partnership, making loans to Affiliates and any other
transactions contemplated by subsections 7.3 and 7.7, the performance of the
Limited Partnership's obligations pursuant to the Basic Documents and to the
extent permitted by the Construction Loan Agreement and the Amended and Restated
Partnership Agreement and (ii) preserve and maintain in full force and effect
its existence as a limited partnership under the laws of the State of Delaware
and its qualification to do business in the States of New Jersey and Texas and
in each other jurisdiction in which the conduct of its business requires such
qualification. The General Partner will (i) engage solely in the business of
being the sole general partner of the Borrower and the performance of the
Borrower's obligations pursuant to the Transaction Documents and (ii) will
preserve and maintain in full force and effect its existence as a corporation
under the laws of the State of Texas and its qualification to do business in the
States of
<PAGE>
38
New Jersey and Texas and in each other jurisdiction in which the conduct of its
business requires such qualification.
6.2 Payment of Obligations. The Borrower will pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all of its Indebtedness and other obligations of whatever nature, except for
any Indebtedness or other obligations which are being contested in good faith
and by appropriate proceedings and to the extent that the Borrower is complying
with the relevant provisions of subsection 6.9 or 6.10, as applicable.
6.3 Performance under Other Agreements. The Borrower shall duly perform and
observe all of the covenants, agreements and conditions on its part to be
performed and observed hereunder and under the Term Note and the other
Transaction Documents to which it is a party.
6.4 Insurance Coverage. Without limiting any of the other obligations or
liabilities of the Borrower under this Agreement, the Borrower shall at all
times after the execution of any Collateral Security Document, carry and
maintain or cause to be carried and maintained at its own expense such insurance
as is customarily maintained by prudent owners of property of the type and in
the location of the insured Collateral or cause to be carried and maintained.
The Borrower shall also carry and maintain any other insurance that the Lender
may reasonably require from time to time. All insurance carried pursuant to this
subsection shall be with such insurers, in such amounts and in such form as
shall be satisfactory to the Lender.
6.5 Inspection of Property; Books and Records. The Borrower shall keep
proper books of record and account in which full, true and correct entries shall
be made of all of its transactions in conformity with GAAP, and the Borrower
shall permit representatives of the Lender to visit and inspect its properties
and, to examine its books of record and account, to discuss its affairs,
finances and accounts with its principal officers, engineers and independent
accountants, all at such reasonable times during business hours and at such
intervals as the Lender may request.
6.6 Compliance with Laws. (a) The Borrower shall comply with all laws, rules,
regulations and orders, and shall from time to time obtain and comply with all
Government Approvals as shall now or hereafter be necessary under applicable law
or regulation, except any thereof the non compliance with which could not
reasonably be expected to (i) have a material adverse affect on the business,
operations, property, condition (financial or other) or prospects of the
Borrower or the rights or interests of the Lender or (ii) materially adversely
affect the Borrower's
<PAGE>
39
ability to perform its obligations under the Transaction Documents to which it
is a party.
(b) Notwithstanding the foregoing, the Borrower shall cause all
Hazardous Materials on any Collateral to be handled and disposed of in
compliance with all Relevant Environmental Laws.
6.7 Financial Statements. The Borrower shall furnish or cause to be
furnished to the Lender:
(i) as soon as available, but in any event within 120 days after the
end of each fiscal year of the Borrower, a copy of the balance sheet of the
Borrower as of the end of such fiscal year, the related statements of
income and partners' capital and statements of changes in partners' capital
and cash flow of the Borrower for such fiscal year, setting forth after
fiscal year 1991, in each case in comparative form the figures for the
previous fiscal year certified without qualification or exception as to the
scope of its audit by independent public accountants of national standing
reasonably acceptable to the Lender;
(ii) as soon as available, but in any event within 60 days after the
end of each quarterly period of each fiscal year of the Borrower (other
than the last quarterly period of each such fiscal year), the unaudited
balance sheet of the Borrower as of the end of such quarterly period, the
related unaudited statements of income and partners' capital and statements
of changes in partners' capital and cash flow of the Borrower for such
quarterly period and for the portion of the fiscal year then ended, setting
forth after fiscal year 1991, in each case in comparative form the figures
for the previous period certified by the chief executive officer or chief
financial officer of the General Partner (subject to normal year-end audit
adjustments);
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except for
changes approved or required by the independent public accountants certifying
such statements and disclosed therein).
6.8 Certificates; Other Information. The Borrower shall furnish or
cause to be furnished to the Lender:
(a) concurrently with the delivery of the financial statements
referred to in clauses (i) and (ii) of subsection 6.7, a certificate of a
Responsible
<PAGE>
40
Officer of the General Partner stating that, to the best of his knowledge
after due inquiry, the Borrower, during the period covered by such
financial statements has observed and performed in all material respects
all of its covenants and other agreements, and satisfied in all material
respects every condition, contained in this Agreement and the other
Transaction Documents to be observed, performed or satisfied by it, and
that such Responsible Officer has obtained no knowledge of any Default or
Event of Default which has not been waived or cured and notice given
hereunder at any time during such period or on the date of such certificate
and no knowledge of any default or event which with the giving of notice or
the lapse of time or both would constitute a default under any of the other
Transaction Documents at any time during such period or on the date of such
certificate (or, if any such Default or Event of Default or default or
event shall have occurred, a statement setting forth the nature thereof and
tbe steps being taken by the Borrower to remedy the same);
(b) promptly after the same are sent, copies of all financial
statements and reports which the Borrower sends to its Partners;
(c) promptly after the filing thereof, the "Annual Returns" (Form 5500
series) and attachments filed annually with the Internal Revenue Service
with respect to each Single Employer Plan, if any, of the Borrower;
(d) with respect to any Single Employer Plan adopted or amended by the
Borrower or the General Partner or any Commonly Controlled Entity on or
after the Borrowing Date, any determination letters received from the
Internal Revenue Service with respect to the qualification of such Plan, as
initially adopted or amended under Section 401(a) of the Code;
(e) promptly after delivery or receipt thereof, a copy of each
material notice, demand or other communication delivered by or received by
the Borrower pursuant to any Transaction Document; and
(f) promptly, such additional financial and other information with
respect to the Borrower, the General Partner or the Project, as the Lender
may from time to time reasonably request.
6.9 Taxes and Claims. The Borrower shall pay and discharge all taxes,
assessments and governmental charges or levies imposed on it or on its income or
profits or on any of its property prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a Lien upon the
property of the Borrower. The Borrower shall
<PAGE>
41
have the right, however, to contest in good faith the validity or amount of any
such tax, assessment, charge, levy or claim by proper proceedings timely
instituted, and may permit the taxes, assessments, charges, levies or claims so
contested to remain unpaid during the period of such contest if: (a) the
Borrower diligently prosecutes such contest, (b) the Borrower sets aside on its
books adequate cash reserves with respect to such contested item, (c) during the
period of such contest the enforcement of any contested item is effectively
stayed; provided however that this clause (c) shall apply to contested income
taxes; of a Partner only if the failure to pay such tax may then become a Lien
on any of the property of the Borrower or may interfere with the operation of
the Facility, and (d) in the reasonable opinion of the Lender, such contest does
not involve any substantial danger of the sale, forfeiture or loss of any of the
property of the Borrower, title thereto or any interest therein. The Borrower
will promptly pay or cause to be paid any valid, final judgment enforcing any
such tax, assessment, charge, levy or claim and cause the same to be satisfied
of record.
6.10 Mechanics' and Materialmen's Liens. The Borrower shall protect
and defend its interest in, and the Lander's Liens on, the Borrower's property
against any Lien for the performance of work or the supply of materials filed
against the property of the Borrower; provided, that the Borrower shall have the
right to contest in good faith any such Lien by proper proceedings timely
instituted, and may permit such Lien to exist during the period of such contest
if: (a) the Borrower diligently prosecutes such contest, (b) the Borrower sets
aside on its books adequate cash reserves with respect to such contested item,
(c) during the period of such contest the enforcement of any contested item and
tbe Lien relating thereto is effectively stayed, and (d) in the reasonable
opinion of the Lender, such contest does not involve any substantial danger of
the sale, forfeiture or loss of any of the property of the Borrower, title
thereto or any interest therein. The Borrower will promptly pay or cause to be
paid any valid, final judgment enforcing any such item, cause the Lien relating
thereto to be removed and otherwise cause such item to be satisfied of record.
6.11 Maintenance of Property. (a) The Borrower, at its expense, shall
keep all property useful and necessary to its business in good working order and
condition and make all repairs, replacements and renewals with respect thereto
and additions and betterments thereto which are necessary for such property to
comply with all Requirements of Law affecting it and all requirements of the
appropriate Board of Fire Underwriters or other similar body acting in and for
the locality in which such property is located.
<PAGE>
42
(b) If, after any loss, destruction or damage with respect to the
Project referred to in clause (b) of the of definition of "Event of Loss", the
conditions specified in subclauses (i), (ii), and (iii) of said clause (b) are
satisfied, the Borrower at all times thereafter will proceed diligently with all
work necessary to replace and/or repair such loss, destruction or damage to the
extent of the insurance proceeds or other funds received by it or the Limited
Partnership.
6.12 Notices. The Borrower will promptly give notice to the Lender:
(a) of the occurrence of any Default, Event of Default or Event of
Loss;
(b) of any litigation, investigation or proceeding affecting the
Borrower or the General Partner in which the amount involved is $500,000 or
more or in which injunctive or similar relief is sought;
(c) of the following events, as soon as possible and in any event
within 10 days after the Borrower knows or has reason to know of the
following events: (i) the occurrence or expected occurrence of any
Reportable Event with respect to any Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer Plan or
(ii) the institution of proceedings or the taking of any other action by
PBGC, the Borrower, any Commonly Controlled Entity or any Multiemployer
Plan with respect to the withdrawal from, or the terminating,
Reorganization or Insolvency of, any Plan;
(d) of any loss or damage to the Collateral in excess of $500,000;
(e) of the receipt by the Borrower of any Environmental Notice or of
any notice of any event that creates a material likelihood of the
occurrence of an Adverse Environmental Event;
(f) of the imposition of any material Lien on or the assertion of any
material claim against any of the Borrower's property; and
(g) of the receipt by the General Partner or the Borrower of any
notice or declaration by any Governmental Authority which relates to, or
could result in, the Project, the owner thereof or any of the owner's
Affiliates being deemed to be, or subject to regulation as, a "public
utility", "electric utility" or "public utility holding company" under any
Applicable Law.
<PAGE>
43
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer of the General Partner setting forth details of the
occurrence referred to therein and stating what action the Borrower proposes to
take with respect thereto. For all purposes of clause (c) of this subsection,
the Borrower shall be deemed to have all knowledge or knowledge of all facts
attributable to the administrator of such Plan.
6.13 Maintenance of Liens of the Collateral Security Documents. The
Borrower will:
(a) promptly upon the request of the Lender and at the Borrower's
expense, execute and deliver, or cause the execution and delivery of, and
thereafter register, file or record in each appropriate governmental
office, any Collateral Security Document or any document or instrument
supplemental to or confirmatory of such Collateral Security Document or
otherwise deemed by the Lender to be necessary or desirable for the
creation or perfection of the liens and security interests purported to be
created by such Collateral Security Document; and
(b) protect and defend its interest in the Collateral against Liens
asserted by any third Person, other than Permitted Liens, and, subject to
the second sentence of subsection 6.9 and subsection 6.10, immediately
discharge any such Lien so asserted. The Borrower shall promptly notify the
Lender of any such assertion.
6.14 Agent for Service of Process. The Borrower shall appoint
and continuously retain CT Corporation System, or such other agent as shall be
reasonably acceptable to the Lender, as its agent in the State of New York for
receipt of service of process and shall pay all costs, fees, and expenses in
connection therewith. The Borrower has paid all fees necessary to retain CT
Corporation System or such other agent for such purposes for the forthcoming
12-month period.
6.15 Employee Plans. For each Plan adopted by the Borrower which is an
employee benefit plan as defined in Section 3 (2) of ERISA, the Borrower shall
(a) use its best efforts to seek and receive determination letters from the
Internal Revenue Service to the effect that such Plan is qualified within the
meaning of Section 401(a) of the Code; and (b) from and after the date of
adoption of any such Plan, cause such Plan to be qualified within the meaning of
Section 401(a) of the Code and to be administered in all material respects in
accordance with the requirements of ERISA and Section 401(a) of the Code.
6.16 Fiscal Year. The fiscal year of the Borrower shall be a calendar
year.
<PAGE>
44
6.17 Qualifying Facility Status. The Borrower will take all necessary
action within its control and otherwise use its best efforts, to ensure that the
Facility continues to meet the requirements of a Qualifying Facility.
SECTION 7. NEGATIVE COVENANTS
------------------
So long as the Term Loan Commitment remains in effect, the Term Note
remains outstanding and unpaid or any other amount is owing to the Lender
hereunder or under the Collateral Security Documents, the Borrower agrees that:
7.1 Merger, Sale of Assets, Purchases, Etc. The Borrower shall not
merge into or consolidate with any other Person, change its form of organization
or its business, or liquidate or dissolve itself (or suffer any liquidation or
dissolution), or sell, lease, transfer or otherwise dispose of all or any
substantial portion of its assets other than sales of interests in the Borrower
which are permitted by the Amended and Restated Partnership Agreement.
7.2 Indebtedness; Guarantee; Obligations. The Borrower shall not
create, incur, assume or suffer to exist any Indebtedness or Guarantee
Obligations, except Indebtedness or Guarantee Obligations of the Borrower to the
Lender.
7.3 Distributions, Etc. The Borrower shall not, without the prior
written consent of the Lender, make any distributions to the Partners or to any
other Person in respect of any partnership interest in the Borrower or any
payments of management fees to any Partner, whether in cash or other property,
or redeem, purchase or otherwise acquire any interest of any Partner in the
Borrower, or permit any Partner to withdraw any capital from the Borrower;
provided that, so long as no Default or Event of Default has occurred and is
continuing, the Borrower may make (i) loans to any Affiliate upon fair and
reasonable terms no less favorable than the Borrower could obtain, or could
become entitled to, in an arm's-length transaction with a Person which is not an
Affiliate, (ii) distributions to its Partners in respect of their partnership
interests in the Borrower in an aggregate amount not to exceed the amounts
distributed (in accordance with the terms of the Basic Documents) to the
Borrower by the Limited Partnership in respect of its partnership interest in
the Limited Partnership and (iii) distributions to its Partners in respect of
the Development Fee and the Construction Management Fee.
7.4 Liens. The Borrower shall not create or suffer to exist any Lien
on any of its properties or assets, other than Permitted Liens.
<PAGE>
45
7.5 Nature of Business. The Borrower shall not engage in any business
other than the business of being the general partner of the Limited Partnership,
making loans to Affiliates and any other transactions contemplated by
subsections 7.3 and 7.7 and performing the Limited Partnership's obligations
pursuant to the Non-Competition Agreement and the Basic Documents. The General
Partner will engage solely in (i) the business of being the general partner of
the Borrower and (ii) the performance of the Borrower's obligations pursuant to
the Transaction Documents.
7.6 Amendment of Contracts, Etc. The Borrower will not, without the
prior written consent of the Lender, agree to or permit (a) the cancellation,
suspension or termination of any Transaction Document (except upon the
expiration of the stated term thereof), except as contemplated by this Agreement
and the Collateral Security Documents, (b) the assignment of the rights or
obligations of any party to any Transaction Document (except (x) as contemplated
by this Agreement or the Collateral Security Documents or (y) as permitted
without the consent of the Borrower by the terms of such Transaction Document,
Affiliate Note or Affiliate Collateral Security Document or (c) any amendment,
supplement or modification of, or waiver with respect to any of the provisions
of, any Transaction Document or with respect to which the consent of the
Borrower or the General Partner is required.
7.7 Investments. The Borrower shall not make any investments (whether
by purchase of stock, bonds, notes or other securities, loan, advance or
otherwise) other than (a) Permitted Investments and (b) capital contributions to
the Limited Partnership to cure any event which might give rise to a Special
Event described in subsection 14.1(q) of the Amended and Restated Partnership
Agreement, provided, that (i) such capital contributions shall not be made with
the proceeds of any new Loan hereunder and (ii) the Borrower shall not be
permitted to cure more than two consecutive events and four cumulative events
and (c) as permitted by subsection 7.3.
7.8 Leases. The Borrower shall not enter into, or be or become liable
under, any agreement for the lease, hire or use of any real property or of any
personal property, except for leases of real and personal property which are not
Capital Leases, the aggregate annual rental under which shall not, without the
prior written consent of the Lender (such consent not to be unreasonably
withheld), exceed $200,000 in any fiscal year of the Borrower.
7.9 Change of Office. The Borrower shall not change the location of
its chief executive office or principal place of business or the office where it
keeps its records concerning the Project and contracts relating thereto
<PAGE>
46
from that existing on the date of this Agreement and specified in subsection
4.15, unless the Borrower shall have given the Lender at least 30 days' prior
written notice thereof and all action necessary or advisable in the Lender's
opinion to protect and perfect the liens and security interests with respect to
the right, title, estate and interest of the Borrower in and to the Collateral
created by the Collateral Security Documents to which the Borrower is a party
shall have been taken.
7.10 Change of Name. The Borrower shall not change its name except on
at least 60 days' prior written notice to the Lender.
7.11 Compliance With ERISA. The Borrower shall not (a) terminate any
Single Employer Plan so as to result in any material liability to PBGC, (b)
engage in or permit any Affiliate to engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan
which would subject the Borrower to any material tax, penalty or other
liability, (c) incur or suffer to exist any material "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived,
involving any Plan subject to Section 412 of the Code or Part 3 of Title I(b) of
ERISA, (d) allow or permit to exist any event (including a Reportable Event) or
condition which represents a material risk of incurring a material liability to
PBGC, or (e) permit the present value of all benefits vested under all Single
Employer Plans subject to Title IV of ERISA, based on those assumptions used to
fund the Plans, as of any valuation date with respect to such Plans to exceed
the value of the assets of the Plans allocable to such benefits by a material
amount.
7.12 Transactions with Affiliates and Others. The Borrower shall not,
directly or indirectly, purchase, acquire, exchange or lease any property from,
or sell, transfer or lease any property to, or borrow any money from, or enter
into any management or similar fee arrangement with, any Affiliate or any
officer, director or employee of the Borrower or the General Partner, except for
(a) the transactions contemplated by the Construction Loan Agreement, (b) one or
more management agreements with the Limited Partnership pursuant to which the
Borrower or its designee would receive the Construction Management Fee and the
Management Fee (as defined in the Partnership Agreement), (c) loans and capital
contributions to Affiliates of the Borrower permitted by subsections 7.3 and 7.7
and (d) transactions in the ordinary course of business and upon fair and
reasonable terms no less favorable than the Borrower could obtain, or could
become entitled to, in an arm's length transaction with a Person which is not an
Affiliate.
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47
7.13 Capital Expenditures. The Borrower shall not directly or
indirectly make or commit to make any expenditure in respect of the purchase or
other acquisition (including installment purchases or financing leases) of fixed
or capital assets (excluding normal replacements and maintenance which are
properly charged to current operations).
7.14 Sale and Leaseback. The Borrower shall not enter into any
arrangement with any Person providing for the leasing by the Borrower of real or
personal property which has been or is to be sold or transferred by the Borrower
to such Person or to any other Person to whom funds have been or are to be
advanced by such Person on the security of such property or rental obligations
of the Borrower.
SECTION 8. EVENTS OF DEFAULT
-----------------
If any of the Events of Default listed below in this Section 8 shall
occur and be continuing, the Lender may, (i) by notice to the Borrower, declare
the Term Loan Commitment to be terminated, whereupon the same shall forthwith
terminate; and/or (ii) declare the entire unpaid principal amount of the Term
Loan and the Term Note, all interest accrued and unpaid thereon, and all other
Obligations to be forthwith due and payable, whereupon such amounts shall become
and be forthwith due and payable, without presentment, demand, protest, or
notice of any kind, all of which are hereby expressly waived by the Borrower;
and/or (iii) foreclose on any or all of the Collateral; and/or (iv) proceed to
enforce all other remedies available to it under applicable law. Notwithstanding
the foregoing, if an Event of Default referred to in paragraph (e) or (f) below
shall occur, automatically and without notice the actions described in clauses
(i) and (ii) above shall be deemed to have occurred.
Such Events of Default are the following:
(a) As of the first day of January, April, July or October, any
principal of or interest on any Term Loan then or theretofore payable shall
not have been paid in full; or any fee or any other amount payable to the
Lender hereunder or under the Term Note or under any other Transaction
Document shall not be paid when due and shall remain unpaid for five or
more days; or
(b) Any representation or warranty made by the Borrower herein or by
the Borrower, the Limited Partnership or any Partner in any Transaction
Document or Operative Document (other than any Project Document) to which
the Borrower, the Limited Partnership or such Partner is a party, or any
representation, warranty or statement in any certificate, financial
statement or
<PAGE>
48
other document furnished to the Lender by or on behalf of the Borrower or
the General Partner hereunder or to the Lender or any Project Limited
Partner by or on behalf of the Borrower, the Limited partnership or any
Partner under any Transaction Document or Operative Document (other than
any Project Document), shall prove to have been false or misleading as of
the time made or deemed made; or
(c) (i) The Borrower or the General Partner shall fail to perform or
observe any of its covenants contained in this Agreement (other than those
referred to in paragraph (a) above) or in any other Transaction Document or
Operative Document (other than any Project Document) to which it is a party
and such failure shall continue unremedied for a period of 30 days after
written notice thereof from the Lender to the borrower; provided however,
that if such default is susceptible to cure, such 30 day period shall be
extended for such period of time (not to exceed 60 days) during which the
Borrower or the General Partner, as the case may be, shall be diligently
using its best efforts to cure such default or (ii) the Limited Partnership
shall fail to perform or observe any of its covenants contained in the
Amended and Restated Partnership Agreement or in any other Operative
Document (other than any Project Document) to which it is a party and such
failure shall continue unremedied for a period of 30 days after written
notice thereof from any Project Limited Partner or the Lender to the
Borrower; provided however that such 30 day period shall be extended for
such period of time (not to exceed 60 days) during which the Borrower on
behalf of the Limited Partner shall be diligently using its best efforts to
cure such default; or
(d) (i) The Borrower or the General Partner, with respect to any
Indebtedness or Guarantee Obligation, the principal amount of which exceeds
$500,000, shall (i) default in any payment of principal of or interest on
any such Indebtedness (other than the Term Note) or Guarantee Obligation
beyond the period of grace (not to exceed 30 days), if any, provided in the
instrument or agreement under which such Indebtedness or Guarantee
Obligation was created, or (ii) default in the observance or performance of
any other agreement or condition relating to any such Indebtedness or
Guarantee Obligation or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is
to cause, or to permit the holder or holders of such Indebtedness (or a
trustee or agent on behalf of such holder or holders) or the beneficiary or
beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf
of
<PAGE>
49
such beneficiary or beneficiaries) to cause, with the giving of notice if
required or the passage of time, or both, such Indebtedness to become due
prior to its stated maturity or such Guarantee Obligation to become
payable; or
(e) The Borrower or the Limited Partnership shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part
of its property, (ii) admit in writing its inability, or be generally
unable, to pay its debts as such debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a voluntary case
under the Federal Bankruptcy Code (as now or hereafter in effect), (v) file
a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding up, or composition or
readjustment of debts, (vi) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against such Person
in an involuntary case under the Bankruptcy Code, or (vii) take any
partnership or corporate action for the purpose of effecting any of the
foregoing; or
(f) A proceeding or case shall be commenced without the application or
consent of the Borrower or the Limited Partnership, in any court of
competent jurisdiction, seeking (i) its liquidation, reorganization,
dissolution, winding-up, or the composition or readjustment of debts, (ii)
the appointment of a trustee, receiver, custodian, liquidator or the like
of the borrower or the Limited Partnership, under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts or (iii) a warrant of attachment, execution or similar
process against all or a substantial part of the assets of the Borrower or
the Limited Partnership, and such proceeding or case shall continue
undismissed, or any order, judgment or decree approving or ordering any of
the foregoing shall be entered and continue unstayed and in effect, for a
period of 60 or more days, or any order for relief against such Person
shall be entered in an involuntary case under the Federal Bankruptcy Code
(as now or hereafter in effect); or
(g) A judgment or judgments for the payment of money in excess of
$1,000,000 shall be rendered against the Borrower or the Limited
Partnership and such judgment or judgments shall remain in effect and
unpaid, unstayed and unbonded for a period of 60 or more consecutive days;
or
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50
(h) Any Collateral Security Document, once executed and delivered,
shall cease to provide the Lender the liens, priority and security
interests intended to be created thereby on all items of Collateral (other
than items of Collateral which, individually or in the aggregate, are not
material) or, shall cease, for any reason, to be in full force and effect
(other than as a result of any action by the Lender and other than with
respect to such immaterial items of Collateral) or any party thereto (other
than the Lender) shall so assert in writing; or
(i) The General Partner shall at any time cease to be the managing
general partner of the Borrower, or shall transfer, sell, assign, mortgage,
pledge or otherwise dispose of its partnership interest in the Borrower
without the Lender's prior written consent, except as contemplated by this
Agreement or the Amended and Restated Partnership Agreement; or
(j) (i) Robert McNair or his wife or children shall fail to own and
control, directly or indirectly, a beneficial interest of at least 8.2% in
the Borrower until the expiration of [seven years] after the Second Capital
Contribution Date and (ii) thereafter, Robert McNair or his wife or
children or an entity with a net worth equal to at least $100,000,000 shall
fail to own and control, directly or indirectly, a beneficial interest of
at least 8.2% in the Borrower;
(k) The Limited Partnership shall abandon the Project for a period of
longer than 30 days; or
(1) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan, or
(iii) a Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate any Single Employer Plan, which Reportable Event
or institution of proceedings is, in the reasonable opinion of the Lender,
likely to result in the termination of such Plan under ERISA, or (iv) any
Single Employer Plan shall terminate under Section 4041(c) of ERISA, or (v)
the Borrower or any Commonly Controlled Entity shall, or is, in the
reasonable opinion of the Lender, likely to incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization of,
a Multiemployer Plan, or (vi) any other event or condition shall occur or
exist with respect to a Plan; and in each case in clauses (i) through (vi)
above, such event or condition,
<PAGE>
51
together with all other such events or conditions, if any, could subject
the Borrower to any tax, penalty or other liabilities in the aggregate
material in relation to the business, operations, property or financial or
other condition of the Borrower; or
(m) At any time, (i) any beneficial ownership interests in the
Borrower shall be levied upon, attached or seized pursuant to a court order
and such order is not vacated or stayed within 20 days of entry of such
order, (ii) the Limited Partnership shall fail to pay, satisfy or otherwise
obtain a release of any bond or lien for the performance of work or the
supply of materials filed against the Site within 20 days of the Borrower's
or the Limited Partnership's becoming aware of the filing thereof unless,
if any such Lien arose in connection with a claim referred to in subsection
7.2(l) of the Amended and Restated Partnership Agreement, the Borrower on
behalf of the Limited Partner shall be diligently contesting the same in
accordance with, and subject to, subsection 7.2(l) of the Amended and
Restated Partnership Agreement or (iii) any right, title or interest of the
Limited Partnership in and to the Site or any beneficial ownership interest
of the Borrower in the Limited Partnership shall be levied upon, attached
or seized pursuant to a court order and such order is not vacated or stayed
within 20 days of entry of such order; or
(n) (i) Any Participant, other than the Limited Partnership or the
Borrower, shall fail to perform or observe in any material respect any of
its covenants or obligations contained in any of the Project Contracts to
which it is a party within the grace period, if any, provided for in such
Project Contracts, which failure shall continue unremedied for a period of
30 days after notice by the Lender or any Project Limited Partner to the
Borrower or (ii) (x) any material provision of any Operative Document shall
at any time for any reason cease to be valid and binding or in full force
and effect (other than as a result of any action by the Lender or any
Project Limited Partner) or any party thereto (other than the Lender or
Limited Partner) shall so assert in writing, (y) any material provision of
any Operative Document shall be declared to be null and void (other than as
a result of any action by the Lender or any Project Limited Partner) or (z)
any party thereto shall deny that it has any further liability or
obligation under any Operative Document to which it is a party; provided
that it shall not be an Event of Default under this paragraph (q) if, (1)
within 30 days after the occurrence of any of the foregoing events with
respect to any Project Contract (other than the Power Purchase Agreement or
the Gas Service Agreement), the
<PAGE>
52
General Partner shall have submitted a plan to the Lender to execute and
deliver a document in substitution for such Project Contract, which plan
shall be reasonably satisfactory in form and substance to the Lender, and
(2) within 90 days after the occurrence of any of the foregoing events with
respect to any Project Contract (other than the Power Purchase Agreement or
the Gas Service Agreement), such Project Contract shall have been replaced
with another document (x) which is executed and delivered by parties
acceptable to the Lender in its reasonable discretion and (y) which has
terms and conditions similar to, and in the reasonable opinion of the
Lender, at least as favorable to the Project as, the substituted Project
Contract; or
(o) The dissolution and liquidation of the Borrower without the prior
written consent of the Lender unless (i) an entity meeting the requirements
of subsection 10.1 of the Amended and Restated Partnership Agreement
succeeds to the Borrower's interest thereunder or (ii) the ultimate result
of such dissolution and liquidation is the incorporation of the Borrower
and the ownership provisions of such subsection 10.1 apply to such
corporation; or
(p) The Limited Partnership shall cease to have good and marketable
title to the Site and the Project, in each case, free and clear of all
Liens other than Permitted Liens (as defined in the Amended and Restated
Partnership Agreement).
Upon the occurrence of and during the continuance of any Event of
Default, all remedies available to the Lender under this Agreement or any
Collateral Security Document or by statute or by rule of law may be exercised by
the Lender at any time and from time to time whether or not the Term Loan shall
be due and payable, and whether or not the Lender shall have instituted any
foreclosure or other action for the enforcement of any of the Transaction
Documents. For the purpose of carrying out the provisions and exercising the
rights, powers and privileges granted by this paragraph, the Borrower hereby
irrevocably constitutes and appoints the Lender its true and lawful
attorney-in-fact to execute, acknowledge and deliver any instruments and to do
and to perform any acts such as are referred to in this paragraph in the name
and on behalf of the Borrower. This power of attorney is a power coupled with an
interest and cannot be revoked.
<PAGE>
53
SECTION 9. MISCELLANEOUS
-------------
9.1 Amendments and Waivers. No provision of this Agreement or of any
other Transaction Document to which the Lender is a party may be amended,
supplemented, modified or waived, except in accordance with the terms of this
subsection 9.1. The Lender and the Borrower may, from time to time, enter into
written amendments, supplements or modifications hereto or to any other
Transaction Document to which the Lender is a party for the purpose of adding
any provisions to this Agreement or any Note or any other Transaction Document
to which the Lender is a party or changing in any manner the rights of the
Lender or of the Borrower hereunder or thereunder, and the lander may execute
and deliver to the Borrower a written instrument waiving, on such terms and
conditions as the Lender may specify in such instrument, any of the requirements
of this Agreement or any Note or any other Transaction Document to which the
Lender is a party or any Default or Event of Default and its consequences. Any
such amendment, supplement, modification or waiver shall be binding upon the
Borrower, the Lender and all future holders of the Term Note.
9.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing, by telecopier,
or, if available, by telex and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or when
deposited in the mail, first clans postage prepaid, or in the case of
transmission by telecopier, when confirmation of receipt is obtained, or in the
case of telex notice, when sent, answerback received, addressed as follows or to
such other address as may be hereafter notified by the respective parties hereto
and any future holders of the Term Note:
The Borrower: Cogen Technologies Camden GP Limited
Partnership
c/o Cogen Technologies
1600 Smith Street
Suite 5000, 50th Floor
Houston, Texas 77002
Attention: Robert C. McNair
Telecopy: (713) 951-7747
The Lender: General Electric Capital Corporation
1600 Summer Street
Stamford, Connecticut 06927
Attention: Project Financing Investments--
Transportation and Industrial
Financing Division
Telecopy: (203) 357-6366
except that any notice, request or demand to or upon the Lender pursuant to
subsection 2.2 shall not be effective until received by the Lender.
<PAGE>
54
9.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Lender, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
9.4 Survival. All representations and warranties made in this
Agreement and in any document, certificate or statement delivered pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement and the Term Note.
9.5 Expenses. Whether or not any Term Loans are made or any of the
other transactions contemplated by this Agreement are consummated, the borrower
shall pay the fees and expenses set forth in the Latter Agreement.
9.6 Indemnification. The Borrower agrees to pay, indemnify and hold
the Lender, any of its affiliates and any director or officer thereof harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including without limitation at any time
following the payment of the Note) be imposed on, incurred by or asserted
against the Lender, any of its affiliates or any director or officer thereof in
any way relating to or arising out of this Agreement, the other Transaction
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby (all of the foregoing,
collectively, the "indemnified liabilities") provided that the Borrower shall
have no obligation hereunder to the Lender, any of its affiliates or any
director or officer thereof with respect to indemnified liabilities arising from
(i) the gross negligence or willful misconduct of the Lender, any of its
affiliates or any director or officer thereof, (ii) legal proceedings commenced
against the Lender, any of its affiliates or any director or officer thereof, by
any security holder or creditor of the Lender, any of its affiliates or any
director or officer thereof arising out of and based upon rights afforded any
such security holder or creditor solely in its capacity as such, or (iii) legal
proceedings commenced against the Lender, any of its affiliates or any director
or officer thereof, by any Permitted Assignee or Transferee. The agreerents in
this subsection shall survive repayment of the Term Note and all other amounts
payable hereunder.
9.7 Successors and Assigns; Transferees; Transferred Interests. (a)
This Agreement shall be binding
<PAGE>
55
upon and inure to the benefit of the Borrower, the Lender, all future holders of
the Term Note and their respective successors and assigns, except that the
Borrower may not assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of the Lender.
(b) The Lender may at any time assign to one or more Affiliates or one
or more other entities (a "Permitted Assignee"), all or a portion of its
interests, rights and obligations under this Agreement (including, without
limitation, all or a portion of its Term Loan Commitment, the Term Loan at the
time owing to it and the Term Note). Within five Business pays after notice of
execution and delivery of such assignment, the Borrower, at its own expense,
shall execute and deliver to the Lender in exchange for the Lender's surrendered
Term Note(s) new Term Note(m) to the order of such Permitted Assignee in an
amount reflecting the portion of the Commitments assumed by it pursuant to such
assignment and new Term Note(s) to the order of the Lender in an amount
reflecting the portion of the Commitments retained by it hereunder. Such new
Term Note(s) shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Term Note(m), shall be dated the date of
such surrendered Term Note(s) and shall otherwise be in substantially the form
of Exhibit A. Upon (i) the execution of such assignment, (ii) delivery of an
executed copy thereof to the Borrower and (iii) payment by such Permitted
Assignee of the purchase price specified therein, (x) such Permitted Assignee
shall be a Lender party hereto and, to the extent provided in such assignment
(but in no event in excess of the amount assigned), shall have the rights and
obligations of a Lender hereunder and (y) the Lender shall, to the extent
provided in such assignment with respect to the interests, rights and
obligations of the Lender so assigned, be released from its obligations under
this Agreement. From and after the date of any assignment pursuant to this
subsection 9.7(b), the term "Lender" in this Agreement shall be deemed to
include GE Capital and all Permitted Assignees under each such assignment.
(c) The Borrower acknowledges that the Lender may at any time sell,
assign, transfer, grant participation in, or otherwise dispose of all or any
portion of the Term Loan or of its right, title and interest therein or in this
Agreement and the Collateral Security Documents (collectively, "Participation")
to one or more Persons (much Persons being herein called "Transferees");
provided, however, that (i) the Lender's obligations under this Agreement and
under any Collateral Security Document shall remain unchanged, (ii) the Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) the Transferees shall be entitled to the benefit of
the provisions contained in subsections 3.8, 3.9 and 3.10 hereof, and (iv) the
Borrower
<PAGE>
56
shall continue to deal solely and directly with the Lender in connection with
the Lender's rights and obligations under this Agreement and under any
Collateral Security Document.
(d) The Borrower authorizes the Lender to disclose to any prospective
Permitted Assignee pursuant to paragraph (b) of this subsection 9.7 or
prospective Transferee pursuant to paragraph (c) of this subsection 9.7 all
financial or other necessary information in the Lender's possession concerning
the Borrower, any Partner or the Project which has been delivered to the Lender
by or on behalf of the Borrower pursuant to this Agreement or any other
Transaction Document or which has been delivered to the Lender by or on behalf
of the Borrower or any Affiliate of the Borrower in connection with the Lender's
credit evaluation of the Borrower, the Collateral and the Project prior to or
after entering into this Agreement, provided, however, that if any such
information furnished to the Lender is marked in writing as being confidential
information, the Lender shall use reasonable efforts to preserve the
confidentiality of such information.
9.8 Severability. Any provision hereof which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof and without affecting the validity or enforceability
of any provision in any other jurisdiction.
9.9 Headings. The headings of the various sections and paragraphs of
this Agreement are for convenience of reference only, do not constitute a part
hereof and shall not affect the meaning or construction of any provision hereof.
9.10 Counterparts. This Agreement may be executed by one or more of
the parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
9.11 The Lender Sole Beneficiary. All conditions of the obligations of
the Lender to make the Term Loan hereunder are imposed solely and exclusively
for the benefit of the Lender and its assigns and no other Person shall have
standing to require satisfaction of such conditions in accordance with their
terms or be entitled to assume that the Lender will refuse to make the Term Loan
in the absence of strict compliance with any or all of such conditions and no
Person shall, under any circumstances, be deemed to be a beneficiary of such
conditions, any or all of which may be freely waived in whole or in part by the
Lender at any time if in its sole discretion it deems it advisable to do so.
Inspections and approvals of the natural gas reserves impose
<PAGE>
57
no responsibility or liability of any nature whatsoever on the Lender, and no
Person shall, under any circumstances, be entitled to rely upon such inspections
and approvals by the Lender for any reason. The Lender is obligated hereunder
solely to make the Term Loan if and to the extent required by this Agreement.
9.12 Governing Law. This Agreement and the Term Note and the rights
and obligations of the parties under this Agreement and the Term Note shall be
governed by, and construed and interpreted in accordance with, the law of the
State of New York.
9.13 Submission to Jurisdiction; Waivers. (A) The Borrower hereby
irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any other Transaction Document, or
for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the State of New York,
the courts of the United States of America for the Southern District of New
York, and appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in any inconvenient court and agrees not
to plead or claim the same;
(iii) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in subsection 9.2 or at such other
address of which the Lender shall have been notified pursuant thereto; and
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction.
(B) The Borrower and the Lander hereby irrevocably and unconditionally
waive trial by jury in any legal action or proceeding referred to in paragraph
(a) above.
<PAGE>
58
9.14 Maximum Interest Rate. Anything to the contrary notwithstanding,
the Lender shall not charge, take or receive and the Borrower shall not be
obligated to pay to the Lender, any amounts constituting interest on the Term
Loan in excess of the maximum rate permitted by applicable law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
COGEN TECHNOLOGIES CAMDEN GP
LIMITED PARTNERSHIP
By: Cogen Technologies
Camden, Inc.,
its general partner
By: /s/
-------------------------
Title: Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION, as Lender
By: /s/
-------------------------
Title: Senior Vice President
and Manger of Energy
Project Financing
<PAGE>
EXHIBIT 10.39
AMENDMENT NO. 1 TO
TERM LOAN AGREEMENT
AMENDMENT NO. 1 to TERM LOAN AGREEMENT, dated as of April 1, 1993 (this
"Amendment") between (i) COGEN TECHNOLOGIES CAMDEN GP LIMITED PARTNERSHIP, a
Delaware limited partnership (the "Borrower"), of which COGEN TECHNOLOGIES
CAMDEN, INC., a Texas corporation (the "General Partner") is the sole general
partner and (ii) GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation
("GE Capital" or the "Lender").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Borrower and the Lender are parties to that certain Term
Loan Agreement, dated as of February 4, 1992 (as amended, modified or
supplemented from time to time, the "Loan Agreement");
WHEREAS, the Borrower has requested the Lender to amend certain
provisions of the Loan Agreement and the Lender has agreed to do so;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. Definitions. Unless otherwise defined herein, all terms used herein
which are defined in the Loan Agreement shall have their respective meanings as
therein defined.
2. Amendment to Section 2.1 (Term Loan Commitment). Section 2.1 of the
Loan Agreement is hereby amended by deleting the phrase "(i) the lesser of
$36,500,000" and inserting, in lieu thereof, the following phrase: "the lesser
of (i) $36,500,000 or, so long as the City of Camden Letter of Credit is
outstanding, $36,373,634."
3. Amendment to Section 8 of the Agreement (Events of Default). Section
8(a) of the Agreement is hereby amended in its entirety as follows:
"(a) As of the first day of February, May, August or November, any
principal of or interest on any Term Loan then or theretofore payable shall
not have been paid in full; or any fee or any other amount payable to the
Lender hereunder or under the Term Note or under any other Transaction
Document shall not be paid when due and shall remain unpaid for five or more
days; or".
<PAGE>
counterparts, taken together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the date first above written.
COGEN TECHNOLOGIES CAMDEN GP
LIMITED PARTNERSHIP
By: COGEN TECHNOLOGIES CAMDEN, INC.,
its sole general partner
By: /s/ [Signature appears here]
--------------------------------
Title: Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION, as a Lender
By: /s/ M. J. Tzongrakin
-------------------------------------
Title: Manager-Operations
<PAGE>
EXHIBIT 10.40
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE. WITHOUT SUCH REGISTRATION. SUCH SECURITIES MAY
NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT UPON DELIVERY
TO THE PARTNERSHIP OF AN OPINION OF COUNSEL SATISFACTORY TO THE GENERAL PARTNER
OF THE PARTNERSHIP THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR THE
SUBMISSION TO THE GENERAL PARTNER OF THE PARTNERSHIP OF SUCH OTHER EVIDENCE AS
MAY BE SATISFACTORY TO THE GENERAL PARTNER TO THE EFFECT THAT ANY SUCH TRANSFER
SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED
THEREUNDER. THE SALE AND TRANSFER OF THESE INTERESTS IS ALSO SUBJECT TO CERTAIN
RESTRICTIONS WHICH ARE SET FORTH IN THIS AGREEMENT.
AGREEMENT OF LIMITED PARTNERSHIP
OF
COGEN TECHNOLOGIES CAMDEN GP LIMITED PARTNERSHIP
THIS AGREEMENT is made as of the 26th day of July, 1991, by and
among Cogen Technologies Camden, Inc., a Texas corporation, as the General
Partner, and Cogen Technologies Limited Partners Joint Venture, a Texas general
partnership, as the Limited Partner.
DEFINITIONS
The following definitions shall be applicable to the terms set
forth below as used in this Agreement:
"Affiliate" means any corporation, partnership, trust or other
entity controlling, controlled by or under direct or indirect common control
with a Partner or in which a Partner holds ten percent (10%) or more of the
outstanding voting or equity interests; however, the General Partner and the
Limited Partner shall not be deemed Affiliates.
"Agreed Value" means, in the case of any contributions or
distributions of property, the fair market value of such property net of any
indebtedness or other liability either assumed or to which such property is
subject, as such fair market value is determined by the General Partner using
such reasonable method of valuation as it may adopt.
<PAGE>
"Agreement" means the Agreement of Limited Partnership of Cogen
Technologies Camden GP Limited Partnership as the same may be amended or
modified from time to time in accordance with Article XX hereof.
"Built-In Gain" with respect to any Partnership property means
(i) the excess of the Agreed Value of any Contributed Property over its adjusted
basis for federal income tax purposes as of the time of contribution and (ii) in
the case of any adjustment to the Carrying Value of any Partnership property
subject to depreciation. cost recovery or amortization pursuant to Section 8.4
as a result of a contribution of cash for a Partnership Interest, the Unrealized
Gain with respect to such property.
"Built-In Loss" with respect to any Partnership property means
(i) the excess of its adjusted basis for federal income tax purposes of any
Contributed Property over its Agreed Value as of the time of contribution and
(ii) in the case of any adjustment to the Carrying Value of any Partnership
property subject to depreciation, cost recovery or amortization pursuant to
Section 8.4 as a result of a contribution of cash for a Partnership Interest,
the Unrealized Loss with respect to such property.
"Camden Cogen" means Camden Cogen L.P., a Delaware limited
partnership.
"Capital Account" means the account established for each Partner
pursuant to Section 8.3.
"Capital Contributions" means the Agreed Value of any property
and the amount of cash contributed to the Partnership.
"Carrying Value" with respect to any Capital Contribution means
the Agreed Value of such property reduced as of the time of determination by all
book depreciation, cost recovery and amortization deductions charged to the
capital accounts with respect to such property and an appropriate amount to
reflect any sales, retirements or other dispositions of assets included in such
property and, with respect to any other Partnership property, the adjusted basis
of such property for federal income tax purposes as of the time of
determination. The Carrying Values shall be further adjusted as provided in
Section 8.4.
"Certificate of Limited Partnership" means the Certificate of
Limited Partnership required to be filed in the Office of the Secretary of State
of the State of Delaware pursuant to the Partnership Act.
-2-
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended
and in effect on the effective date hereof and, to the extent applicable, as
subsequently amended.
"Contributed Property" means any Capital Contribution of
property other than cash.
"Distributable Cash" means, at the time of determination, all
Partnership cash derived from the conduct of the Partnership's business,
other than (i) Capital Contributions, together with interest earned thereon
pending utilization thereof, (ii) financing proceeds, (iii) reserves for
working capital and (iv) other amounts that the General Partner reasonably
determines to be necessary for the proper operation of the Partnership's
business and its winding up and liquidation.
"Facility" means the cogeneration facility more fully defined in
Article III hereof.
"General Partner" means Cogen Technologies Camden, Inc., a
Texas corporation, or its successor or assign.
"Limited Partner" means Cogen Technologies Limited Partners
Joint Venture, a Texas general partnership, or its successor or assign.
"Minimum Gain" with respect to any fiscal year of the
Partnership means the minimum gain of the Partnership computed in accordance
with the principles of Treasury Regulations Section 1.704-lT(b)(4)(iv)(c) or any
successor provision.
"Nonrecourse Deductions" has the meaning specified in Treasury
Regulations Section 1.704-lT(b)(4)(iv)(b) or any successor provision. The amount
of Nonrecourse Deductions for a fiscal year equals the net increase, if any, in
the amount of the Partnership's Minimum Gain during the fiscal year, as
determined under such Treasury Regulations.
"Nonrecourse Liability" or "Nonrecourse Debt" means those
Partnership liabilities (or portion thereof) for which no Partner bears the
economic risk of loss, in accordance with Treasury Regulations Sections
1.704-lT(b)(4)(iv)(k) and 1.752-lT(d)(3) or any successor provision(s).
"Partners" means the General Partner and the Limited Partner.
"Partnership" means Cogen Technologies Camden GP Limited
Partnership, the limited partnership entered into and formed hereunder pursuant
to the Partnership Act.
-3-
<PAGE>
"Partnership Act" means the Delaware Revised Uniform Limited
Partnership Act, 6 Del, Cod. (S)(S) 17-l01 et seq., as it may be amended from
time to time, and any successor to said Partnership Act.
"Partnership Interest" as to any Partner means the entire
ownership interest and rights of that Partner in the Partnership, including,
without limitation, its right to a distributive share of the profits and losses
of the Partnership, its right to a distributive share of the assets of the
Partnership in accordance with the provisions hereof, and in the case of a
General Partner, its right to participate in the management of the affairs of
the Partnership.
"Prime Rate" means the interest rate as defined in Section
9.4 hereof.
"PURPA" shall mean the Public Utilities Regulatory Policies Act
of 1978, as heretofore and hereafter amended, and the regulations now and
hereafter promulgated by the Federal Energy Regulatory Commission or such
successor governmental agency as may be charged with rule making authority
thereunder, which regulations are currently set forth at 18 C.F.R.
(S) 292.
"Sharing Ratio" means the percentages described in Section 8.1.
"Qualifying Cogeneration Facility" means a Qualifying
Cogeneration Facility as defined in PURPA.
"Unrealized Gain" attributable to a Partnership property means,
as of the date of determination, the excess of the fair market value of such
property as of such date of determination over the Carrying Value of such
property as of such date of determination.
"Unrealized Loss" attributable to a Partnership property means,
as of the date of such determination, the excess of the Carrying Value of such
property as of such date of determination over the fair market value of such
property as of such date of determination.
ARTICLE I
Formation of Limited Partnership
The parties hereto enter into and form a limited partnership
pursuant to the Partnership Act. The rights and liabilities of the Partners
shall be as provided in the Partnership Act, except as herein otherwise
expressly provided.
-4-
<PAGE>
The Partnership Interests of any Partner shall be personal property for all
purposes. On the request of the General Partner, each Partner shall execute,
acknowledge, swear to, and deliver all certificates and other instruments
conforming With this Agreement that are necessary to qualify, continue, or
terminate the Partnership as a limited partnership under the laws of the State
of Delaware and to qualify the Partnership to do business in the States of New
Jersey and Texas and such other states where such qualification is necessary or
desirable.
ARTICLE II
Name
The name of the Partnership shall be, and the business of the
Partnership shall be conducted under the name of, Cogen Technologies Camden GP
Limited Partnership or such other name or names that comply with applicable law
as the General Partner may designate from time to time. The General Partner
shall take any action that it determines is required to comply with the
Partnership Act, assumed name act, fictitious name act, or similar statute in
effect in each jurisdiction or political subdivision in which the Partnership
proposes to do business and the Limited Partner agrees to execute any documents
requested by the General Partner in connection with any such action.
ARTICLE III
Purpose
The purposes of the Partnership are (i) to participate in the
design, financing, construction, ownership and operation or lease of a
cogeneration facility in or near Camden, New Jersey for the generation and sale
of electricity and the production and sale of steam (the "Facility") by serving
as the general partner of Camden Cogen, and to engage in all activities related
or incident thereto, and (ii) to engage in any other business activities that
are not forbidden by the laws of the jurisdiction in which the Partnership
engages in such business.
ARTICLE IV
Names and Addresses of Partners and
Principal Office of Partnership
The names and mailing addresses of the Partners are as set
forth on the signature pages hereof. The location of the principal office of
the Partnership where the books and records of the Partnership shall be kept
shall be Suite 5000, 1600 Smith Street Building, 1600 Smith Street, Houston,
Texas 77002. The
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General Partner may in its sole discretion change the location of the principal
office of the Partnership. The General Partner shall provide the Limited Partner
with written notice of any change in the Partnership's principal place of
business
ARTICLE V
Registered Agent; Registered Office;
Additional Offices
The name and address of the registered office of the Partnership
in the State of Delaware is c/o The Corporation Trust Company, Corporation Trust
Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The
name and address of the registered agent for service of process on the
Partnership in the State of Delaware is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801. The General Partner may change the registered agent or the
registered office of the Partnership and may establish such additional offices
of the Partnership as the General Partner may, in its sole discretion, from time
to time determine. The General Partner shall provide the Partners with written
notice of any change in the Partnership's principal office, registered agent or
registered office.
ARTICLE VI
Term
The term of the Partnership shall be from the date of the filing
of the Certificate of Limited Partnership in the Office of the Secretary of
State of the State of Delaware until December 31, 2041, unless extended or
sooner liquidated or dissolved in accordance with this Agreement. The
Partnership shall conduct no business until the Certificate of Limited
Partnership shall have been filed in the Office of the Secretary of State of the
State of Delaware.
ARTICLE VII
Additional Limited Partners
In the event the General Partner determines, in its sole
discretion, that funds in addition to those acquired pursuant to Section 8.1 are
necessary to carry out the purposes of the Partnership and the General Partner
and the Limited Partner do not agree to contribute such funds in their
respective Sharing Ratios, the General Partner is authorized to offer and sell
additional Partnership Interests and admit any
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purchasers thereof as additional limited partners of the Partnership. In such
event, the dilution of the then Partners shall be pro rata in accordance with
their respective Sharing Ratios prior to the issuance of such additional
Partnership Interests and this Partnership Agreement shall be amended by the
General Partner to reflect the admissions of such persons as limited partners of
the Partnership, the revised ownership and Sharing Ratio of each Partner and
otherwise to reflect the relative rights and obligations of the parties. The
General Partner is authorized to take any and all actions, in its sole
discretion, as it deems necessary or appropriate to effect the foregoing, all
without any approval of, or action by, any then Limited Partner.
ARTICLE VIII
Capital Contributions
Section 8.1. Upon execution of this Agreement, each Partner will
make the following contributions of cash to the Partnership.
Cash Sharing
Partner Contribution Ratio
- --------------- ------------ ---------
General Partner $1.638.90 81.945%
Limited Partner 361.10 18.055%
--------- -------
Total $2,000.00 100.000%
By execution of this Agreement the General Partner hereby assigns and conveys
all of its right, title and interest in and to Camden Cogen, and the Partnership
assumes the General Partner's obligations with respect to such interest and
agrees to reimburse the General Partner for the $2.000 cost incurred by the
General Partner in acquiring such partnership interest in Camden Cogen. The
General Partner shall receive no credit or charge in or to its Capital Account
as a result of such assignment and reimbursement.
Section 8.2. The liability of the Limited Partner to the
Partnership shall be limited to the amount of its Capital Contribution made
pursuant to Section 8.1 and the Limited Partner shall not hare any further
personal liability to contribute money to, or in respect of, the liabilities or
the obligations of the Partnership unless it agrees in writing to make
additional capital contributions to the Partnership, nor shall the Limited
Partner be personally liable for any obligations of the Partnership, except as
may be provided in the Partnership Act. No Partner shall be entitled to the
return of any part of its Capital Contribution or to be paid interest in
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respect of either its Capital Account or any Capital Contribution made by such
Partner. No unrepaid Capital Contribution shall be deemed or considered to be a
liability of the Partnership or any Partner. No Partner shall be required to
contribute or lend any cash or property to the Partnership to enable the
Partnership to return any Partner's Capital Contributions to the Partner.
Section 8.3. A capital account ("Capital Account") shall be
established for each Partner and shall be maintained in such a manner as to
correspond with the requirements of Treasury Regulations promulgated from time
to time under section 704(b) of the Code. A Partner's Capital Account shall be
credited with the amounts of cash and Agreed Value of property contributed to
the Partnership by such Partner and shall be credited or charged, as the case
may be, with such Partner's distributive share of Partnership items of book
income, gain, loss, and deduction for each fiscal year of the Partnership
determined pursuant to Article X below. Each Partner's Capital Account shall be
charged with the amount of cash or Agreed Value of property distributed to him.
The respective Capital Accounts of the Partners shall not bear interest.
Section 8.4. If any additional Partnership Interests are to be
issued in consideration for a contribution of property or cash or if any
Partnership property is to be distributed in liquidation of the Partnership or a
Partnership Interest, the capital accounts of the Partners (and the amounts at
which all Partnership properties are carried on its books and records) shall,
immediately prior to such issuance or distribution, as the case may be, be
adjusted (consistent with the provisions of Section 704(b) of the Code and the
Treasury Regulations promulgated thereunder) upward or downward to reflect any
Unrealized Gain or Unrealized Loss attributable to all Partnership properties
(as if such Unrealized Gain or Unrealized Loss had been recognized upon actual
sale of such properties upon a liquidation of the Partnership immediately prior
to such issuance).
ARTICLE IX
Distributions
Section 9.1. Except as otherwise provided herein, Distributable
Cash shall be distributed from time to time at the sole discretion of the
General Partner among the Partners pro rata in accordance with their Sharing
Ratios. It is the intention of the Partners that the Partnership will not
accumulate funds in excess of the amounts that the General Partner reasonably
believes to be necessary for the conduct of
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the Partnership's business, including appropriate reserves, and that to the
extent possible, without impairing the cash needs of the Partnership, to
distribute sufficient funds (in the Sharing Ratios) for the Partners to pay
income taxes on their allocable share of Partnership income.
Section 9.2. If any Partner does not withdraw the whole or any
part of his share of any cash distribution made pursuant to Section 9.1, such
Partner shall not be entitled to receive any interest thereon without the
express written consent of the other Partner.
Section 9.3. Unless otherwise agreed in writing by a transferor
and transferee of a Partnership Interest herein, Distributable Cash
distributable with respect to any Partnership Interest which may have been
transferred during any year shall be distributed to the holder of such
Partnership Interest who was recognized as the owner on the date of such
distribution, without regard to the results of Partnership operations during the
year.
Section 9.4. Notwithstanding the foregoing, if any Partner
advances any funds or makes any other payment to or on behalf of the
Partnership, not required pursuant to the provisions hereof. to cover operating
or capital expenses of the Partnership which cannot be paid out of the
Partnership's operating revenues, such advance or payment shall be deemed a loan
to the Partnership by such Partner, bearing interest from the date such advance
or payment was made until such loan is repaid at a floating rate per annum equal
to the lesser of (i) two percent (2%) over the interest rate publicly quoted by
Texas Commerce Bank National Association from time to time as its prime
commercial rate, with adjustments in such varying rate to be made on the same
date as any change in the aforesaid rate (herein called "Prime Rate") or (ii)
the maximum rate permitted under applicable law, Notwithstanding Sections 9.1
and 9.2 above, all distributions of Distributable Cash shall first be
distributed to the Partners making such loans until all such loans have been
repaid to such Partners, together with interest thereon as above provided, and,
thereafter, the balance of such distributions, if any, shall be made in
accordance with the terms of Sections 9.1 or 9.2 above. If distributions are
insufficient to repay and return all such loans as provided above, the funds
available from time to time shall first be applied to repay and retire the
oldest loan first and, if any funds thereafter remain available, such funds
shall be applied in a similar manner to remaining loans in accordance with the
order of the dates on which they were made; however, as to loans made on the
same date, each such loan shall be repaid pro rata in the proportion that such
loan bears to the total loans made on said date.
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ARTICLE X
Allocations of Income, Gain,
Loss, Deduction and Credit
Section 10.1. Except as otherwise provided herein or unless
another allocation is required by the Code, Treasury Regulations, published
revenue rulings or judicial decisions, all items of Partnership book income,
gain, loss, deduction and credit shall be allocated among the Partners pro rata
in accordance with their Sharing Ratios in effect for the period during which
such items accrue. For purposes of computing the amount of each item of book
income, gain, deduction or loss, the determination, recognition and
classification of such item shall be the same as its determination, recognition
and classification for federal income tax purposes, provided that:
(a) Any deductions for depreciation, cost recovery or amortization
attributable to any Partnership property shall be determined as if the
adjusted basis of such property were equal to the Carrying Value of such
property. Upon an adjustment to the Carrying Value of any Partnership
property subject to depreciation, cost recovery or amortization pursuant to
Section 8.4, any further deductions for such depreciation, cost recovery or
amortization attributable to such property shall be determined as if the
adjusted basis of such property were equal to the Carrying Value of such
property immediately following such adjustment.
(b) Any income, gain or loss attributable to the taxable disposition
of any Partnership property shall be determined by the Partnership as if
the adjusted basis of such property as of such date of disposition were
equal in amount to the Carrying Value of such property as of such date.
(c) All fees and other expenses incurred by the Partnership to promote
the sa1e of a Partnership Interest that can neither be deducted nor
amortized under Section 709 of the Code shall be treated as an item of
deduction.
(d) Computation of all items of income, gain, loss and deduction shall
be mad without regard to any election under Section 754 of the Code which
may be mad by the Partnership and, as to those items described in the
Section 705(a)(1)(D) or Section 705(a)(2)(B) of the Code, without regard to
the fact that such items are not includable in gross income or are neither
currently
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deductible nor capitalizable for federal income tax purposes.
Section 10.2. Upon the sale or other taxable disposition of all,
or substantially all, of the Partnership's assets, the gain or loss resulting
therefrom shall be allocated as provided in the second sentence of Section 18.3
in the event the balance in the Capital Accounts of the Partners are not in
proportion to their Sharing Ratios prior to such sale or disposition.
Section 10.3.
(a) Notwithstanding anything to the contrary set forth herein, no
allocation of loss or deduction shall be made to the Limited Partner to the
extent that it is determined that such allocation would cause the Limited
Partner's Capital Account to have a deficit balance in excess of the sum of
(i) the Limited Partner's share of the Partnership's Minimum Gain,
including Minimum Gain attributable to any Partner Nonrecourse Debt owed or
attributable to such Limited Partner, and (ii) any amounts which the
Limited Partner is required to restore to the Partnership upon liquidation
of its Partnership Interest (or which are treated as such amounts pursuant
to Treasury Regulation Section 1.704-l(b)(2)(ii)(c) or any successor
provision), after taking into account the adjustments described in Treasury
Regulations Section 1.704-l(b)(2)(ii) (d)(4), (5) and (6) or any successor
provisions. Any allocations disallowed by reason of this Section 10.3 (a)
shall be allocated to the General Partner. If the Limited Partner
unexpectedly receives an adjustment, allocation or distribution described
in Treasury Regulations Section 1.704-l(b)(2)(ii)(d)(4), (5) or (6) or any
successor provisions which causes the negative Capital Account balances of
any such Limited Partner at the end of any fiscal year to exceed the sum of
(i) such Limited Partner's share of the Partnership's Minimum Gain,
including Minimum Gain attributable to any Partner Nonrecourse Debt owed or
attributable to such Limited Partner, and (ii) any amounts which the
Limited Partner is required to restore to the Partnership upon liquidation
of its Partnership Interest (or which are treated as such amounts pursuant
to Treasury Regulation Section 1.704-l(b) (2)(ii)(c) or any successor
provision), after taking into account the adjustments described in Treasury
Regulations Section 1.704-l(b)(2)(ii)(d)(4), (5) and (6) or any successor
provisions, then, items of Partnership income and gain shall be specially
allocated to the Limited Partner in an amount and manner sufficient to
eliminate the resulting Capital Account deficit as quickly as possible.
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(b) If there is a net decrease in Minimum Gain during a fiscal year,
each Partner will be allocated items of Partnership income and gain for
such fiscal year (and, if necessary, for subsequent fiscal years) in
proportion to, and to the extent of, the greater of (i) the portion of such
Partner's share of the net decrease in the Partnership's Minimum Gain
during such fiscal year that is allocable to the disposition of Partnership
property subject to one or more Nonrecourse Liabilities of the Partnership;
or (ii) the deficit balance in such Partner's Capital Account at the end of
such fiscal year (determined before any allocation of Partnership income,
gain, loss, deduction or Code Section 705(a)(2)(B) expenditure for such
year and excluding from each such deficit Capital Account balance any
amount that such Partner is obligated to restore under Treasury Regulations
Section 1.704-l(b)(2) (ii)(c) or any successor provision, as well as each
Partner's share of the Partnership's Minimum Gain and the amount of any
Partner Nonrecourse Debt owed or attributable to such Partner).
(c) Any special allocations or reallocations pursuant to Section
10.3(a) and (b) shall be taken into account in computing subsequent
allocations of income, gain, loss and deduction pursuant to this Article 10
so that, to the maximum extent possible, the aggregate amount of such items
allocated to each Partner over the term of the Partnership shall be equal
to the amounts that would have been allocated to each Partner but for the
provisions of Sections 10.3(a) and (b).
(d) Notwithstanding the allocations set forth in Sections 10.3(a), (b)
and (c), Nonrecourse Deductions attributable to a Partner Nonrecourse Debt
shall be allocated to the Partners who bear the economic risk of loss in
accordance with Treasury Regulations Section 1.704-1T(b)(4)(iv)(h) or any
successor provision. In the event there is a net decrease during a fiscal
year in the Minimum Gain attributable to Partner Nonrecourse Debt, any
Partner with a share of the Minimum Gain attributable to such debt at the
beginning of the fiscal year shall be allocated items of Partnership income
and gain for such fiscal year in such amounts and in such manner as
required under Treasury Regulations Section 1.704-1T(b)(4)(iv)(h)(4) or any
successor provision.
Section 10.4
(a) The Partnership shall, except to the extent such item is
subject to allocation pursuant to subsection (b)
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below, allocate each item of income, gain, loss, deduction and credit,
as determined for federal and other income tax purposes, in the same manner
as such item was allocated for book purposes; and
(b) The Partnership, for federal and other income tax purposes shall,
in the case of Contributed Properties, allocate items of income, gain,
loss, depreciation and cost recovery deductions attributable to those
properties with a Built-In Gain or Built-In Loss pursuant to Section 704(c)
of the Code. Similar allocations shall be made in the event that the
Carrying Value of Partnership properties subject to depreciation, cost
recovery or amortization are adjusted pursuant to Section 8.4 upon the
issuance of Partnership Interests for cash. If an existing Partner acquires
additional Partnership Interests, such allocations shall apply only to the
extent of his or its additional Interests. No allocation under Section
704(c) of the Code shall be charged or credited to a Partner's Capital
Account.
Section 10.5. Income, gain, loss, deduction or credit
attributable to any Partnership Interest which has been transferred shall be
allocated between the transferor and the transferee allocated equally among the
days of the Partnership's fiscal year without regard to Partnership operations
during such days.
Section 10.6. The General Partner may rely upon, and shall have
no liability to the Limited Partner or the Partnership if it does rely upon, the
written opinion of tax counsel or accountants retained by the Partnership from
time to time with respect to all matters (including disputes with respect
thereto) relating to computations and determinations required to be made under
this Article X or other provisions of this Agreement.
Section 10.7.
(a) The General Partner is designated tax matters partner ("TMP") as
defined in Section 6231(a)(7) of the Code. The TMP and the Limited Partner
shall use their best efforts to comply with responsibilities outlined in
this Section 10.7 and in sections 6222 through 6232 of the Code (including
any Treasury regulations promulgated thereunder) and in doing so shall
incur no liability to any other Partner.
(b) If the Limited Partner intends to file a notice of inconsistent
treatment under Section 6222(b) of the Code, such Partner shall, prior to
the filing of such
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notice, notify the TMP of such intent and the manner in which the
Limited Partner's intended treatment of a Partnership item is (or may be)
inconsistent with the treatment of that item by the Partnership.
(c) No Partner other than the TMP shall file a request pursuant to
Section 6227 of the Code for an administrative adjustment of partnership
items for any Partnership taxable year.
(d) No Partner other than the TMP shall file a petition under Code
sections 6226, 6228 or other Code sections with respect to any Partnership
item, or other tax matters involving the Partnership. In the case where the
TMP files such petition, it shall determine the forum in which such
petition will be filed.
ARTICLE XI
Books of Account, Records and Tax Information
Section 11.1. Proper and complete records and books of account
(including those required by the Partnership Act) shall be kept by the General
Partner in which shall be entered all transactions and other matters relative to
the Partnership's business as are usually entered into records and books of
account maintained by persons engaged in businesses of like character. The
Partnership books and records shall be maintained in accordance with accounting
principles described herein, and shall be kept on the accrual basis. The books
and records shall at all times be made available at the principal office of the
Partnership and shall be open to the reasonable inspection and examination of
the Partners or their duly authorized representatives during the business hours
of the General Partner for any purpose reasonably related to the interest of
such Partner as a partner in the Partnership.
Section 11.2. As soon as reasonably practicable after the end of
each calendar year, the General Partner shall send each person who was a holder
of a Partnership Interest at any time during the calendar year then ended
(including any assignee permitted under Article XVI below, whether or not a
substituted Limited Partner) all Partnership tax information as shall be
necessary for the preparation by such holder of his federal income tax return.
Further, on request by a Partner, the General Partner will furnish such Partner
copies of all federal, state and local income tax returns or information
returns, if any, which the Partnership is required to file.
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ARTICLE XII
Fiscal Year
The fiscal year of the Partnership shall end on the thirty-first
(31st) day of December in each year.
ARTICLE XIII
Partnership Funds
The funds of the Partnership shall be deposited in such bank
account or accounts, or invested in such interest-bearing or
non-interest-bearing accounts, as shall be designated by the General Partner in
its sole discretion. A11 withdrawals from any such bank accounts shall be made
by the General Partner or other agent or agents duly authorized by the General
Partner. Partnership funds shall not be commingled with those of any other
person (including the General Partner or any of its Affiliates).
ARTICLE XIV
Status of Limited Partners
Section 14.1. No Limited Partner shall have any personal
liability whatever, whether to the Partnership, to any of the Partners or to the
creditors of the Partnership, for the debts of the Partnership or any of its
losses beyond the amount agreed to be contributed by him to the capital of the
Partnership as set forth in Section 8.1 except to the extent required by the
Partnership Act. No Limited Partner shall be obligated to restore any deficit in
its Capital Account upon the liquidation of the Partnership or its Partnership
Interest.
Section 14.2. The dissolution, bankruptcy, mental incompetency
or legal disability of the Limited Partner shall not cause a dissolution of the
Partnership, but the rights of such Limited Partner to share in the profits and
losses of the Partnership, and to receive distributions of Partnership funds,
shall on the happening of such an event, devolve upon such Limited Partner's
legal representatives or successors in interest, as the case may be, subject to
the terms and conditions of this Agreement, and the Partnership shall continue
as a limited partnership. Each Limited Partner's estate or other successor in
interest shall be liable for all the obligations of such Limited Partner. In no
event, however, shall such estate, legal representative or other successor in
interest become a substituted Limited Partner, except in accordance with Article
XVI hereof.
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ARTICLE XV
Management and Operation of Business
Section 15.1 (a) Except as otherwise expressly provided in
Section 15.3 of this Agreement, all management powers over the business and
affairs of the Partnership shall be exclusively vested in the General Partner,
and the Limited Partner shall not have any right of control or management power
over the business and affairs of the Partnership or Camden Cogen. In addition to
the powers now or hereafter granted a general partner of a limited partnership
under applicable law or which are granted to the General Partner under any other
provisions of this Agreement, the General Partner shall have full power and
exclusive authority to do all things deemed necessary or desirable by it, in its
sole discretion, to conduct the business of the Partnership, without the need
for approval by or any other authorization or consent from, the Limited
Partners, including, without limitation, (i) the making of any expenditures, the
borrowing of money, the guaranteeing of indebtedness and other liabilities, the
issuance of evidences of indebtedness and the incurring of any obligations it
deems necessary for the conduct of the activities of the Partnership or Camden
Cogen; (ii) the acquisition, disposition, lease, mortgage, pledge, encumbrance,
hypothecation or exchange of any or all of the assets of the Partnership and the
merger or consolidation of the Partnership with or into another entity; (iii)
the use of the assets of the Partnership (including, without limitation, cash on
hand) for any purpose and on any terms it sees fit, including, without
limitation, the financing of the conduct of the operations of the Partnership or
Camden Cogen, the lending of funds to other persons (including Affiliates) and
the repayment of obligations of the Partnership or other persons (including
Affiliates); (iv) the negotiation and execution of any agreements deemed
desirable in its sole discretion and the performance of any contracts,
conveyances or other instruments that it considers useful or necessary to the
conduct of the Partnership's or Camden Cogen's operations or the implementation
or exercise of its powers under this Agreement or the Agreement of Limited
Partnership of Camden Cogen including, without limitation, execution and
delivery of any contracts, agreements, partnership agreements and amendments
thereto including amendments to this Agreement and the Agreement of Limited
Partnership of Camden Cogen; (v) the distribution of Partnership cash; (vi) the
selection and dismissal of employees and outside attorneys, accountants,
consultants and contractors and the determination of their compensation and
other terms of employment or hiring; (vii) the maintenance of such insurance for
the benefit of the Partnership and the Partners as it deems
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necessary, if any; and (viii) the control of any matters affecting the
rights and obligations of the Partnership, including, without limitation,
the conduct of litigation, the incurring of legal expense and the
settlement of claims and litigation.
(b) It is the intention of the parties hereto that the General
Partner have complete authority to operate the Partnership and its affairs, to
amend this Agreement, and to exercise all powers of the General Partner under
this Agreement and at law, all in its sole discretion (as described in this
Section l5.1(b) and in Section l5.1(c) below), and that all provisions of this
Agreement and all rights and powers of the General Partner pursuant to this
Agreement and at law are to be read, interpreted and exercised in accordance
with the foregoing statement of intent. In that regard, the General Partner
shall be entitled to consider only such interests and factors as it desires and
may consider its own interests, and shall have no duty or obligation to give any
consideration to any interest of, or factors affecting, the Partnership or the
Limited Partner, and may take any action or omit to take any action all without
any involvement of, or consent or approval by, the Limited Partner.
(c) Whenever in this Agreement the General Partner is permitted
or required to make a decision (i) in its "sole discretion" or "discretion." or
under a similar grant of authority or latitude, the General Partner shall be
entitled to consider only such interests and factors as it desires and may
consider its own interests, and shall have no duty or obligation to give any
consideration to any interest of or factor affecting the Partnership or the
Limited Partner, or (ii) in its "good faith" or under another express standard,
the General Partner shall act under such express standard and shall not be
subject to any other or different standards imposed by this Agreement or by law
or any other agreement contemplated herein. The Limited Partner hereby agrees
that any standard of care or duty imposed in this Agreement or any other
agreement contemplated herein or under the Partnership Act or any other
applicable law, rule or regulation shall be modified, waived or limited in each
case as required to permit the General Partner to act under this Agreement or
any other agreement contemplated herein and to make any decision pursuant to the
authority prescribed in this Agreement so long as such action or decision was
not performed or omitted with the intent to defraud or deliberately cause injury
to the Limited Partner.
Section 15.2 No Limited Partner shall participate in the
management or operations of or have any control over the Partnership's business
nor shall any Limited Partner have the
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power to represent, act for, sign for or bind the General Partner or the
Partnership. The Limited Partner hereby consents to the exercise by the
General Partner of the powers conferred on it by this Agreement.
Section 15.3 Notwithstanding any other provision of this
Agreement to the contrary, without the consent of the Limited Partner, the
General Partner shall not have the authority to:
(1) Admit a person as a General Partner, except as provided in this
Agreement;
(2) Admit a person as a Limited Partner, except as provided in this
Agreement; or
(3) Knowingly perform any act that would subject the Limited Partner to
any liability as a general partner.
Section 15.4 Notwithstanding any other provision of this
Agreement to the contrary, no lender, lessor, lessee purchaser (including any
purchaser of property from the Partnership or Cogen Camden) or any other person
dealing with the Partnership or Cogen Camden, shall be required to verify any
representation by the General Partner as to the extent of the interest in the
assets of the Partnership that the General Partner is entitled to encumber,
sell, lease or otherwise use or Partnership action that the General Partner is
empowered to authorize and conduct and such person shall be entitled to rely
exclusively on the representations of the General Partner as to its authority to
enter into such arrangements and shall be entitled to deal with the General
Partner as if it were the sole party in interest therein, both legally and
beneficially. The Limited Partner and each assignee hereby waives any and all
defenses or other remedies that may be available against such lender, purchaser
or other person to contest, negate or disaffirm any such action of the General
Partner. In no event shall any person dealing with the General Partner or its
representative with respect to any business or property of the Partnership be
obligated to ascertain that the terms of this Agreement have been complied with,
or to inquire into the necessity or expediency of any act of the General Partner
or its representative; and every contract, agreement, deed, mortgage, security
agreement, promissory note or other instrument or document executed by the
General Partner or its representative with respect to any business or property
of the Partnership shall be conclusive evidence in favor of any and every person
relying thereon or claiming thereunder that (i) at the time of the execution and
delivery thereof this Agreement was in full force and effect, (ii) such
instrument or document
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was duly executed in accordance with the terms and provisions of this Agreement
and is binding upon the Partnership, and (iii) the General Partner or its
representative was duly authorized and empowered to execute and deliver any and
every such instrument or document for and on behalf of the Partnership.
Section 15.5. The General Partner shall receive no compensation
for its services hereunder but shall be reimbursed for any costs, expenses, fees
or other disbursements paid or incurred by it for or on behalf of the
Partnership. The General Partner may pay with funds of the Partnership or incur
for and on behalf of the Partnership, costs, expenses, fees and other
disbursements as it in its sole discretion deems necessary for the ongoing
operations of the Partnership's business, activities and affairs.
Section 15 6. Neither the General Partner, its Affiliates,
nor any owner, officer, director, partner, employee or agent of the
General Partner or its Affiliates, shall be liable, responsible or
accountable in damages or otherwise to the Partnership or any Partner for
any action taken or failure to act (even if such action or failure to act
constituted the negligence of a person) on behalf of the Partnership
within the scope of the authority conferred on the person described in
this Agreement or by law unless such act or omission was performed or
omitted fraudulently or constituted willful misconduct. To the extent
that, at law or in equity, the General Partner, its Affiliates, or any
owner, officer, director, partner, employee or agent thereof have duties
(including fiduciary duties) and liabilities relating to the Partnership
or to another Partner, the General Partner, its Affiliates, or any owner,
officer, director, partner, employee or agent thereof acting under the
Agreement shall not be liable to the Partnership or to any such other
Partner for their reliance on the provisions of this Agreement. The
provisions of this Agreement, to the extent that they expand or restrict
the duties and liabilities of the General Partner, its Affiliates, or any
owner, officer, director, partner, employee or agent thereof otherwise
existing at law or in equity, are agreed by the Partners to replace such
other duties and liabilities of the General Partner, its Affiliates, or
any owner, officer, director, partner, employee or agent thereof.
Section 15.7.
(a) To the fullest extent permitted by law, the General Partner,
its Affiliates, their respective officers, directors, partner, employees
and agents or any person performing a similar function (individually, an
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<PAGE>
"Indemnitee") shall be indemnified and held harmless by the Partnership from and
against any and all losses, claims, damages, judgments, liabilities,
obligations, penalties, settlements and reasonable expenses (including legal
fees) arising from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, in which the Indemnitee may be
involved, or threatened to be involved, as a party or otherwise, by reason of
its status as (x) the General Partner or an Affiliate thereof, or (y) an
officer, director, partner, employee or agent of the General Partner or an
Affiliate thereof, regardless of whether the Indemnitee continues to be the
General Partner or an Affiliate or an officer, director, employee or agent of
the General Partner or an Affiliate thereof at the time any such liability or
expense is paid or incurred, unless the act or failure to act giving rise to
indemnity hereunder was performed or omitted with the intent to defraud or
deliberately cause injury to the Limited Partner.
(b) The Partnership through the General Partner, in its sole
discretion, may purchase and maintain insurance on behalf of the General Partner
and such other persons as the General Partner shall determine, in its sole
discretion, against any liability that may be asserted against or expense that
may be incurred by such person in connection with the Partnership's activities,
regardless of whether the Partnership would have the power to indemnify such
person against such liability under the provisions of this Partnership
Agreement.
(c) Expenses incurred by any Indemnitee in defending any claim with
respect to which such Indemnitiee may be entitled to indemnification by the
Partnership hereunder (including without limitation reasonable attorneys' fees
and disbursements) shall, to the maximum extent permitted by law, be advanced by
the Partnership prior to the final disposition of such claim, upon receipt of a
written undertaking by or on behalf of such Indemnitee to repay the advanced
amount of such expenses unless it is determined ultimately that the Indemnitee
is entitled to indemnification by the Partnership under Section 15.7(a).
(d) The indemnification provided in this Section 15 7 is for the
benefit of the indemnitees and shall not be deemed to create any right to
indemnification for any other persons.
Section 15.8. It is further understood and agreed
that the other business interests and activities of the
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Partners and Affiliates of the Partners may be of any nature or description,
including, but not limited to, the ownership, operation or management of
cogeneration facilities similar to the Facility, and may be engaged in by such
Affiliates independently or with others. Neither the Partnership nor any Partner
shall have any right, by virtue of this Agreement or the partnership
relationship created hereby, in or to the business activities of the other
Partners or of such Affiliates or to the income or proceeds derived therefrom,
and the pursuit of such business activities, even if competitive with the
business of the Partnership, shall not be deemed wrongful or improper. Any
Partner or any Affiliate of a Partner shall have the right to take for its own
account or to recommend to others any investment opportunity without being
required to offer the same to the other Partners of the Partnership.
ARTICLE XVI
Transfer of Interests by Partners
Section 16.1. No Partner shall have the right to transfer its
interest in the Partnership, or any portion thereof, and to have the transferee
admitted as a substituted Partner in respect of such Partnership interest
without complying with the provisions of this Article XVI and, in the case of
the Limited Partner, the consent of the General Partner, which consent may be
withheld in its sole discretion, and in the case of the General Partner, the
consent of the Limited Partner. Any attempted transfer or assignment of any
interest in the Partnership in violation of the provisions of this Article XVI
shall be void and of no force and effect. Notwithstanding the foregoing, nothing
herein shall prohibit Cogen Technologies Limited Partners Joint Venture, the
original Limited Partner, from transferring its interest in the Partnership to
its partners, pro rata in accordance with their interests, upon the dissolution
and liquidation of Cogen Technologies Limited Partners Joint Venture.
Section 16.2. No transfer shall be made of any Partnership
Interest if such transfer would result in the Facility ceasing to qualify as a
Qualifying Cogeneration Facility. Moreover, there shall be no transfers of any
equity interest in a Partner (or any Affiliate of a Partner) if such transfers
would result in the Facility ceasing to qualify as a Qualifying Cogeneration
Facility. No Partner or any Affiliate thereof shall request (nor permit such a
request by any party to whom such Partner or Affiliate is contemplating
transferring a Partnership Interest or an equity interest in such Partner or any
Affiliate) any order or ruling from the Federal Energy Regulatory Commission, as
to whether any action would
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potentially cause the Facility to lose its status as a Qualifying Cogeneration
Facility, unless such request shall first have been reviewed and approved by the
General Partner, in its sole discretion.
Section 16.3. Any Partner who desires to transfer his
Partnership Interest shall arrange for any permitted transferee to be bound by
the provisions of this Agreement, as it may then be amended, by having such
transferee execute two counterparts of an instrument of assignment satisfactory
in form and substance to the other Partner and by delivering the same to the
other Partner together with any such other information that may be required by
counsel to the Partnership to determine whether the proposed transfer violates
applicable federal or state securities or other laws or regulations or would
cause the Facility to cease to qualify as a Qualifying Cogeneration Facility. If
and when the consent of the Partners to such assignment and the substitution of
such transferee hereof is secured and the other requirements of this Article XVI
are satisfied, the transferee shall become a substituted Partner as to the
Partnership Interest thus transferred effective as of the first day of the
calendar month during which the General Partner actually receives the aforesaid
instrument of assignment executed by both the transferor and transferee. The
transferee shall be required to pay any and all reasonable filing and recording
fees, legal fees, accounting fees, and other charges and fees incurred by the
Partnership and its counsel as a result of such transfer.
Section 16.4. All Partners acknowledge that the Partnership
interests have not been registered under (i) the Securities Act of 1933, as
amended (the "1933 Act"), in reliance on the exemptions afforded by Section 4(2)
of the 1933 Act, or (ii) applicable state securities laws in reliance on
exemptions under such laws. Therefore, to preserve said exemptions and
notwithstanding anything contained herein to the contrary, the Partners hereby
agree that interests of the Partners shall be nontransferable and nonassignable,
except in compliance with the registration provisions of the 1933 Act and the
Partnership Act, or an exemption or exemptions therefrom, and any attempted or
purported transfer or assignment in violation of the foregoing shall be void and
of no effect. Accordingly, as an additional condition precedent to any
assignment or other transfer of any interest in the Partnership, the General
Partner may require an opinion of counsel satisfactory to the General Partner
that such assignment or transfer will be made in compliance with the
registration provisions of the 1933 Act and applicable state securities laws or
exemption(s) therefrom, and such transferor or assignor shall be responsible for
paying said counsel's fee
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for the opinion. The foregoing shall not limit the restrictive legend set
forth at the beginning of this Agreement.
Section 16.5. Nothing in this Article XVI shall be deemed to
prohibit a Partner from pledging or hypothecating its Partnership Interest or
any part thereof in connection with any bona fide financing of such Partner.
However, in the event of a foreclosure of any such pledge or hypothecation, the
person who shall acquire the Partnership Interest incident to such foreclosure
shall not become a substituted Partner hereunder without the written consent of
the other Partners. If the foreclosure occurs with respect to all the interest
of the General Partner and the Limited Partner does not elect, within ninety
(90) days after the foreclosure, to allow the assignee of the General
Partnership interest acquired incident to such foreclosure, to become a
substituted general partner, then such failure shall be deemed to be the
affirmative vote of the Limited Partner to terminate effective as of such 90th
day the General Partner's status as the General Partner of the Partnership, and
in such event the resulting event of withdrawal of the General Partner shall not
be in contravention of this Agreement.
ARTICLE XVII
Dissolution of the Partnership
The happening of any one of the following events shall work an
immediate dissolution of the Partnership:
(a) An event of withdrawal of the General Partner as defined in (S)
17-402 of the Partnership Act except that an event described in Subsections
(a)(4) and (a)(5) of (S) 17-402 shall not be an event of withdrawal;
(b) The receipt by the Partnership of the final payment due on the
sales price of all or substantially all the assets of the Partnership or the
Partnership's business following the Partnership's sale thereof;
(c) The agreement by all of the Partners to dissolve; and
(d) The expiration of the term of the Partnership as provided in
Article VI of this Agreement, unless all Partners agree to extend the term of
the Partnership past the date set forth in Article VI.
Any withdrawal of the General Partner under (S) 17-602 of the Partnership Act
shall be effective on the date specified in a
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written notice of withdrawal given by the General Partner for the Limited
Partner; provided, however, that the effective date shall be not less than 60
days following the date of delivery of such notice.
ARTICLE XVIII
Winding Up and Termination of the Partnership
Section 18.1. If the Partnership is dissolved for any reason, a
liquidator (the "Liquidator") shall commence to wind up the affairs of the
Partnership and to liquidate and sell its assets. The General Partner shall
serve as the Liquidator unless the dissolution occurred as a result of an event
of withdrawal of the General Partner, in which case the Limited Partner shall
serve as the Liquidator. The Liquidator shall have full right and discretion to
determine the time, manner and terms of sale or sales of Partnership property
pursuant to such liquidation having due regard to the activity and condition of
the relevant market and general financial and economic conditions. The
Liquidator appointed in the manner provided herein shall have and may exercise,
without further authorization or consent of any of the parties hereto or their
legal representatives or successors in interest, all of the powers conferred
upon the Partnership Manager and the General Partner under the terms of this
Agreement (but subject to all of the applicable limitations, contractual and
otherwise, upon the exercise of such powers) to the extent necessary or
desirable in the good faith judgment of the Liquidator to carry out the duties
and functions of the Liquidator hereunder for and during such period of time,
not to exceed two (2) years after the date of dissolution of the Partnership, as
shall be reasonably required in the good faith judgment of the Liquidator to
complete the liquidation and dissolution of the Partnership as provided for
herein. including, without limitation, the following specific powers:
(a) The power to continue to manage and operate any business of the
Partnership during the period of such liquidation or dissolution proceedings,
excluding, however, the power to make and enter into contracts which may extend
beyond the period of liquidation.
(b) The power to make sales and incident thereto to make deeds, bills
of sale, assignments and transfers of assets and properties of the Partnership;
provided, that the Liquidator may not impose personal liability upon any of the
Partners under any such instrument.
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(c) The power to borrow funds as may, in the good faith judgment of the
Liquidator, be reasonably required to pay debts and obligations of the
Partnership or operating expenses. and to execute and/or grant deeds of trust,
mortgages, security agreements, pledges and collateral assignments upon and
encumbering any of the Partnership properties as security for repayment of such
loans or as security for payment of any other indebtedness of the Partnership;
provided, that the Liquidator shall not have the power to create any personal
obligation on any of the Partners to repay such loans or indebtedness other than
out of available proceeds of foreclosure or sale of the properties or assets as
to which a lien or liens are granted as security for payment thereof.
(d) The power to settle, release, compromise or adjust any claims
asserted to be owing by or to the Partnership, and the right to file, prosecute
or defend lawsuits and legal proceedings in connection with any such matters.
Section 18.2. After making payment or provision for payment of all
debts and liabilities of the Partnership and all expenses of liquidation, the
Liquidator may set up, for a period not to exceed the aforesaid two (2) years,
such cash reserves as the Liquidator may deem reasonably necessary for any
contingent liabilities or obligations of the Partnership. Upon the satisfaction
or other discharge of such contingency, the amount of the reserves not retired,
if any, will be distributed in accordance with this Article.
Section 18.3. Upon the winding up and termination of the business and
affairs of the Partnership, its assets (other than cash) shall be sold, its
liabilities and obligations to creditors and all expenses incurred in its
liquidation shall be paid (either by payment or the making of reasonable
provision for payment). If the balances in the Partners' respective capital
accounts are not in proportion to their Sharing Ratios, the items of Partnership
income, gain or loss or deduction resulting from the sale of the Partnership
assets pursuant to this Article XVIII shall first be allocated, to the extent
possible, among such of the Partners in such shares as will bring the positive
balances in the Partners' Capital Accounts into proportion with their Sharing
Ratios. A11 remaining items of Partnership income, gain, loss or deduction shall
be credited or charged to the Capital Accounts of the Partners pro rata in
accordance with their Sharing Ratios. Thereafter, the net proceeds from such
sales (after deducting all selling costs and expenses in connection therewith).
together with (at the expiration of the two (2) year period referred to therein)
the balance and reserve account referred
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to in Section 18.2 above, shall be distributed among the Partners in accordance
with their respective positive balances in their Capital Accounts.
Section 18.4. Within a reasonable time following the completion
of the liquidation of the Partnership's properties, the Liquidator shall supply
to each of the Partners a statement prepared by the Partnership's accountants
which shall set forth the assets and the liabilities of the Partnership as of
the date of complete liquidation, each Partner's pro rata portion of
distributions pursuant to Section 18.3, and the amount retained as reserves by
the Liquidator pursuant to Section 18.2.
Section 18.5. Each holder of an interest in the Partnership
shall look solely to the assets of the Partnership for all distributions with
respect to the Partnership and his Capital Contribution thereto (including the
return thereof) and share of profits or losses thereof, and shall have no
recourse therefor (upon dissolution or otherwise) against the Partnership, the
General Partner or the Liquidator. No holder of an interest in the Partnership
shall have any right to demand or receive property other than cash upon
dissolution and termination of the Partnership.
Section 18.6. Upon the completion of the liquidation of the
Partnership and the distribution of all Partnership funds, the Partnership shall
terminate and the Liquidator shall (and is hereby given the power and authority
to) execute, acknowledge, swear to and record all documents required to
effectuate the dissolution and termination of the Partnership. No Partner shall
be required to restore any deficit balance existing in its Capital Account upon
the liquidation and termination of the Partnership.
ARTICLE XIX
Notices
To be effective, all notices and demands under this Agreement
must be in writing and must be given (i) by depositing same in the United States
mail, postage prepaid, certified or registered, return receipt requested, (ii)
by prepaid telegram, or (iii) by delivering same in person and receiving a
signed receipt therefor. For purposes of notice, the addresses of the Partners
or their respective assigns shall be as set forth on the signature pages hereof.
Notices mailed in accordance with the foregoing shall be deemed to have been
given and made upon receipt. Any Partner or his assignee may designate a
different address to which notices or demands shall thereafter be directed by
written notice given in the manner
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hereinabove required and directed to the Partnership at its principal
office as hereinabove set forth.
ARTICLE XX
Amendment of Limited Partnership Agreement
This Agreement may be modified or amended from time to time by
the General Partner, as the General Partner may, in its sole discretion deem
appropriate, without the consent of the Limited Partner so long as such
modification or amendment does not (i) convert the Limited Partner's interest in
the Partnership into a General Partner's interest, (ii) otherwise subject the
Limited Partner to liability for the obligation of the Partnership or (iii)
require Capital Contributions to the Partnership from the Limited Partner other
than as provided in Section 8.1 hereof. The General Partner shall have no
liability to the Limited Partner or any owner or Affiliate thereof for damages
or otherwise as a result of any amendment allowable by the preceding sentence so
long as such amendment was not made with the intent to defraud or deliberately
cause injury to the Limited Partner.
ARTICLE XXI
Power of Attorney
The Limited Partner and any permitted assignee or transferee of
its interest hereunder, does hereby irrevocably constitute and appoint the
General Partner, its true and lawful attorney in fact and agent, to execute,
acknowledge, verify, swear to, deliver, record and file, in such Limited
Partner's or assignee's name, place and stead, all instruments, documents and
certificates which may from time to time be required to effectuate and implement
the terms and provisions of this Agreement including, without limitation, the
power and authority to execute, verify, swear to, acknowledge, deliver, record
and file (i) all certificates and other instruments (including counterparts of
this Agreement and amendments thereto) which the General Partner deems in its
sole discretion appropriate to form, qualify or continue the Partnership as a
limited partnership in the State of Delaware, qualify to do business in the
States of Texas and New Jersey and in such other states as the General Partner
deems appropriate, (ii) all instruments which the General Partner deems in its
sole discretion appropriate to reflect any amendment to this Agreement, or
modification of the Partnership, made in accordance with the terms of this
Agreement, (iii) all conveyances and other instruments which the General Partner
deems in its sole discretion appropriate to reflect the dissolution and
termination of the Partnership pursuant to the
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terms of this Agreement, including any writing required by the Partnership Act,
(iv) all instruments relating to the admission of any additional or substituted
Limited Partner, (v) a certificate of assumed name and such other certificates
and instruments as may be necessary under any fictitious or assumed name
statutes from time to time in effect in jurisdictions in which the Partnership
conducts or plans to conduct business and (vi) all other instruments that may be
required or permitted by law to be filed on behalf of the Partnership and that
are not inconsistent with this Agreement. The power of attorney granted herein
shall be deemed to be coupled with an interest, shall be irrevocable, shall
survive and not be affected by the subsequent death, dissolution, bankruptcy,
incompetency or legal disability of the Limited Partner and shall extend to such
Limited Partner's successors and assigns; and may be exercised by executing such
instrument acting as attorney in fact for the Limited Partner or in such other
manner as said agent and attorney in fact may deem appropriate. The Limited
Partner and each partner thereof hereby agrees to be bound by any action taken
by the General Partner acting pursuant to such power of attorney, and the
Limited Partner and each of its partners and assigns hereby waives any and all
defenses which may be available to contest, negate or disaffirm any action of
the General Partner taken under such power of attorney.
ARTICLE XXII
Representations, Warranties and Covenants
The General Partner and the Limited Partner each hereby
respectively represent and warrant to the others that (i) it is duly organized,
validly existing and in good standing under the jurisdiction of its
organization, with full power and authority to enter into and perform its
obligations under this Agreement; (ii) it has validly executed this Agreement.
and upon delivery, this Agreement shall be a binding obligation of such party,
enforceable against such party in accordance with its terms; (iii) its entry
into this Agreement and the performance of its obligations hereunder will not
require the approval of any governmental body or regulatory authority and will
not violate, conflict with or cause a default under, any of its organizational
documents, any contractual covenant or restriction by which such party is bound,
or any applicable law. regulation, rule, ordinance, order, judgment or decree,
(iv) neither the admission of said party as a Partner in the Partnership nor the
performance of this Agreement or the transactions contemplated herein will cause
the Facility to fail to meet the qualifying cogeneration facility requirements
under PURPA or to lose its status as a Qualifying Cogeneration Facility, and (v)
during the term of the Partnership, such
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<PAGE>
Parties shall not willingly or knowingly take or permit any action which would
cause the Facility to fail to meet such requirements or to lose such status.
ARTICLE XXIII
Miscellaneous
Section 23.1. The Partners agree that the Partnership
properties are not and will not be suitable for partition. Accordingly,
each of the Partners hereby irrevocably waives any and all rights that he
may have to maintain any action for partition of any of the Partnership
property.
Section 23.2. This Agreement and the additional documents and
agreements referred to herein constitute the entire agreement among the parties.
It supersedes any prior agreement or understandings among them, and it may not
be modified or amended in any manner other than as set forth herein.
Section 23.3. This Agreement and the rights of the parties
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware.
Section 23.4. Except as herein otherwise specifically provided,
this Agreement shall be binding upon and inure to the benefit of the parties and
their legal representatives, heirs, administrators, executors, successors and
assigns.
Section 23.5. Wherever from the context it appears
appropriate, each term stated in either the singular or the plural shall
include the singular and the plural, and pronouns stated in the masculine,
the feminine or the neuter gender shall include the masculine, feminine
and neuter. The term "person" means any individual, corporation,
partnership, trust or other entity.
Section 23.6. Captions contained in this Agreement are inserted
only as a matter of convenience and in no way define, limit or extend the scope
or intent of this Agreement or any provision hereof.
Section 23.7. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those to which it is held invalid, shall
not be affected thereby.
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<PAGE>
Section 23.8. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument, It shall not be necessary for all
Partners to execute the same counterpart hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and in the year first above written.
Address:
GENERAL PARTNER:
COGEN TECHNOLOGIES CAMDEN, INC.
Suite 5000
1600 Smith Street Building
1600 Smith Street By: /s/ D. Cal McNair
Houston, Texas 77002 -----------------------------
D. Cal McNair, Vice President
Address: COGEN TECHNOLOGIES LIMITED
PARTNERS JOINT VENTURE
c/o Evergreen Energy
Suite 5000
1600 Smith Street Building
1600 Smith Street By: /s/ Pauline E. Buck
Houston, Texas 77002 ------------------------------
Pauline E. Buck. as Trustee
of the Charles N. Buck
Family Trust under the
Will of Charles N. Buck
By: /s/ Robert A. Hansen
-------------------------------
Robert A. Hansen
By: EVERGREEN ENERGY
By: /s/ Velva G. Levine
--------------------------
Its: General Partner
-------------------------
By:The 1989 Energy Trust
By: /s/ Jack R. Sowell
--------------------------
Jack R. Sowell, Trustee
(and not in his individual
capacity)
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By: /s/ C. Donald Van Wart
----------------------------
C. Donald Van Wart
By: Hansfam Three, a Trust
By: /s/ John P. Hansen
----------------------
John P. Hansen, Trustee
(and not in his individual
capacity)
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<PAGE>
FIRST AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
COGEN TECHNOLOGIES CAMDEN GP LIMITED PARTNERSHIP
THIS First Amendment, dated as of December 1, 1991 (this "First
Amendment"), is hereby entered into to amend the Agreement of Limited
Partnership of Cogen Technologies Camden GP Limited Partnership, dated as of
July 26, 1991 (the "Agreement"). Initially capitalized terms used herein and not
otherwise defined are used as defined in the Agreement.
1. Pursuant to and in accordance with Articles XX and XXI of the Agreement,
the Agreement is hereby amended to add a new Section 15.9, which reads as
follows:
"Section 15.9 Authorizations. (a) The Partnership is hereby
--------------
authorized to engage in all activities and transactions and to do all
things and to hold all interests in real, personal and mixed property,
contract rights and other property, necessary, appropriate, proper,
advisable or desirable for, or incidental or convenient to, the objects
and purposes of the Partnership, including, but not limited to, the
power to enter into, make and perform any agreement, contract,
commitment, arrangement or undertaking to acquire, own, hold, purchase,
lease, dispose of, mortgage, pledge, hypothecate or assign, and to
exercise all rights, powers, privileges and other incidents of ownership
or possession with respect to, any property, whether real, personal or
mixed, and to exercise any and all of the powers that may be exercised
by the General Partner on behalf of the Partnership pursuant to Article
XV.
(b) Notwithstanding anything to the contrary contained in this
Agreement or any other agreement or undertaking, in furtherance of the
Partnership's objects and purposes, the Partnership, on its own behalf
or on behalf of Camden Cogen, and the General Partner, on behalf of the
Partnership, shall have any and all powers necessary,appropriate proper,
advisable, incidental or convenient to or for the accomplishment of the
Partnership's objects and purposes, alone or with others, including,
without limitation, the following:
(i) to design, plan, finance, construct, own, develop, maintain,
operate, lease and dispose of the Facility, or any part
thereof, and to engage in any and all activities necessary or
incidental to the foregoing;
(ii) to negotiate and enter into, and make, execute, deliver and
perform, assign and transfer to others all contracts,
agreements, commitments, arrangements and other undertakings,
as the same may be amended, restated, supplemented or
otherwise modified from time to time, and
<PAGE>
to grant liens, security interests in and other encumbrances
on, in and against the property of the Partnership or Camden
Cogen, as the case may be, all as may be necessary,
convenient or incidental to carry out the Partnership's
objects and purposes, including, but not limited to, the
following:
(1) loan agreements, including but not limited to
construction, term and working capital loan agreements;
(2) notes, including, but not limited to, construction, term
and working capital notes;
(3) capital contribution agreements;
(4) borrower indemnity agreements;
(5) collateral security documents, including, but not
limited to, mortgages, security agreements, security
deposit agreements, assignments and security agreements,
pledge agreements, assignments regarding contracts,
consents to assignments regarding contracts and any
Collateral Security Document (as defined in that certain
Construction and Term Loan Agreement) to which the
Partnership or Camden Cogen is a party;
(6) power purchase agreements;
(7) equipment supply contracts;
(8) additional contracts, agreements or other undertakings,
including, but not limited to, subordinated mortgages,
steam supply agreements, gas service agreements, gas
sourcing agreements, gas purchase agreements, turnkey
contracts, operation and maintenance agreements and
easement agreements;
(9) reimbursement agreements;
(10) recognition agreements;
(11) Midlantic Agreements (as defined in that certain
Construction and Term Loan Agreement);
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<PAGE>
(12) any (a) assignment, (b) consent to assignment, (c)
consent and agreement, and (d) consent and/or
recognition agreement relating to types of contracts,
agreements, commitments, arrangements or other
undertakings set forth in this Section 15.9;
(13) certificates and notices, including, but not limited to,
construction loan borrowing certificates, term loan
borrowing certificates, completion certificates, cost
certificates and notices of borrowing;
(14) collateral agency agreements and letter agreements;
(15) tax indemnity agreements and noncompete agreements;
(16) Project Contracts (as defined in that certain
Construction and Term Loan Agreement);
(17) Operative Documents (as defined in that certain form of
Amended and Restated Agreement of Limited Partnership of
Camden Cogen);
(18) partnership agreements; and
(iii) to have letters of credit issued for its account and on its
own behalf."
2. Pursuant to and in accordance with Articles XX and XXI of the Agreement,
the first sentence of Section 16.5 of the Agreement is hereby amended to delete
the words "in connection with any bona fide financing of such Partner."
This First Amendment shall be interpreted in accordance with the laws of
the State of Delaware, all rights and remedies being governed by such laws.
Except to the extent modified hereby, the Agreement shall remain in full force
and effect.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this First Amendment as
of the date first set forth above.
GENERAL PARTNER:
Cogen Technologies Camden, Inc.
By: /s/ [SIGNATURE APPEARS HERE]
------------------------------
Vice President
LIMITED PARTNER:
Cogen Technologies Limited Partners
Joint Venture
Pursuant to powers of attorney
executed and delivered in favor of
the General Partner
By: Cogen Technologies Camden, Inc.
By: /s/ [SIGNATURE APPEARS HERE]
------------------------------
Vice President
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<PAGE>
================================================================================
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
CAMDEN COGEN L.P.
Dated
February 9, 1993
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
DEFINITIONS
1.1 Defined Terms...................................................... 2
1.2 Other Definitions.................................................. 21
ARTICLE II
FORMATION AND CONTINUATION OF PARTNERSHIP
2.1 Formation of Partnership; Name..................................... 22
2.2 Purpose; Business of the Partnership............................... 22
2.3 Authorizations..................................................... 22
2.4 Principal Office; Offices; Addresses............................... 24
2.5 Further Filings.................................................... 25
2.6 Term............................................................... 25
ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 Partners and Contributions......................................... 25
3.2 Interest on Capital Contributions.................................. 25
3.3 Withdrawal of McNair............................................... 25
ARTICLE IV
DISTRIBUTIONS
4.1 Distributable Cash................................................. 26
4.2 Distributions Prior to the Second Capital
Contribution Date................................................ 26
4.3 Distributions After the Second Capital
Contribution Date and Prior to the Flip Date..................... 26
4.4 Distributions Subsequent to the Flip Date.......................... 27
4.5 Arrears Account.................................................... 27
4.6 Tax Indemnity...................................................... 28
4.7 Net Cash From Sales or Refinancing................................. 28
4.8 Special Event ..................................................... 29
4.9 Failure to Make Second Capital Contribution ....................... 29
4.10 General Partner Term Loan.......................................... 29
-i-
<PAGE>
Page
----
ARTICLE V
ALLOCATION OF CERTAIN PROFITS AND LOSSES
FOR BOOK AND TAX PURPOSES
5.1 Operating Profits Subsequent to the Initial
Capital Contribution Date and Prior to the
Second Capital Contribution Date................................. 30
5.2 Operating Profits Subsequent to the Second
Capital Contribution Date........................................ 30
5.3 Operating Losses................................................... 31
5.4 Depreciation....................................................... 31
5.5 Gains.............................................................. 32
5.6 Losses............................................................. 32
5.7 Qualified Income Offset............................................ 32
5.8 Minimum Gain Chargeback............................................ 32
5.9 Special Allocation of Certain Expenses............................. 33
5.10 Partner Nonrecourse Deductions..................................... 33
5.11 Curative Allocations............................................... 33
5.12 Tax Allocations.................................................... 33
5.13 Property Subject to 704(c) and 704(b).............................. 33
5.14 Gross Income Allocation............................................ 34
5.15 Limitations........................................................ 34
5.16 Ordering Rules..................................................... 34
ARTICLE VI
BOOKS OF ACCOUNT, RECORDS, REPORTS AND TAX MATTERS
6.1 Books and Records.................................................. 34
6.2 Information Kept by Managing General Partner....................... 35
6.3 Fiscal Year........................................................ 35
6.4 Partnership Funds.................................................. 36
6.5 Income Tax Elections/Return Preparation............................ 36
6.6 Tax Accounting Matters............................................. 36
6.7 Financial Statements............................................... 37
6.8 Computations....................................................... 39
6.9 Taxes and Tax Controversies........................................ 39
6.10 Inspection; Reports to Regulatory Authorities...................... 41
ARTICLE VII
MANAGEMENT
7.1 Appointment; Powers of the Managing General
Partner.......................................................... 41
7.2 Certain Management Duties and Responsibilities
of the Managing General Partner.................................. 44
7.3 Restrictions on Powers of the Managing General
Partner.......................................................... 52
7.4 Fee................................................................ 55
7.5 Limitations on Liability of Managing General
Partner.......................................................... 55
7.6 Partnership Information Meetings................................... 56
7.7 Limitations on the Partners........................................ 56
-ii-
<PAGE>
Page
----
7.8 Cooperation Regarding Permits and Power Agreement.................. 56
7.9 Time Devoted to Partnership........................................ 57
7.10 Other Business Activities.......................................... 57
ARTICLE VIII
CALLS FOR AND PAYMENT OF FUNDS....................... 57
ARTICLE IX
CONDITIONS PRECEDENT
9.1 Conditions to the Contributions on the Initial
Capital Contribution Date........................................ 57
9.2 Conditions to the Contributions on or prior to
the Second Capital Contribution Date............................. 58
ARTICLE X
TRANSFER AND ENCUMBRANCE
10.1 Transfer of Partnership Interest; General
Provisions....................................................... 58
10.2 Additional Partners................................................ 59
10.3 Revisions to this Agreement Upon Transfer or
Encumbrance...................................................... 60
10.4 Amendment to Certificate of Limited Partnership.................... 60
10.5 Voluntary Withdrawal by Limited Partners........................... 60
ARTICLE XI
OPTIONS TO PURCHASE
11.1 Fair Market Sales Value Purchase Options........................... 62
ARTICLE XII
NOTICES
12.1 Notices............................................................ 63
12.2 Addresses.......................................................... 63
ARTICLE XIII
WITHDRAWAL............................... 63
ARTICLE XIV
SPECIAL EVENTS AND DISSOLUTION; LIQUIDATION; TERMINATION
14.1 Special Events..................................................... 64
14.2 Certain Remedies Following Special Event........................... 69
14.3 Events of Dissolution.............................................. 72
14.4 Procedure in Dissolution and Liquidation........................... 72
-iii-
<PAGE>
Page
----
14.5 Disposition of Documents and Records............................... 73
14.6 Termination........................................................ 74
ARTICLE XV
RIGHT AND OBLIGATIONS OF LIMITED PARTNER
15.1 Management of the Partnership...................................... 74
15.2 Limitation on Liability of Limited Partners........................ 74
ARTICLE XVI
MISCELLANEOUS
16.1 Further Assurances................................................. 75
16.2 Amendments and Waivers............................................. 75
16.3 Successors and Assigns............................................. 75
16.4 Indemnification.................................................... 75
16.5 Incorporation By Reference......................................... 76
16.6 Severability....................................................... 76
16.7 Headings and Table of Contents..................................... 76
16.8 Counterparts....................................................... 76
16.9 Submission to Jurisdiction; Waivers................................ 76
16.10 GOVERNING LAW...................................................... 77
16.11 Entire Agreement................................................... 77
-iv-
<PAGE>
Schedules
Schedule 1 Name; Addresses; Capital Contributions
Schedule 2 Tax Assumptions
Schedule 3 Permits
Schedule 4 Indebtedness
Schedule 5 Monthly Distributions
Schedule 6 Stipulated Redemption Value Distributions
Schedule 7 Insurance
-v-
<PAGE>
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
CAMDEN COGEN L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (the
"Agreement") of CAMDEN COGEN L.P. (the "Partnership") is made and entered into
---------
this 9th day of February, 1993, by and among COGEN TECHNOLOGIES CAMDEN GP
LIMITED PARTNERSHIP, a Delaware limited partnership ("Cogen Camden", the
------------
"General Partner" or the "Managing General Partner"), ROBERT C. McNAIR
--------------- ------------------------
("McNair") and GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation ("GE
------ --
Capital").
- -------
WHEREAS, Cogen Camden is the sole general partner and McNair is
the sole limited partner of the Partnership, a limited partnership established
pursuant to the Agreement of Limited Partnership dated March 25, 1988 (as
heretofore amended, supplemented, restated or otherwise modified, the "Original
--------
Partnership Agreement") and Cogen Camden and McNair desire to amend and restate
- ---------------------
in its entirety the Original Partnership Agreement in order to make GE Capital
the sole limited partner of the Partnership and Cogen Camden the sole general
partner of the Partnership; and
WHEREAS, pursuant to the Original Partnership Agreement, Cogen
Camden agreed to contribute $200 to the capital of the Partnership in exchange
for its General Partnership Interest (as hereinafter defined) in the Partnership
and McNair agreed to contribute $100 to the capital of the Partnership in
exchange for its limited partner interest in the Partnership; and
WHEREAS, pursuant to the Original Partnership Agreement, Cogen
Camden may admit additional limited partners to the Partnership and upon such
admission McNair shall withdraw from the Partnership; and
WHEREAS, pursuant to the Capital Contribution Agreement (as
hereinafter defined), GE Capital shall make a capital contribution to the
Partnership on the Initial Capital Contribution Date (as hereinafter defined) in
exchange for the Limited Partnership Interest (as hereinafter defined), and
agree, subject to the terms and conditions set forth therein, to make additional
capital contributions to the Partnership on or before the Second Capital
Contribution Date (as hereinafter defined) in respect of the Limited Partnership
Interest (as hereinafter defined); and
WHEREAS, on the Initial Capital Contribution Date, upon return
of his capital contribution to the Partnership and immediately following the
admission of GE Capital as a limited partner of the Partnership, McNair shall
withdraw from the Partnership;
<PAGE>
2
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings contained herein, the parties hereto hereby agree that as of the
Initial Capital Contribution Date, McNair shall cease to be a Partner, the
Partnership shall be continued between the General Partner and GE Capital and
the Original Partnership Agreement shall be amended and restated in its entirety
as follows:
W I T N E S S E T H:
- - - - - - - - - -
ARTICLE I
DEFINITIONS
-----------
1.1 Defined Terms. Terms used but not defined herein shall have
-------------
their respective meanings in the Construction Loan Agreement (as hereinafter
defined) (after giving effect to any waiver or amendment thereof with the
consent of GE Capital) and the following terms shall have the following
meanings:
"Adjusted Capital Account Deficit" shall mean, with respect to
--------------------------------
any Partner, the deficit balance, if any, in such Partner's Capital
Account as of the end of the relevant fiscal year, after giving effect
to the following adjustments:
(i) credit to such Capital Account any amounts which such
Partner is obligated to restore pursuant to any provision of
this Agreement or is deemed to be obligated to restore pursuant
to the penultimate sentence of Regulations Section 1.704-
2(g)(1) and 1.704-2(i)(5);
(ii) debit to such Capital Account the items described in
Regulations Sections 1.704-l(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Regulations Section 1.704-
l(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"Affiliate" shall mean, with respect to any Person, (a) any
---------
Person which, directly or indirectly, is in control of, is controlled
by, or is under common control with such Person, or (b) any Person who
is a director or officer (i) of such Person, (ii) of any Subsidiary of
such Person or (iii) of any Person described in clause (a) above. For
purposes of this definition, control of a
<PAGE>
3
Person shall mean the power, direct or indirect, (i) to vote 10% or
more of the securities having ordinary voting power for the election of
directors of such Person, or (ii) to direct or cause the direction of
the management and policies of such Person, whether by contract or
otherwise; provided that for purposes of this definition, the Limited
Partner (unless and until it exercises its rights to become Managing
General Partner under subsection 14.2 or 14.3) shall not be deemed to
be an Affiliate of the Partnership.
"Agent" shall mean GE Capital, as agent for the lenders parties
-----
to the Construction Loan Agreement, or any entity acting as successor
agent under the Construction Loan Agreement.
"Agreement" shall mean this Amended and Restated Agreement of
---------
Limited Partnership, as the same may be amended, supplemented, restated
or otherwise modified from time to time.
"Annual Period" shall mean a period of four consecutive fiscal
-------------
quarters.
"Applicable Laws" shall mean all applicable laws, ordinances,
---------------
judgments, decrees, injunctions, writs, orders, rules, regulations,
orders, interpretations, licenses and permits of any federal, state,
county, municipal, regional or other Governmental Authority.
"Appraisal Procedure" shall mean a procedure whereby two
-------------------
independent appraisers, one chosen by the Managing General Partner and
one by the Limited Partner, shall agree upon the determinations then
the subject of appraisal. The Managing General Partner or the Limited
Partner, as the case may be, shall deliver a written notice to the
other appointing its appraiser within 15 days (5 days in the case of
subsection 14.2(g)(ii) hereof and subsection ll(b) of the Capital
Contribution Agreement) after receipt from the other of a written
notice appointing its appraiser. Each appraiser then shall prepare a
written appraisal with respect to the determinations which then are the
subject of appraisal. If within 30 days (20 days in the case of
subsection 14.2(g)(ii) hereof and 10 days in the case of subsection
ll(b) of the Capital Contribution Agreement) after appointment of the
two appraisers they are unable to agree upon the amount in question, a
third independent appraiser shall be chosen within 10 days (5 days in
the case of subsection 14.2(g)(ii) hereof and
<PAGE>
4
subsection ll(b) of the Capital Contribution Agreement) thereafter by
the mutual consent of such first two appraisers or, if such first two
appraisers fail to agree upon the appointment of a third appraiser,
such appointment shall be made by the American Arbitration Association,
or any organization successor thereto, from a panel of arbitrators
having experience in the business of operating a cogeneration facility
and a familiarity with equipment used or operated in such business. The
decision of the third appraiser so appointed and chosen shall be given
within 30 days (20 days in the case of subsection 14.2(g)(iii) hereof
and 10 days in the case of subsection ll(b) of the Capital Contribution
Agreement) after the selection of such third appraiser. If three
appraisers shall be appointed and the determination of one appraiser is
disparate from the median by more than twice the amount by which the
other determination is disparate from the median, then the
determination of such appraiser shall be excluded, the remaining two
determinations shall be averaged and such average shall be binding and
conclusive on the Managing General Partner and the Limited Partner;
otherwise the average of all three determinations shall be binding and
conclusive on the Managing General Partner and the Limited Partner. If
the Managing General Partner or the Limited Partner shall appoint an
appraiser and the other Person shall fail to appoint an appraiser in
the manner specified herein, the determination of the appraiser so
appointed shall be binding and conclusive on the Managing General
Partner and the Limited Partner. The expenses of the appraisal
procedure shall be borne solely by the Partnership.
"Business Day" shall mean a day other than a Saturday, Sunday or
------------
other day on which commercial banks in New York City or Camden, New
Jersey are authorized or required by law to close.
"Capital Account" shall mean, with respect to any General Partner
---------------
or Limited Partner, the Capital Account maintained for such Partner in
accordance with the following provisions:
(i) To each Partner's Capital Account there shall be
credited such Partner's Capital Contributions, such Partner's
distributive share of Operating Profits, Gains and any items in the
nature of income or gain which are specially allocated pursuant to
subsections 5.7, 5.8, 5.11 and 5.14 hereof.
<PAGE>
5
(ii) To each Partner's Capital Account there shall be
debited the amount of cash and the Gross Asset Value of any
property (other than money) (net of any liabilities assumed by such
Partner or to which the property is subject) distributed to such
Partner pursuant to any provision of this Agreement, and such
Partner's distributive share of Operating Losses, Depreciation,
Losses, Organizational Expenses and any items in the nature of
deductions or losses which are specially allocated pursuant to
subsections 5.10 and 5.11 hereof.
(iii) In the event all or a portion of an interest in the
Partnership is transferred in accordance with the terms of this
Agreement in a transaction that does not result in a termination of
the Partnership under Code Section 708(b)(1)(B), the transferee
shall succeed to the Capital Account of the transferor to the
extent it relates to the transferred interest.
(iv) In determining the amount of any liability for
purposes of clause (i) and clause (ii) hereof, there shall be taken
into account Code Section 752(c) and any other applicable
provisions of the Code and the Regulations.
(v) Each Partner's Capital Account shall in all other
respects be maintained in accordance with the provisions of
Regulations Section 1.704-l(b).
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-l(b), and shall be interpreted and applied in a manner
consistent with such Regulations.
"Capital Contribution" shall mean, with respect to any Partner, the
--------------------
amount of money and the initial Gross Asset Value of any property (other than
money) (net of any liabilities assumed by the Partnership or to which the
property is subject) contributed to the Partnership with respect to any
partnership interest held by such Partner pursuant to the terms of this
Agreement.
"Capital Contribution Agreement" shall mean the Capital
------------------------------
Contribution Agreement dated as of the
<PAGE>
6
Conformed Agreement Date, among the Partnership, Cogen Camden, the Agent and GE
Capital, as amended, supplemented, restated or otherwise modified from time to
time.
"Cash Equivalents" shall mean (a) obligations of, or guaranteed as
----------------
to interest and principal by, the United States of America or any agency
thereof, in each case maturing within one year from the date of acquisition
thereof, (b) open market commercial paper of any corporation incorporated under
the laws of the United States of America or any state thereof and not an
Affiliate of the Partnership or the General Partner maturing no more than one
year from the date of creation thereof which paper is rated "prime-2" or its
equivalent by Moody's Investors Service Inc. or "A-2" or its equivalent by
Standard & Poor's Corporation, (c) certificates of deposit issued by any
domestic commercial bank of recognized stature having capital and surplus in
excess of $500,000,000 or any domestic branch of any foreign commercial bank of
recognized stature having capital and surplus in excess of $500,000,000 in each
case maturing within one year from the date of acquisition thereof, (d)
repurchase agreements fully collateralized by obligations described in clause
(a) above in each case maturing within one year from the date of acquisition
thereof, or (e) a money market fund registered under the Investment Company Act
of 1940, the portfolio of which is limited to obligations described in clause
(a) above; provided, however, that the aggregate amount at any one time so
invested (A) in open market commercial paper issued by any corporation shall not
exceed $5,000,000 and (B) in certificates of deposit issued by any one bank
shall not exceed $10,000,000.
"Certificate of Limited Partnership" shall mean the Amended and
----------------------------------
Restated Certificate of Limited Partnership of the Partnership, dated July 26,
1991, filed with the Secretary of State of the State of Delaware on July 31,
1991, and all amendments thereto and restatements thereof.
"Code" shall mean the Internal Revenue Code of 1986, as the same
----
may be amended from time to time, or any corresponding provisions of succeeding
law.
"Commonly Controlled Entity" shall mean an entity, whether or not
--------------------------
incorporated, which is under common control with the Managing General Partner
within the meaning of Section 4001 of ERISA or is
<PAGE>
7
part of a group which includes the Managing General Partner and which is treated
as a single employer under Code Section 414.
"Conformed Agreement Date" shall mean January 2, 1992.
------------------------
"Construction Loan Agreement" shall mean the Construction and Term Loan
---------------------------
Agreement dated as of the Conformed Agreement Date, among the lenders parties
thereto, the Partnership and the Agent, as amended, supplemented, restated or
otherwise modified from time to time.
"Contractual Obligation" shall mean, as to any Person, any provision of
----------------------
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Contribution Dates" shall mean, collectively, the Initial Capital
------------------
Contribution Date and the Second Capital Contribution Date.
"Depreciation" shall mean, for each fiscal year or other period, an
------------
amount equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to the tangible and intangible assets of the Partnership
for such year or other period, except that if the Gross Asset Value of an asset
differs from its adjusted basis for federal income tax purposes at the beginning
of such year or other period, Depreciation shall be an amount which bears the
same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization or other cost recovery deduction for such year or
other period bears to such beginning adjusted tax basis; provided, however, that
-------- -------
if the federal income tax depreciation amortization or other cost recovery
deduction for such year is zero, Depreciation shall be determined with reference
to such beginning Gross Asset Value using any reasonable method elected by the
Managing General Partner.
"Distributable Cash" shall mean the gross cash proceeds from
------------------
Partnership operations (excluding Net Cash from Sales or Refinancing and any
Debt Service Account Interest, but including the interest and other income
earned on the other Accounts (as defined in the Security Deposit Agreement))
minus the portion of such cash proceeds used to pay, or establish reserves for,
all Partnership operating,
<PAGE>
8
maintenance and improvement expenses, taxes (other than income taxes) and
payments in lieu of taxes, insurance premiums, any other similar amount payable
by the Managing General Partner or the Partnership under any Project Document,
payments due under contracts which are permitted under the terms of the
Operative Documents to which the Partnership is a party (other than payments of
principal of, interest on and premium, if any, with respect to the Partnership
Term Loan and the first refinancing thereof), payments required by FERC and any
other governmental entity, fees and expenses of trustees, security agents and
escrow agents and other reasonable expenses incurred in connection with the
Project, and the Management Fee (including, without limitation, costs incurred
in connection with the procurement of gas for the Facility). "Distributable
Cash" shall not be reduced by depreciation, amortization, cost recovery
deductions or similar allowances.
"Environmental Discharge" shall mean any discharge or release of
-----------------------
pollutants or effluent or emissions of any kind in violation of any Relevant
Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
-----
as amended from time to time.
"Fair Market Sales Value" shall mean, with respect to any interest in
-----------------------
the Partnership or any portion thereof, the cash price that would be obtained in
an arm's-length transaction between an informed and willing buyer and an
informed and willing seller, both under no compulsion, respectively, to buy or
sell, and neither of which is related to, or an Affiliate of, the Partnership,
the General Partner or any Limited Partner, giving due consideration, in the
determination of such fair market sales value, to the Partnership's rights at
such time to use the Project, together with the right to sell the steam and
electricity therefrom and to use the necessary ancillary rights and to obtain
the necessary services and materials in connection with the operation of the
Facility. The Managing General Partner and the Limited Partner may agree upon a
determination of Fair Market Sales Value, provided, that in the event that they
--------
are unable to agree upon such a determination, such Fair Market Sales Value
shall be determined in accordance with the Appraisal Procedure.
<PAGE>
9
"Fair Market Sales Value of the Project" shall mean, with respect to
--------------------------------------
the Project, the cash price that would be obtained in an arm's-length
transaction between an informed and willing buyer and an informed and willing
seller, both under no compulsion, respectively, to buy or sell, and neither of
which is related to, or an Affiliate of, the Partnership, the General Partner or
any Limited Partner, giving due consideration, in the determination of such fair
market sales value, to the Partnership's rights at such time to use the Project,
together with the right to sell the steam and electricity therefrom and to use
the necessary ancillary rights and to obtain the necessary services and
materials in connection with the operation of the Facility. The Managing General
Partner and the Limited Partner may agree upon a determination of Fair Market
Sales Value, provided, that in the event that they are unable to agree upon such
--------
a determination, such Fair Market Sales Value shall be determined in accordance
with the Appraisal Procedure.
"FERC" shall mean the Federal Energy Regulatory Commission.
----
"FERC Order" shall mean the certification issued by FERC with respect
----------
to the status of the Project as a Qualifying Facility.
"Financing Lease" shall mean (a) any lease of property, real or
---------------
personal, if the then present value of the minimum rental commitment thereunder
should, in accordance with GAAP, be capitalized on a balance sheet of the
lessee, and (b) any other such lease the obligations under which are capitalized
on a balance sheet of the lessee.
"Flip Date" shall mean the date which is seventeen years after the
---------
Second Capital Contribution Date (unless at such time there is a positive
balance in any Arrears Account).
"Floating Rate" shall mean LIBOR or LIBOR (Reference Banks), as
-------------
applicable.
"GAAP" shall mean generally accepted accounting principles in the
----
United States of America in effect from time to time.
"Gains" and "Losses" shall mean the gain or loss resulting from any
----- ------
disposition of Partnership property with respect to which gain or loss is
recognized for federal income tax purposes;
<PAGE>
10
provided, however, that such gain or loss shall be computed by reference to
- -------- -------
Gross Asset Value rather than adjusted tax basis of such property.
"GE Capital" shall mean General Electric Capital Corporation, a New
----------
York corporation, or its successors or assigns.
"General Partner" shall mean Cogen Camden, its permitted successors and
---------------
assigns, and any other Person properly holding a General Partnership Interest
pursuant to this Agreement, when acting in such capacity.
"General Partnership Interest" shall mean the interest of a General
----------------------------
Partner in the Partnership.
"Governmental Authority" shall mean any nation or government, any state
----------------------
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Gross Asset Value" shall mean, with respect to any asset, the asset's
-----------------
adjusted basis for federal income tax purposes, except as follows:
(i) the initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, as determined by the contributing Partner and the Partnership;
(ii) the Gross Asset Value of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as
determined by the Managing General Partner, as of the following times:
(1) the acquisition of an additional interest in the Partnership by any
new or existing Partner (other than pursuant to the Capital
Contribution Agreement) in exchange for more than a de minimis Capital
-- -------
Contribution; (2) the distribution by the Partnership to a General
Partner or a Limited Partner of more than a de minimis amount of
-- -------
property as consideration for an interest in the Partnership if the
Managing General Partner reasonably determines that such adjustment is
necessary or appropriate to reflect the relative economic interests of
the General Partner and the Limited Partner in the Partnership; and (3)
the liquidation of the Partnership within the
<PAGE>
11
meaning of Regulations Section 1.704-l(b)(2)(ii)(g);
(iii) the Gross Asset Value of any Partnership asset distributed
to any General Partner or Limited Partner shall be the gross fair
market value of such asset on the date of distribution; and
(iv) the Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Regulations Section
1.704-l(b)(2)(iv)(m); provided, however, that Gross Asset Values shall
-------- -------
not be adjusted to the extent the Managing General Partner determines
that an adjustment pursuant to clause (ii) of this definition is
necessary or appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to clause (iv) of this
definition. If the Gross Asset Value of an asset has been determined or
adjusted pursuant to clauses (i) and (ii) of this definition or clause
(iv) of this definition, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such
asset.
"Hazardous Materials" shall mean asbestos and any toxic or hazardous
-------------------
substances, materials, wastes or contaminants, medical wastes, infectious
wastes, polychlorinated biphenyls ("PCB's"), paint containing lead and urea
formaldehyde foam insulation, as any of such terms is defined from time to time
in or for the purposes of any Relevant Environmental Law.
"Implicit Rate" shall mean a per annum rate equal to (a) 3.38% plus (b)
-------------
the Ten Year Treasury Rate used in the calculation of the Tranche A
Distributions set forth on Schedule 5 multiplied by (1-.42).
"Indebtedness" of a Person, shall mean, at a particular date, the sum
------------
(without duplication) at such date of (a) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services (other
than obligations under agreements for the purchase of goods and services in the
normal course of business which are not more than 90 days past due), or which is
evidenced by a note, bond, debenture or similar instrument, (b) all obligations
of such Person under Financing Leases, (c) all obligations of such Person in
respect of letters of credit, acceptances, or similar
<PAGE>
12
obligations issued or created for the account of such Person, (d) all
liabilities secured by any lien on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof
and (e) any obligation of such Person or a Commonly Controlled Entity to a
Multiemployer Plan.
"Initial Capital Contribution Date" shall have the meaning specified in
---------------------------------
the Capital Contribution Agreement.
"Insolvency" shall mean, with respect to any Multiemployer Plan, the
----------
condition that such Plan is insolvent within the meaning of such term as used in
Section 4245 of ERISA.
"LIBOR" shall mean, with respect to any one month period, the rate per
-----
annum determined on the basis of the offered rates for deposits in U.S. dollars
for such period which appear on the Reuters Screen LIBO Page as of 11:00 a.m.,
London time, on the day that is two Working Days prior to the beginning of such
period. If at least two such offered rates appear on the Reuters Screen LIBO
Page, the rate in respect of such period will be the arithmetic mean of such
offered rates. If fewer than two offered rates appear, the rate in respect of
such period will be determined as if the parties had specified "LIBOR (Reference
Banks)" as the applicable Floating Rate.
"LIBOR (Reference Banks)" shall mean, with respect to any one month
-----------------------
period, a rate per annum equal to the arithmetic mean of the rates quoted by
Bankers Trust Company and Chemical Bank (or, if either Bankers Trust Company or
Chemical Bank shall cease to exist, Barclays Bank plc shall be substituted for
the bank which ceased to exist, or if both Bankers Trust Company and Chemical
Bank shall cease to exist, Barclays Bank plc and National Westminster Bank plc
shall be substituted for such banks) in New York City at approximately 11:00
a.m., New York City time, on the first day of such period for loans in U.S.
dollars to prime banks in the London interbank market for a period equal to the
number of days in such period and in an amount substantially equal to the amount
of Distributable Cash anticipated to be distributed during such period.
"Lien" shall mean any mortgage, deed of trust, security interest,
----
pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any agreement to give any of the foregoing, any conditional sale or
other title retention agreement, any Financing Lease having substantially the
same economic effect as any
<PAGE>
13
of the foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction).
"Limited Partner" shall mean GE Capital or any of its designees or
---------------
assignees (including, without limitation, a grantor trust) that has been
admitted to the Partnership as a limited partner of the Partnership pursuant to
subsection 10.1 hereof, and any other Person properly holding a Limited
Partnership Interest pursuant to this Agreement, and admitted to the Partnership
as a limited partner of the Partnership and shown as such on the books and
records of the Partnership, when acting in such capacity.
"Limited Partner Benefits" shall mean, with respect to the Limited
------------------------
Partnership Interest, the sum of the following, determined at the beginning of
each month: (i) the cumulative cash distributions with respect to such Limited
Partnership Interest made by the Partnership after the Initial Capital
Contribution Date, plus (ii) 36% of the net taxable losses of the Partnership
allocated (and not subsequently reallocated to the General Partner) for income
tax purposes with respect to such Limited Partnership Interest after the Initial
Capital Contribution Date through the beginning of such month, plus (iii) income
tax credits of the Partnership to the extent properly allocable (and not
subsequently disallowed) to such Limited Partnership Interest after the Initial
Capital Contribution Date through the beginning of such month, but only to the
extent that the Limited Partner holding such Limited Partnership Interest
actually realizes a current income tax benefit with respect to such credit (the
ability of such Limited Partner to currently utilize a tax credit shall be
determined by the independent accountants of such Limited Partner, who shall
certify such determination to the General Partner), minus (iv) 36% of the net
taxable income allocated with respect to such Limited Partnership Interest (or
realized with respect to a distribution on such Limited Partnership Interest
that is treated for federal income tax purposes as other than a distribution
under Code Section 731) after the Initial Capital Contribution Date through the
beginning of such month.
"Limited Partnership Interest" shall mean the limited partner interest
----------------------------
in the Partnership that has the rights and privileges granted to such interest
in this Agreement.
"Management Fee" shall mean the management fee to be paid to the
--------------
Managing General Partner pursuant to subsection 7.4 hereof.
<PAGE>
14
"Managing General Partner" shall mean Cogen Camden as the initial
------------------------
managing general partner of the Partnership or any substitute managing general
partner appointed pursuant to subsection 14.2 hereof and shown as such on the
books and records of the Partnership.
"Managing General Partner Group" shall have the meaning specified in
------------------------------
subsection 7.5 hereof.
"Monthly Arrears Account" shall have the meaning assigned to such term
-----------------------
in subsection 4.5.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan as
------------------
defined in Section 4001(a)(3) of ERISA.
"Net Cash From Sales", "Net Cash From Refinancing" or "Net Cash From
-------------------------------------------------------------------
Sales or Refinancing" shall mean, as the context may require, the net cash
- --------------------
proceeds from all sales and other dispositions (excluding dispositions in the
ordinary course of business or in the case of any involuntary conversion of
assets having an aggregate book value not exceeding $500,000, but including,
without limitation, (i) the proceeds of insurance received by the Partnership or
the Managing General Partner from any insurer pursuant to the insurance
maintained under subsection 7.2(f) hereof and subsection 6.5(a) of the General
Partner Term Loan Agreement and (ii) all awards and proceeds of a Taking with
respect to the Project) and all refinancing of Partnership property, less any
portion thereof used to establish reserves or to pay the cost of renewing,
repairing, rebuilding or otherwise replacing damaged or destroyed or lost
property in respect of which insurance proceeds or awards or proceeds of a
Taking were received in accordance with subsection 4.05(d) of the Security
Deposit Agreement. "Net Cash From Sales or Refinancing" shall include only
principal payments with respect to any note or other obligation received by the
Partnership in connection with sales and other dispositions (other than in the
ordinary course of business or in the case of any involuntary conversion of
assets having an aggregate book value not exceeding $500,000) of Partnership
property.
"Nonrecourse Deductions" shall have the meaning set forth in
----------------------
Regulations Section 1.704-2(c). The amount of Nonrecourse Deductions for a
Partnership fiscal year equals the net increase, if any, in the amount of
Partnership minimum gain during that fiscal year, determined according to the
provisions of Regulations Section 1.704-2(c).
"Operating Budget" shall have the meaning specified in subsection
----------------
6.7(b).
<PAGE>
15
"Operating Profits" and "Operating Losses" shall mean, for each monthly
----------------------------------------
period, an amount equal to the Partnership's taxable income or loss for such
month, determined in accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income or loss),
with the following adjustments:
(i) income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Operating
Profits or Operating Losses pursuant to this definition shall be added
to such taxable income or loss;
(ii) any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Regulations Section 1.704-l(b)(2)(iv)(i), and
not otherwise taken into account in computing Operating Profits or
Operating Losses pursuant to this definition shall be subtracted from
such taxable income or loss; and
(iii) notwithstanding any other provision of this definition, any
items which are specially allocated pursuant to subsections 5.4, 5.5,
5.6, 5.7, 5.8, 5.9, 5.10, 5.11, 5.12, 5.13 and 5.14 hereof shall not be
taken into account in computing Operating Profits or Operating Losses.
"Operative Documents" shall mean collectively, this Agreement, the
-------------------
Capital Contribution Agreement, the Construction Loan Agreement, the General
Partner Term Loan Agreement, the Security Deposit Agreement, the other
Collateral Security Documents and the Project Documents.
"Organizational Expenses" shall mean organizational expenses as defined
-----------------------
under Code Section 709.
"Partner" shall mean Cogen Camden and GE Capital so long as they hold a
-------
General Partnership Interest or Limited Partnership Interest and any other
General Partner(s) or Limited Partner(s); collectively, the "Partners".
"Partner Nonrecourse Deductions" shall have the meaning specified in
------------------------------
Regulations Section 1.704-2(i)(2).
"Partnership" shall mean the limited partnership governed by this
-----------
Agreement formed under and pursuant to the Partnership Act and known as "Camden
Cogen L.P.", as it may from time to time be constituted.
<PAGE>
16
"Partnership Act" shall mean the Delaware Revised Uniform Limited
---------------
Partnership Act, 6 Del. Code (S)(S) 17-101, et seq., as it may be amended from
---- ---- -- ---
time to time, and any successor to said Partnership Act.
"Partnership Business" shall have the meaning specified in subsection
--------------------
2.2.
"Partnership Debt Service Account" shall have the meaning specified in
--------------------------------
the Amended and Restated Security Deposit Agreement.
"Partnership Term Loan" shall mean the "Term Loan" as such term is
--------------------- ---------
defined in the Construction Loan Agreement.
"PBGC" shall mean the Pension Benefit Guarantee Corporation.
----
"Permits" shall mean all material permits and licenses necessary for
-------
construction and operation of the Project, a list of which is attached hereto as
Schedule 3.
"Permitted Indebtedness" shall have the meaning specified in subsection
----------------------
7.3(a)(iv).
"Permitted Liens" shall mean (i) Liens created by the Collateral
---------------
Security Documents; (ii) Liens in favor of any Person (other than the General
Partner, McNair or any Affiliate of any such Person) which arise in the ordinary
course of business of the Partnership (including, without limitation,
materialmen's, mechanics', workers', repairmen's and employees' Liens and
similar Liens which arise in connection with any tax, assessment, governmental
charge or levy) but not (unless otherwise permitted by this Agreement) in
connection with any Indebtedness or Guarantee Obligation and which do not in the
aggregate materially impair the use and value of the Partnership's property or
assets in the conduct of its business; provided, that if any such Lien arose in
--------
connection with any tax, assessment, governmental charge or levy or any claim
referred to in subsection 7.2(a) or 7.2(b) or any charge or claim of a mechanic
or a materialman referred to in subsection 7.2(1), the Managing General Partner
shall be diligently contesting the same in accordance with, and subject to, the
provisions of subsection 7.2(a), 7.2(b) or 7.2(1), as the case may be; and
provided, further, that any such Lien arose out of transactions relating to the
- -------- -------
Project; (iii) Liens arising out of judgments or awards which are bonded or with
respect to which at the time an appeal or proceeding for review is being
prosecuted in good faith and for the payment of which adequate cash reserves
shall have been provided; (iv) mineral rights, utility easements, any other
easements, and any covenants running with the land relating to the Site or any
similar
<PAGE>
17
deed restrictions, the existence and use of any of which do not materially
interfere with the use and enjoyment of the Facility or the Site; (v) any
exceptions to title which are contained in the title insurance policy delivered
pursuant to the Capital Contribution Agreement; (vi) the PSE&G Subordinated
Mortgage; (vii) the Lien in favor of Midlantic granted pursuant to the Security
Deposit Agreement; and (viii) Liens in favor of the Limited Partner as
contemplated by subsections 10.5 and 14.2(g) hereof.
"Person" shall mean an individual, partnership, corporation, business
------
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan" shall mean at a particular time, any employee benefit plan which
----
is covered by ERISA and in respect of which the Managing General Partner or a
Commonly Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Power Purchase Agreement" shall mean the Power Purchase and
------------------------
Interconnection Agreement, dated April 15, 1988, between PSE&G and the
Partnership, as amended by the First Amendment thereto dated June 12, 1990 and
the Second Amendment thereto, and as the same may be further amended,
supplemented, restated or otherwise modified from time to time.
"Project" shall mean the Facility, the Site and all easements,
-------
leasehold interests, licenses, permits, contract rights and other real and
personal property interests now owned or hereafter acquired by Cogen Camden or
the Partnership or in which Cogen Camden or the Partnership or in which Cogen
Camden or the Partnership has any rights, other than the interest of any Partner
hereunder.
"Project Cost" shall mean the lesser of (a) all Certified Construction
------------
Costs and (b) $136,000,000.
"Project Documents" shall mean the collective reference to the Power
-----------------
Purchase Agreement, the Steam supply Agreement, the Gas Service Agreement, any
Gas Purchase Agreement, the Operation and Maintenance Agreement and, so long as
any of the provisions thereof are in effect, the Turnkey Contract and the
Equipment Supply Contract.
"Prudent Utility Practice" shall mean, at a particular time, those
------------------------
practices, methods, acts and omissions applicable to the operation and
maintenance of
<PAGE>
18
the Facility as are in accordance with standards of prudence applicable to the
electric utility industry for cogeneration facilities located in the
Northeastern United States known at the time the decision in question is made,
which would have been expected to accomplish the desired result at a reasonable
cost consistent with reliability, safety and expediency. Prudent Utility
Practice is not intended to be limited to the optimum practice, method, act or
omission, at the exclusion of all others, but rather is a spectrum of possible
practices, methods, acts and omissions which could have been expected to
accomplish the desired result at a reasonable cost consistent with reliability,
safety and expediency.
"PSE&G" shall mean Public Service Electric & Gas Company,
-----
a New Jersey corporation.
"PUC" shall mean the State of New Jersey Board of Regulatory
---
Commissioners or similar regulatory authority of any other jurisdiction.
"Public Utility Status" shall have the meaning specified in subsection
---------------------
10.5(a) hereof.
"Purchase Notice" shall mean an irrevocable written notice delivered by
---------------
the Managing General Partner or the General Partner to the Limited Partner
pursuant to subsection 11.1 or 14.2, evidencing the Managing General Partner's
or the General Partner's intent to exercise any purchase option provided for
therein.
"Quarterly Arrears Account" shall have the meaning assigned to such
-------------------------
term in subsection 4.5.
"Regulations" shall mean the temporary, proposed and final regulations
-----------
under the Code and any successor provisions thereto.
"Relevant Environmental Law" shall mean, as to any Person, any law,
--------------------------
treaty, rule or regulation, or any determination of an arbitrator or a court or
other Governmental Authority, relating to the handling, treatment, storage or
disposal of Hazardous Materials, the occurrence or remediation of any
Environmental Discharge, environmental protection or any other environmental
matter, in each case applicable to or binding upon such Person or any of its
properties or to which such Person or any of its properties is subject, the
violation of which or series of related violations of which, or which
determination, creates a material likelihood that such Person will be subject to
penalties, fines or remediation costs in excess of $250,000 or to injunctive or
similar relief.
<PAGE>
19
"Reorganization" shall mean, with respect to any Multiemployer Plan,
--------------
the condition that such Plan is in reorganization within the meaning of such
term as used in Section 4241 of ERISA.
"Reportable Event" shall mean any of the events set forth in Section
----------------
4043(b) of ERISA, other than those events as to which the thirty-day notice
period is waived under subsections .13, .14, .16, .18, .19, or .20 of PBGC Reg.
2615.
"Requirement of Law" shall mean, as to any Person, (a) the Certificate
------------------
of Incorporation and By-Laws or partnership agreement or other organizational or
governing documents of such Person, (b) any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority (other
than any Relevant Environmental Law), in each case applicable to or binding upon
such Person or any of its properties or to which such Person or any of its
properties is subject and the violation of which, or which determination, could
reasonably be expected to (i) have a material adverse effect on the business,
operations, properties, condition (financial or otherwise) or prospects of such
Person or (ii) materially adversely affect the ability of such Person to perform
its obligations under the Operative Documents to which it is a party and (c) any
Relevant Environmental Law.
"Responsible Officer" of a Person, shall mean in the case of the
-------------------
General Partner, the president or any vice president of the general partner of
the General Partner, or with respect to financial matters, the chief financial
officer of the general partner of the General Partner and in the case of any
Person which is a corporation, the president or any vice president of such
Person or with respect to financial matters, the chief financial officer of such
Person.
"Second Capital Contribution Date" shall have the meaning specified in
--------------------------------
the Capital Contribution Agreement.
"Securities Act" shall mean the Securities Act of 1933, or any similar
--------------
Federal statute, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder, all as the same shall be in effect at the
time.
"Security Agent" shall mean Midlantic National Bank or any bank acting
--------------
as successor security agent under the Security Deposit Agreement.
"Security Deposit Agreement" shall mean the Amended and Restated
--------------------------
Security Deposit Agreement, to be entered
<PAGE>
20
into among the Partnership, the Limited Partner, the General Partner, the Agent,
the Working Capital Lender (as defined in the Amended and Restated Security
Deposit Agreement) and the Security Agent in substantially the form of Exhibit B
to the Capital Contribution Agreement, as amended, supplemented, restated or
otherwise modified from time to time.
"Single Employer Plan" shall mean any Plan which is covered by Title IV
--------------------
of ERISA, but which is not a Multiemployer Plan.
"Site" shall mean the land described in Schedule 4.
----
"Special Event" shall have the meaning specified in
-------------
subsection 14.1.
"Stipulated Redemption Value" shall have the meaning assigned to such
---------------------------
term in the Capital Contribution Agreement.
"Subsidiary" shall mean, as to any Person, a corporation of which
----------
shares of stock 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 are at the time owned,
or the management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such Person, or a limited
partnership of which such Person or any of its Subsidiaries is a general partner
or a business trust in which such Person holds a majority interest (comparable
to that for a corporation as described above).
"Tax Indemnity Amount" shall mean, with respect to the Limited Partner
--------------------
the sum of (i) the Tax Loss Amount, plus (ii) from the date of the Tax Indemnity
Event, the Implicit Rate, compounded monthly, times the Tax Loss Amount, plus
(iii) the amount of all income taxes payable by such Limited Partner as a result
of the allocation of income to the Limited Partner in connection with the
distribution required by subsection 4.6 with respect to the Tax Indemnity Amount
(which allocation will take into account all of the elements of the Tax
Indemnity Amount, including the calculation required pursuant to this clause
(iii)), minus (iv) distributions to such Limited Partner pursuant to subsection
4.6 hereof.
"Tax Indemnity Event" shall mean (i) any act or omission of the General
-------------------
Partner not specifically required or permitted under this Agreement that results
in any loss of or delay in realization of or inability to claim the full tax
depreciation deductions with respect to the Project or the Organizational
Expenses with respect to the
<PAGE>
21
Partnership shown on Schedule 2 by the Limited Partner, (ii) any federal tax
election made by the Partnership that has an adverse impact on the Limited
Partner (with respect to the tax depreciation and interest expense deductions
with respect to the Project or the Organizational Expenses with respect to the
Partnership shown on Schedule 2) and with respect to which election the General
Partner either (x) fails to consult with the Limited Partner or (y) fails to
follow the request of the Limited Partner with respect to such election, and
(iii) any failure by the Partnership to make a tax election specifically
requested by the Limited Partner, but only if the making of such tax election
would not have an adverse impact on the General Partner.
"Tax Loss Amount" shall mean, with respect to the Limited Partner, an
---------------
amount equal to the present value as of the date of the Tax Indemnity Event,
using a discount rate equal to the Implicit Rate of the sum of (i) the aggregate
net additional taxes payable by the Limited Partner as a result of a Tax
Indemnity Event (offset by any net additional savings of such Limited Partner as
a result of such Tax Indemnity Event) from time to time computed on the basis of
a 36% tax rate, plus (ii) the amount of any net interest thereon, plus (iii) any
penalties or additions to tax payable as a result of a Tax Indemnity Event.
"Ten Year Treasury Rate" shall mean, as of any date of determination,
----------------------
the rate on ten year United States Treasury notes as reported in Federal
Statistical Release H.15(519), or any successor publication of the Federal
Reserve Board, on such date.
"TMP" shall have the meaning specified in subsection 6.9.
---
"Tentative Purchase Notice" shall mean a written notice delivered by
-------------------------
the Managing General Partner or the General Partner to the Limited Partner
pursuant to subsection 11.1 or 14.2, evidencing the Managing General Partner's
or the General Partner's interest in exercising any purchase option provided for
therein.
"Tranche A Distribution" shall have the meaning specified in subsection
----------------------
4.3(a).
1.2 Other Definitions. The words "hereof" and "hereunder" and words of
-----------------
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section,
subsection, schedule and exhibit references are to this Agreement unless
otherwise specified.
<PAGE>
22
ARTICLE II
FORMATION AND CONTINUATION OF PARTNERSHIP
-----------------------------------------
2.1 Formation of Partnership; Name. The Partnership was formed on March
------------------------------
28, 1988 by the filing, pursuant to the Partnership Act, of the Certificate of
Limited Partnership. The Certificate of Limited Partnership was replaced by the
filing, on July 31, 1991, of the Amended and Restated Certificate of Limited
Partnership. The name of the Partnership is "Camden Cogen L.P."
2.2 Purpose; Business of the Partnership. The Partnership was formed
------------------------------------
for the purpose of constructing, owning, developing, operating, maintaining,
repairing and disposing of the Project or any part thereof; constructing,
installing, leasing or otherwise acquiring, maintaining, repairing and disposing
of any additional improvements to the Project of any kind necessary or desirable
in connection therewith and, by means thereof, producing and selling steam and
electricity; and any other purpose necessary, incidental or ancillary to any of
the foregoing. The foregoing purposes, as effectuated pursuant to the provisions
of subsection 2.3, are herein referred to as the "Partnership Business".
2.3 Authorizations. (a) The Partnership is hereby authorized to engage
--------------
in all activities and transactions and to do all things and to hold all
interests in real, personal and mixed property, contract rights and other
property, necessary, appropriate, proper, advisable or desirable for, or
incidental or convenient to, the Partnership Business, including, but not
limited to, the power to enter into, make and perform any agreement, contract,
commitment, arrangement or undertaking (including, without limitation, the other
Operative Documents), to acquire, hold, purchase, lease, dispose of, mortgage,
pledge, hypothecate or assign, and to exercise all rights, powers, privileges
and other incidents of ownership or possession with respect to, any property,
whether real, personal or mixed, and to incur Permitted Indebtedness and to
secure the payment of any such Permitted Indebtedness of the Partnership by any
Permitted Lien.
(b) In furtherance of the Partnership's objects and purposes, the
Partnership shall have any and all powers necessary, convenient or incidental to
or for the accomplishment of its objects and purposes, alone or with others,
including, without limitation, the following:
(i) to design, plan, finance, construct, own, develop, maintain,
operate, lease and dispose of the Project, or any part thereof and to
<PAGE>
23
engage in any and all activities necessary or incidental to the
foregoing;
(ii) to negotiate and enter into, and make, execute, deliver and
perform, all contracts, agreements and other undertakings, as the
same may be amended, restated, supplemented or otherwise modified
from time to time, and to grant liens, security interests in and
other encumbrances on, in and against the Partnership's
properties, all as may be necessary, convenient or incidental to
carry out its objects and purposes, including, but not limited
to, the following:
(1) construction, term loan and working capital agreements;
(2) notes, including, but not limited to, construction notes,
term notes and working capital notes;
(3) capital contribution agreements;
(4) borrower indemnity agreements;
(5) collateral security documents, including, but not limited
to, mortgages, security agreements, security deposit
agreements, assignments regarding contracts and consents to
assignments regarding contracts;
(6) power purchase contracts;
(7) equipment supply contracts;
(8) additional contracts, including, but not limited to, site
lease agreements, gas transportation agreements,
subordinated mortgages, steam supply agreements, gas service
agreements, gas sourcing agreements, gas purchase
agreements, turnkey contracts, operation and maintenance
agreements, water agreements and easement agreements;
(9) reimbursement agreements;
(10) recognition agreements;
(11) Midlantic Agreements;
<PAGE>
24
(12) any (a) assignment, (b) consent to assignment, (c) consent
and agreement, and (d) consent and/or recognition agreement
relating to types of contracts, agreements, commitments,
arrangements or other undertakings set forth in this Section
2.3(b);
(13) certificates and notices, including, but not limited to,
construction loan borrowing certificates, term loan borrowing
certificates, completion certificates, cost certificates and
notices of borrowing;
(14) collateral agency agreements;
(15) tax indemnity agreements;
(16) Project Documents and Project Contracts;
(17) Operative Documents;
(18) letter agreements; and
(19) non-compete agreements; and
(iii) to have letters of credit issued for its account and on its
behalf.
2.4 Principal Office; Offices; Addresses. (a) The principal office
------------------------------------
and place of business of the Partnership shall be located at the offices of the
Managing General Partner at 1600 Smith Street, Suite 5000, Houston, Texas 77002,
and the registered office of the Partnership in the State of Delaware shall be
the Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801; subject to subsection 7.2(c), either office may be changed to
such other place as the Managing General Partner may from time to time
designate. The registered agent of the Partnership for service of process on the
Partnership at such address in Delaware is The Corporation Trust Company.
(b) The Managing General Partner may also maintain solely for the
conduct of the Partnership Business an office or offices at another location or
locations and in connection therewith rent or acquire office space, engage
personnel, whether part-time or full-time, and do such other acts as it deems
necessary or advisable in connection with the maintenance and administration of
any such office. Any costs and expenses expected to be incurred in connection
with any such office shall be set forth in the Operating Budget delivered and
approved by the Limited Partner pursuant to subsection 6.7(b).
<PAGE>
25
(c) The name and business or residence address of each Partner are set
forth in Schedule 1 hereto, as the same may be amended from time to time.
2.5 Further Filings. If at any time necessary or advisable, the
---------------
Managing General Partner shall promptly (a) register the Partnership under any
assumed, trade or fictitious name under the Partnership Act, or similar law, if
any, in force and effect in the State of Delaware and (b) qualify the
Partnership to do business in any jurisdiction in which the conduct of its
business or the ownership or leasing of its assets requires it to be so
qualified. The Managing General Partner shall make all filings and do all other
things reasonably possible (including publication or periodic filings of any
certificate) that may now or hereafter be required for the perfection and
continued maintenance of the Partnership as a limited partnership, or to protect
the limited liability of the Limited Partner as a limited partner, under the
laws of the State of Delaware.
2.6 Term. The term of the Partnership commenced on the date of filing
----
of the Certificate of Limited Partnership in the Office of the Secretary of
State of the State of Delaware and shall continue until termination of the
Partnership in accordance with Article XIV hereof.
ARTICLE III
CAPITAL CONTRIBUTIONS
---------------------
3.1 Partners and Contributions. The General Partner has agreed to make
--------------------------
a contribution of $200 in cash to the capital of the Partnership. Subject to the
terms and conditions of the Capital Contribution Agreement, the initial capital
contribution of the Limited Partner specified in Section 2(a)(i) thereof shall
be made on the Initial Capital Contribution Date. Subject to the terms and
conditions of the Capital Contribution Agreement, the Limited Partner shall make
the additional capital contributions specified in Section 2(a)(ii) thereof on or
prior to the Second Capital Contribution Date.
3.2 Interest on Capital Contributions. No Partner shall be entitled to
---------------------------------
interest on its Capital Contributions.
3.3 Withdrawal of McNair. McNair agreed to make a contribution of $100
--------------------
in cash to the capital of the Partnership. If McNair shall have made such cash
capital contribution to the Partnership prior to the Initial Capital
Contribution Date, such capital contribution will be returned to McNair
immediately following the making of the contributions by the Limited Partner to
the Partnership pursuant to the second sentence of subsection 3.1 hereof and
<PAGE>
26
the admission of GE Capital as a limited partner of the Partnership, at which
time the Managing General Partner and the Limited Partner hereby consent to
McNair's withdrawal of its capital contribution and at which time McNair shall
withdraw as a limited partner of the Partnership. The Managing General Partner
and the Limited Partner hereby waive and release McNair from any liability and
from any right, claim or action that they or the Partnership may have against
McNair for such withdrawal or as a result of his status as a Partner of the
Partnership. McNair is not entitled to receive any other amount or payment upon
or by reason of the withdrawal of McNair from the Partnership or by reason of
McNair having been a limited partner of the Partnership.
ARTICLE IV
DISTRIBUTIONS
-------------
4.1 Distributable Cash. Beginning with the end of the second month
------------------
following the Second Capital Contribution Date, the Managing General Partner
shall distribute Distributable Cash to the Partners no less frequently than the
end of each month in the manner provided in this Article IV.
4.2 Distributions Prior to the Second Capital Contribution Date. (a) So
-----------------------------------------------------------
long as the aggregate amount distributable to the General Partner under this
Section 4.2 does not exceed the Development Fee, Distributable Cash in respect
of the period prior to the Second Capital Contribution Date (without regard to
whether such Distributable Cash was actually received by the Partnership during
such period) shall, within 30 days after the Second Capital Contribution Date
(but not before the Second Capital Contribution Date but in no event later than
December 31, 1993), be distributed 30% to the Limited Partner and 70% to the
General Partner.
(b) Distributable Cash in respect of the period prior to the Second
Capital Contribution Date which is in excess of the amounts distributed to the
General Partner and the Limited Partner which results in the distribution to the
General Partner of an amount equal to the Development Fee shall not be
distributed to the General Partner and the Limited Partner, but shall instead be
applied to the repayment of the Construction Loans on the Second Capital
Contribution Date.
4.3 Distributions After the Second Capital Contribution Date and Prior
------------------------------------------------------------------
to the Flip Date. Except as provided in subsections 4.5, 4.6 and 14.4(c),
- ----------------
commencing with the second calendar month after the Second Capital Contribution
Date, Distributable Cash for each month after
<PAGE>
27
the Second Capital Contribution Date and prior to the Flip Date shall be
distributed within 15 days after the end of such month as follows:
(a) First, 99% to the Limited Partner, and 1% to the General Partner,
until the Partners have received pursuant to this subsection 4.3(a) an
aggregate amount in such month equal to the amount set forth in Schedule 5
hereto (the "Tranche A Distribution")[provided, however, that in determining
---------------------- -------- -------
the amount of Distributable Cash to be paid to the Limited Partner, there
shall be deducted amounts of principal of and interest on the Partnership
Term Loan (or any refinancing thereof pursuant to Section 12 of the Capital
Contribution Agreement) paid by the Partnership during the month most
recently ended.]
(b) Second, 99% to the General Partner and 1% to the Limited Partner.
4.4 Distributions Subsequent to the Flip Date. Except as provided in
-----------------------------------------
subsections 4.6 and 14.4(c), after the Flip Date, Distributable Cash shall be
distributed 90% to the General Partner and 10% to the Limited Partner.
4.5 Arrears Account. The partnership records shall contain a monthly
---------------
arrears account (the "Monthly Arrears Account") and a Quarterly Arrears Account
-----------------------
(the "Quarterly Arrears Account") with respect to the Limited Partnership
-------------------------
Interest. If, on any Transfer Date (as defined in the Security Deposit
Agreement) that occurs after the Second Capital Contribution Date, the
distributions to the Limited Partner pursuant to subsection 4.3(a) (without
giving effect to the proviso in subsection 4.3(a)) are less than an amount equal
to 99% of the Tranche A Distributions, such deficit shall be entered as an
increase to the balance of the Monthly Arrears Account. The balance of the
Monthly Arrears Account shall bear interest at the Implicit Rate which shall be
computed monthly on each succeeding Transfer Date and entered as an increase to
the balance of such account. On any Transfer Date in which the Monthly Arrears
Account has a positive balance, then notwithstanding subsection 4.3(b) hereof,
Distributable Cash otherwise distributable pursuant to subsection 4.3(b) after
application of subsection 4.3(a), or amounts that would otherwise have been
payable to the General Partner as the Management Fee, shall instead be
distributed 99% to the Limited Partner and 1% to the General Partner until the
Limited Partner shall have received a distribution equal to the then balance of
the Monthly Arrears Account and the balance of the Monthly Arrears Account shall
be decreased by the amount so distributed to the Limited Partner. On the first
day of each calendar quarter, any positive balance in the Monthly Arrears
Account shall be transferred to the Quarterly Arrears Account. The balance of
the Quarterly Arrears Account shall accrue interest
<PAGE>
28
each calendar quarter at the lesser of (x) the Eurodollar Rate (as defined in
the General Partner Term Loan Agreement) in effect on the first Working Day of
such calendar quarter plus 4.20% per annum and (y) the Prime Rate (as defined in
the General Partner Term Loan Agreement) in effect on the first Business Day of
such quarter plus 3% per annum, in either case compounded quarterly and entered
as an increase to the balance of such account on the first day of the succeeding
calendar quarter. In the event that the Quarterly Arrears Account has a positive
balance on any Transfer Date, then prior to the making of any distribution to
the Limited Partner pursuant to the third sentence of this subsection 4.5 and
notwithstanding subsection 4.3(b) hereof, Distributable Cash otherwise
distributable pursuant to subsection 4.3(b) after application of subsection
4.3(a), or amounts that would otherwise have been paid to the General Partner as
the Management Fee, shall instead be distributed 99% to the Limited Partner and
1% to the General Partner until the Limited Partner shall have received a
distribution equal to the then balance of the Quarterly Arrears Account and the
balance of the Quarterly Arrears Account shall be decreased by the amount so
distributed to the Limited Partner.
4.6 Tax Indemnity. Notwithstanding anything else contained herein, if a
-------------
Tax Indemnity Event occurs, then an amount of Distributable Cash that would
otherwise have been distributed to the General Partner under this Article IV, or
amounts that would otherwise have been paid to the General Partner as the
Management Fee, for any month shall instead be distributed to the Limited
Partner until (i) the balance in the Tax Indemnity Account equals zero or, at
the election of the Managing General Partner, (ii) the Limited Partner has
received an amount of Distributable Cash in such period pursuant to this
subsection 4.6 equal to the amount of net additional taxes payable with respect
to such period plus the amount of all income taxes payable by such Limited
Partner as a result of the allocation of income to such Limited Partner in
connection with such distribution (which allocation will take into account all
of the elements of the Tax Indemnity Amount, including the calculation of income
taxes payable).
4.7 Net Cash From Sales or Refinancing. Except as provided in
----------------------------------
subsection 14.4(c), any Net Cash From Sales or Refinancing shall be distributed
as follows:
(a) Any Net Cash from Refinancing which results from the refinancing
described in Section 12 of the Capital Contribution Agreement shall be
distributed 100% to the Limited Partner;
(b) On or prior to the Flip Date, any Net Cash from Sales or
Refinancing (other than pursuant to the refinancing referred to in
subsection 4.7(a) above) shall be distributed 99% to the Limited Partner and
1%
<PAGE>
29
to the General Partner until the Partners have received pursuant to this
subsection 4.7(b) an aggregate amount equal to the amount set forth in
Schedule 6 hereto and any Net Cash from Sales in excess of such amount shall
be distributed 10% to the Limited Partner and 90% to the General Partner
until the Partners shall have received pursuant to this subsection 4.7(b) an
aggregate amount equal to 125% of Project Cost and any Net Cash from Sales
in excess of such amount shall be distributed 1% to the Limited Partner and
99% to the General Partner; provided, however, that in determining the
-----------------
amount of Net Cash from Sales to be paid to the Limited Partner, there shall
be deducted from such cash proceeds the portion thereof applied to the
repayment of the principal of and accrued interest on the Partnership Term
Loan and any refinancing thereof; and
(c) Subsequent to the Flip Date, any Net Cash from Sales shall be
distributed 10% to the Limited Partner and 90% to the General Partner until
the Partners shall have received pursuant to this subsection 4.7(c) an
aggregate amount equal to 125% of Project Cost and any Net Cash from Sales
in excess of such amount shall be distributed 1% to the Limited Partner and
99% to the General Partner.
4.8 Special Event. Notwithstanding anything else contained herein, if a
-------------
Special Event occurs and is continuing, Distributable Cash shall be distributed
in accordance with subsection 14.2.
4.9 Failure to Make Second Capital Contribution. If the conditions
-------------------------------------------
specified in Section 2(c) of the Capital Contribution Agreement are not
satisfied or waived and the Limited Partner does not make the additional capital
contribution specified in Section 2(a)(ii) of such Agreement on the Second
Capital Contribution Date, the Limited Partnership Interest held by the Limited
Partner after the Second Capital Contribution Date shall be converted into and
become an interest that is entitled to 5/69ths (or such greater numerator over
69 if the Limited Partner has at such time already contributed more than
$1,000,000 of its total capital contribution to the Partnership) of the
entitlements to Distributable Cash, items of taxable income, gain, loss and
deductions, and other entitlements of the Limited Partner under this Agreement.
4.10 General Partner Term Loan. For the avoidance of doubt, it is
-------------------------
expressly understood that for all purposes of this Agreement (and
notwithstanding anything to the contrary contained herein) (a) all amounts paid
on the General Partner Term Loan by the Partnership, on behalf of the General
Partner, shall be deemed paid by the General Partner from cash distributed to it
and (b) the Partnership has no right,
<PAGE>
30
title or interest in the funds, or any interest or other income earned from the
funds, on deposit in the General Partner Required Payments Reserve Account.
ARTICLE V
ALLOCATION OF CERTAIN PROFITS AND LOSSES
----------------------------------------
FOR BOOK AND TAX PURPOSES
-------------------------
5.1 Operating Profits Subsequent to the Initial Capital Contribution
----------------------------------------------------------------
Date and Prior to the Second Capital Contribution Date. Operating Profits of the
- ------------------------------------------------------
Partnership subsequent to the Initial Capital Contribution Date and prior to the
Second Capital Contribution Date shall be allocated among the Partners as
follows:
(a) First, 30% to the Limited Partner and 70% to the General Partner
until the Partners have been allocated Operating Profits in an amount equal
to the amount of Distributable Cash distributed pursuant to subsection
4.2(a).
(b) Second, 100% to the Limited Partner.
5.2 Operating Profits Subsequent to the Second Capital Contribution
---------------------------------------------------------------
Date. Operating Profits of the Partnership subsequent to the Second Capital
- ----
Contribution Date shall be allocated among the Partners as follows:
(a) First, 99% to the Limited Partner, and 1% to the General Partner
until the Limited Partner has been allocated on a cumulative basis pursuant
to this subsection 5.2(a) an amount of Operating Profits equal to the
aggregate amount of Distributable Cash it has received over the term of the
Partnership pursuant to subsections 4.3(a) hereof plus the amounts of
principal (other than interest) paid by the Partnership with respect to the
Partnership Term Loan or any refinancing thereof.
(b) Second, to the extent Operating Losses have been allocated pursuant
to subsection 5.3(b) hereof, to the Limited Partner to the extent of such
Operating Losses.
(c) Third, 100% to any Partner until each Partner has been allocated an
amount of Operating Profits pursuant to this subsection 5.2(c) equal to the
aggregate amount of Distributable Cash it has received over the term of the
Partnership pursuant to subsection 4.6.
<PAGE>
31
(d) Fourth, 99% to the General Partner and 1% to the Limited Partner
until the Flip Date.
(e) Fifth, after the Flip Date, 90% to the General Partner and 10% to
the Limited Partner.
5.3 Operating Losses. Operating Losses of the Partnership shall be
----------------
allocated among the Partners as follows:
(a) First, 100% to the General Partner until the Capital Account of
the General Partner equals zero.
(b) Second, 100% to the Limited Partner until the Capital Account of
the Limited Partner equals zero.
(c) Third, 100% to the General Partner.
5.4 Depreciation. (a) Except as provided in subsection 5.4(b),
------------
Depreciation with respect to the tangible assets of the Project shall be
allocated as follows:
(i) First, 100% to the Limited Partner until the Capital Account
balance of the Limited Partner equals zero.
(ii) Second, 100% to the Limited Partner to the extent of the
Nonrecourse Deductions or Partner Nonrecourse Deductions with regard to the
Project.
(iii) Third, 100% to the General Partner to the extent that such
Depreciation does not constitute a Nonrecourse Deduction or Partner
Nonrecourse Deduction.
(b) All other Depreciation with respect to assets acquired subsequent
to the Second Capital Contribution Date shall be allocated in accordance
with Code Section 704(b) between the Partners based upon how the basis of
the asset was funded. For example, Depreciation with respect to an asset
funded by a contribution or a loan from a Partner shall be allocated to that
Partner, and Depreciation with respect to an asset funded from net income of
the Partnership shall be allocated 99% to the General Partner and 1% to the
Limited Partner with respect to an asset purchased prior to the Flip Date
and 90% to the General Partner and 10% to the Limited Partner with respect
to an asset purchased subsequent to the Flip Date.
(c) Notwithstanding paragraph (a) of this subsection 5.4, if the
Gross Asset Value of the tangible assets of the Project is attributable to
either capital contributions of, or net income allocated to, the General
Partner, the General Partner will be allocated an amount of the total
Depreciation with respect to such asset in each
<PAGE>
32
period based upon the ratio of (i) its contributions or income described above
to (ii) the Gross Asset Value of the asset, both as adjusted from time to time.
5.5 Gains. Upon the sale, transfer or other disposition of any property
-----
the proceeds from which are distributed pursuant to subsection 4.7(b) or (c)
hereof, any Gain realized by the Partnership shall be allocated as follows:
(a) First, 100% to the Limited Partner until the Capital Account
balance of the Limited Partner equals the amount of Net Cash from Sales to be
received by such Limited Partner pursuant to subsections 4.7(b) or 4.7(c) hereof
plus the principal of the Partnership Term Loan repaid in connection with the
receipt by the Partnership of such Net Cash from Sales.
(b) Second, 100% to the General Partner.
5.6 Losses. Upon the sale, transfer or other disposition of any
------
property the proceeds from which are distributed pursuant to subsection 4.7
hereof, or on the abandonment or other disposition of any tangible or intangible
asset with respect to which no proceeds are realized at a loss in excess of
$30,000, any Loss realized by the Partnership shall be allocated as follows:
(a) First, 100% to the General Partner until the Capital Account of
the General Partner equals zero.
(b) Second, to the Limited Partner until the Capital Account of the
Limited Partner equals zero.
(c) Third, 100% to the General Partner.
5.7 Qualified Income Offset. Notwithstanding anything herein to the
-----------------------
contrary, in the event any Partner unexpectedly receives any adjustments,
allocations or distributions described in paragraphs (b)(2)(ii)(d)(4), (5) or
(6) of Regulations Section 1.704-1, there shall be specially allocated to such
Partner such items of Partnership income and gain, at such times and in such
amounts as will eliminate as quickly as possible that portion of its Adjusted
Capital Account Deficit caused or increased by such adjustments, allocations or
distributions.
5.8 Minimum Gain Chargeback. Notwithstanding any other provision in
-----------------------
this Article V, if there is a net decrease in Partnership minimum gain or
partner nonrecourse debt minimum gain (determined in accordance with the
principles of Regulation Sections 1.704-2(b), 1.704-2(d) and 1.7042(i)(4),(5)
during any Partnership taxable year, the Partners shall be specially allocated
items of Partnership income and
<PAGE>
33
gain for such year (and, if necessary, subsequent years). The items to be so
allocated shall be determined in accordance with Regulations Section 1.704-2(f).
This subsection 5.8 is intended to comply with the minimum gain chargeback
requirements in such Regulation Sections and shall be interpreted consistently
therewith.
5.9 Special Allocation of Certain Expenses. Organizational Expenses,
--------------------------------------
deductions for amortization or deductions otherwise resulting from payments
described in section 5.2(a), shall be allocated 100% to the Limited Partner
until such allocation creates an Adjusted Capital Account Deficit of the Limited
Partner.
5.10 Partner Nonrecourse Deductions. Notwithstanding subsection 5.4
------------------------------
hereof, nonrecourse deductions attributable to otherwise nonrecourse debt with
respect to which a Partner or an Affiliate of a Partner described in Regulations
Section 1.752-4(b) is the creditor or otherwise bears the "economic risk of
loss" as defined in Regulations Section 1.752-2 shall be allocated to such
Partner.
5.11 Curative Allocations. The allocations set forth in subsections 5.7
--------------------
and 5.8 hereof are intended to comply with certain requirements of Regulations
Section 1.704-l(b). Notwithstanding any other provisions of this Article V
(other than subsections 5.7 and 5.8), allocations that have taken place pursuant
to subsections 5.7 and 5.8 shall be taken into account in allocating other
Operating Profits, Operating Losses, Depreciation and other items, so that, to
the extent possible, the net amount of such other allocations and the
subsections 5.7 and 5.8 allocations to each Partner shall equal the net amount
that would have been allocated to each Partner if the subsections 5.7 and 5.8
allocations had not occurred. Notwithstanding anything within this subsection
5.11, no curative allocation shall be made hereunder with respect to a minimum
gain chargeback (under subsection 5.8) attributable to or arising in connection
with the Partnership Term Loan.
5.12 Tax Allocations. Except as provided in subsection 5.13 hereof, for
---------------
income tax purposes each item of income, gain, loss and deduction shall be
allocated in the same manner as the corresponding book item is allocated for
Capital Account purposes.
5.13 Property Subject to 704(c) and 704 (b). In the case of any
--------------------------------------
Partnership asset the Gross Asset Value of which differs from its adjusted tax
basis, income, gain, loss and deduction with respect to such asset shall, solely
for tax purposes, be allocated in accordance with the principles of Code
Sections 704(b) and 704(c) to take account of such difference. Thus, for
example, income tax depreciation with respect to the income tax basis of any
asset that is funded
<PAGE>
34
(either directly or through repayment of a Partnership borrowing) by a Limited
Partner capital contribution shall be allocated to that Limited Partner by
reason of the allocation in subsection 5.4(c) of Depreciation to that Limited
Partner.
5.14 Gross Income Allocation. (a) To the extent all or any portion of
-----------------------
any payment to the General Partner or an Affiliate of the General Partner in any
year (other than a distribution made pursuant to Article IV hereof) is treated
as a non-deductible distribution to such Partner or Affiliate, the General
Partner will be allocated an amount of gross income in such period (or in the
next succeeding periods to the extent there is insufficient gross income in such
period) equal to the amount of the payment.
(b) To the extent the General Partner has been allocated Depreciation
with respect to the Project pursuant to clause (iii) of subsection 5.4(a), the
General Partner will be allocated an amount of gross income in such period (or
in the next succeeding periods to the extent there is insufficient gross income
in such period) equal to the amount of Depreciation so allocated.
5.15 Limitations. Notwithstanding anything to the contrary in this
-----------
Article V, no allocation under this Article V shall be made to a Partner that
would cause such Partner to have, or that would increase, an Adjusted Capital
Account Deficit.
5.16 Ordering Rules. For purposes of Article V hereof, the following
--------------
ordering rules shall apply:
(a) First, all distributions of Distributable Cash under Article IV
shall be deemed to have been made.
(b) Next, Operating Profits and Operating Losses and items other than
Gain and Loss shall be allocated in accordance with Article V hereof.
(c) Finally, Gain or Loss from the sale or other disposition of
Partnership property shall be allocated in accordance with this Article V.
ARTICLE VI
BOOKS OF ACCOUNT, RECORDS, REPORTS AND TAX MATTERS
--------------------------------------------------
6.1 Books and Records. Proper and complete records and books of account
-----------------
for the Partnership shall be kept by the Managing General Partner in which shall
be appropriately entered all transactions and other matters relative to the
Partnership's business as are usually entered into records and books of account
maintained by partnerships
<PAGE>
35
engaged in businesses of like character. Except as otherwise provided in this
Agreement, all decisions regarding accounting and tax matters shall be made by
the Managing General Partner in its sole discretion taking into account such
advice from the Partnership's professional tax and accounting advisors as the
Managing General Partner deems appropriate, having given due consideration to
the advice and recommendations of the Limited Partner, the Limited Partner's tax
counsel and other advisors. The books and records shall at all times be made
available at the principal office of the Partnership and shall be open to the
reasonable inspection and examination of any Partner or its duly authorized
representatives during normal business hours for any purpose reasonably related
to the interest of such Partner as a partner in the Partnership. The Partnership
will be on the accrual method for both tax and accounting purposes.
6.2 Information Kept by Managing General Partner. The Managing General
--------------------------------------------
Partner shall keep at the principal office of the Partnership all the following:
(a) A current list of the full name and last known business or
residence address of each Partner set forth in alphabetical order together
with the Capital Contribution of each Partner;
(b) a copy of the original Certificate of Limited Partnership and all
certificates of amendment thereto and restatements thereof, together with
executed copies of any powers of attorney pursuant to which any such
certificate has been executed;
(c) copies of the Partnership's federal, state and local income tax or
information returns and reports, if any, for the six most recent taxable
years;
(d) copies of this Agreement and all amendments hereto and restatements
hereof;
(e) financial statements of the Partnership for the six most recent
fiscal years;
(f) the Partnership's books and records as they relate to the internal
affairs of the Partnership for at least the current and past three fiscal
years; and
(g) all other material information received by the Managing General
Partner from or with respect to the Partnership.
6.3 Fiscal Year. The fiscal year of the Partnership shall end on
-----------
December 31st of each year.
<PAGE>
36
6.4 Partnership Funds. The funds of the Partnership shall be deposited
-----------------
in the relevant accounts maintained by the Security Agent pursuant to the
Security Deposit Agreement, and be invested in such interest-bearing or
non-interest-bearing investments as are specified therein. All withdrawals from
any such accounts shall be made in accordance with the terms of the Security
Deposit Agreement. Any funds withdrawn from the Revenue Account (as defined in
the Security Deposit Agreement) pursuant to Section 4.01(a) of the Security
Deposit Agreement shall be deposited in a separate bank account of the
Partnership, be invested from time to time only in such Cash Equivalents as may
be determined by the Managing General Partner and be used solely for the payment
of expenses set forth in the Operating Budget. Partnership funds shall not be
commingled with those of any other Person.
6.5 Income Tax Elections/Return Preparation. (a) Prior to the Flip
---------------------------------------
Date, the Managing General Partner shall not make any material federal income
tax elections affecting interest expenses or affecting the depreciation
deductions with respect to the Project or the Organizational Expenses with
respect to the Partnership shown on Schedule 2, or extend the statute of
limitations for assessment of tax deficiencies, unless it has received the prior
written consent of the Limited Partner. However, the sole remedy available to
the Limited Partner for the failure of the General Partner to obtain the consent
of the Limited Partner with respect to an election described above shall be the
creation of a Tax Indemnity Event.
(b) All tax returns and reports of the Partnership shall be prepared
and timely filed under the direction of the Managing General Partner, and,
except as otherwise provided in this Agreement, all tax audits and litigation
with respect thereto shall be conducted under the direction of the Managing
General Partner.
(c) Prior to the Flip Date, the Managing General Partner covenants and
agrees that, as early as reasonably possible prior to its filing of the
Partnership's federal and state income tax returns, it will provide the Limited
Partner with a proposed pro forma of such Partnership returns showing the tax
positions which it intends to reflect in the Partnership's returns, and will
provide the Limited Partner with reasonable opportunity fully to consult with
and/or advise the Managing General Partner with respect to all positions
intended to be reflected.
6.6 Tax Accounting Matters. (a) The Partnership's Capital Accounts and
----------------------
its books and records related thereto shall be maintained in accordance with the
accounting methods used in preparing the Partnership's federal income tax return
<PAGE>
37
notwithstanding the fact that the Partnership shall also maintain books and
records in accordance with GAAP.
(b) All items of income and deductions recognized during a month shall
be allocated as of the end of each month, based on the facts and circumstances
existing as of the end of that month.
6.7 Financial Statements. (a) The Managing General Partner shall
--------------------
furnish to each other Partner:
(i) as soon as available, but in any event within 120 days after the
end of each fiscal year of the Partnership and the Managing General Partner,
a copy of the balance sheet of each of the Partnership and the Managing
General Partner as at the end of such fiscal year and the related statements
of income and partners' capital and changes in partners' capital and cash
flow for such fiscal year, setting forth, after fiscal year 1991, in each
case in comparative form the figures for the previous year, reported on,
without a qualification or exception as to the scope of the audit, by
independent certified public accountants of nationally recognized standing
reasonably acceptable to the Limited Partner; and
(ii) prior to the Flip Date, as soon as available, but in any event not
later than 60 days after the end of each of the first three fiscal quarters
of each year of the Partnership and the Managing General Partner, the
unaudited balance sheet of each of the Partnership and the Managing General
Partner as at the end of each such quarter and the related unaudited
statements of income and partners' capital and changes in partners' capital
and cash flow of the Partnership and the Managing General Partner for such
quarter and the portion of the fiscal year through such date, setting forth,
after fiscal year 1991, in each case in comparative form the figures for the
previous year, certified by a Responsible Officer of the Managing General
Partner (subject to normal year-end audit adjustments);
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
approved by such accountants or officer, as the case may be, and disclosed
therein).
(b) Certificates: Other Information. Prior to the Flip Date, the
-------------------------------
Managing General Partner shall furnish to each other Partner:
(i) concurrently with the delivery of the financial statements referred
to in subsection 6.7(a)(i),
<PAGE>
38
a certificate of the independent certified public accountants
reporting on such financial statements stating that in making the
examination necessary therefor no knowledge was obtained of any
Special Event or of any event which, with the passage of time or the
giving of notice or both, would constitute a Special Event, except as
specified in such certificate;
(ii) concurrently with the delivery of the financial statements referred to
in subsections 6.7(a)(i) and (ii), a certificate of a Responsible
Officer of the Managing General Partner stating that, to the best of
such officer's knowledge, the Managing General Partner during such
period has observed or performed all of its covenants and other
agreements, and satisfied every condition contained in this Agreement
and the other Operative Documents, to be observed, performed or
satisfied by it, and that such officer has obtained no knowledge of
any Special Event or of any event which, with the passage of time or
the giving of notice or both, would constitute a Special Event, except
as specified in such certificate;
(iii) not later than 30 days prior to the end of each fiscal year of the
Partnership, a copy of the monthly operating budget (which includes
revenues and expenses), the capital expenditures budget and the
general and administrative budget (collectively, the "Operating
Budget") for the next fiscal year of the Partnership, and a copy of
the projections by the Managing General Partner of the Operating
Budget and cash flow of the Partnership for the next three succeeding
fiscal years, such Operating Budget to be approved by the Limited
Partner (which approval shall not be unreasonably withheld or delayed)
and such Operating Budget and projections to be accompanied by a
certificate of a Responsible Officer of the Managing General Partner
to the effect that such Operating Budget and projections have been
prepared in good faith on a reasonable basis and that such officer has
no reason to believe they are incorrect or misleading in any material
respect;
(iv) promptly after becoming available, but in any event within 30 days
after the end of each calendar month (except the last month of each
quarter), a report, certified by a Responsible Officer of the Managing
General Partner, setting forth the power production and the revenues
of
<PAGE>
39
the Project during such month and setting forth any extraordinary
items incurred in connection with the Project but not included in
the Operating Budget delivered pursuant to subsection 6.7(b)(iii),
together with a comparison of the projected power production and
revenues of the Project for such month;
(v) promptly after becoming available, but in any event within 30 days
after the end of each calendar quarter, a report, certified by a
Responsible Officer of the Managing General Partner, setting forth
the year-to-date revenues, operating expenses, general and
administrative expenses and capital expenditures of the
Partnership, together with a comparison of the Operating Budget for
such period, and a projection of revenues and expenses for the
remainder of the Partnership's fiscal year;
(vi) upon the Limited Partner's request, quarterly and annual funds flow
statements detailed to its reasonable satisfaction;
(vii) upon request by the Limited Partner, which request shall not be
made more frequently than once in any twelve-month period, a
revised plan for the procurement of natural gas for the Facility
for the next four years demonstrating to the reasonable
satisfaction of the Limited Partner how the Partnership will comply
with the provisions of subsection 7.2(m); and
(viii) promptly, such additional financial and other information as the
Limited Partner may from time to time reasonably request for a
purpose which is reasonably related to the interest of such Partner
as a partner in the Partnership.
6.8 Computations. The Managing General Partner may rely upon, and shall
------------
have no liability to any other Partner if it relies upon, the opinion of Arthur
Andersen & Co. or any other independent nationally recognized accountant and/or
attorneys retained by the Partnership from time to time and reasonably
acceptable to the Limited Partner with respect to all matters (including
disputes with respect thereto) relating to computations and determinations
required to be made under this Article VI or under Articles IV or V hereof.
6.9 Taxes and Tax Controversies. For the purposes of receiving notices
---------------------------
from the Internal Revenue Service (the "IRS") on behalf of the Limited Partner,
---
keeping each Partner informed of all administrative and judicial proceedings
relating to the adjustment of Partnership items at the
<PAGE>
40
Partnership level, and for all other relevant purposes, the Managing General
Partner shall hereby be designated the Tax Matters Partner (the "TMP"), with all
---
of the rights, duties, powers, and obligations provided for in Sections 6221
through 6232, inclusive, of the Code; provided, however, that, with respect to
-----------------
all taxable years beginning on or before the Flip Date, without the consent of
the Limited Partner (or, if there shall be more than one Limited Partner, a
majority in interest of such Limited Partners), the TMP will not:
(a) take any action to extend any statute of limitations with respect
to the tax returns of the Partnership;
(b) make any decision on behalf of the Partnership, which will be
binding upon the Limited Partner, to contest in judicial proceedings any
adverse IRS decision related to a Partnership return of income, including
the decision of whether to contest in Tax Court or in district court or the
Court of Claims; or
(c) file any return or statement of income with respect to the
Partnership or any Partner, or take any position with any taxing authority,
other than in accordance with the tax assumptions set forth in Schedule 2
hereof; provided, however, if the IRS challenges the treatment of any item
--------- -------
on the Partnership's tax return filed in accordance with the tax assumptions
set forth on Schedule 2 hereof, the TMP shall not be required to file future
Partnership tax returns in accordance with such assumption unless (i) such
issue is being contested by the Partnership and (ii) the TMP receives an
opinion of tax counsel acceptable to the TMP to the effect that there is
sufficient authority in support of such position that the filing of future
Partnership tax returns in accordance therewith will not subject the General
Partner (as TMP and as a Partner in the Partnership) to any penalty,
interest or addition to tax as a result thereof or the Limited Partner
agrees to indemnify the General Partner for any such penalty, interest or
addition to tax.
Additionally, the TMP covenants to notify the Limited Partner promptly as to the
beginning of any audit or administrative or judicial proceedings with respect to
Partnership tax matters and as to all material developments in such matters, to
provide the Limited Partner with copies of all reports, notices and
correspondence relating to such matters and, with respect to taxable years
beginning on or before or including the Flip Date, to consult with the Limited
Partner with respect to the conduct on behalf of the Partnership of any audit or
administrative or judicial proceedings in which the Partnership is a party, and
to convey to the IRS all procedural requests made by the Limited Partner. In the
event of any audit or administrative or judicial proceeding, with respect to
taxable
<PAGE>
41
years beginning on or before or including the Flip Date, that involves an issue
that may have a material adverse impact on the Limited Partner, the Limited
Partner may, at its option and at the expense of the Partnership, assume control
of all or any portion of such audit or proceeding.
6.10 Inspection; Reports to Regulatory Authorities. The Partners and
---------------------------------------------
their respective authorized representatives may inspect the Project and the
books and records of the Managing General Partner relating to the Project during
normal business hours for any purpose reasonably related to the interest of the
Partners as partners of the Partnership and make copies and extracts therefrom,
and may discuss the Partnership's affairs, finances and accounts with the
employees and accountants of the Managing General Partner and the Partnership
(and by this provision the Managing General Partner authorizes such accountants
to discuss with each of the Partners and their respective authorized
representatives the affairs, finances and accounts of the Partnership), all at
such times and as often as may be reasonably requested. The Managing General
Partner shall furnish each of the Partners statements accurate in all material
respects regarding the condition and state of repair of the Project, all at such
times and as often as may be reasonably requested. None of the Partners shall
have any duty to make any such inspection or inquiry or incur any liability or
obligation by reason of not making any such inspection or inquiry. To the extent
permitted by Applicable Law, the Managing General Partner shall prepare and file
in timely fashion or, where any Partner shall be required to file, on reasonable
notice, the Managing General Partner shall prepare and deliver to such Partner
within a reasonable time prior to the date for filing, any report with respect
to the Project that shall be required to be filed with any Governmental
Authority. Each of the Partners shall notify the Managing General Partner at
least 30 days prior to any filing deadline if any such notice, application or
document is necessary on its behalf and if the Managing General Partner would
not reasonably be aware of the necessity of such filing.
ARTICLE VII
MANAGEMENT
----------
7.1 Appointment; Powers of the Managing General Partner. (a) The
---------------------------------------------------
General Partner and the Limited Partner hereby appoint Cogen Camden as the
initial Managing General Partner. Cogen Camden shall serve as the Managing
General Partner until it shall cease to be a General Partner or the Managing
General Partner pursuant to subsection 14.2 or otherwise with the consent of the
Limited Partner.
(b) The Managing General Partner, acting as such and subject to
subsection 7.3 and to any other specific limitations
<PAGE>
42
contained in this Agreement, shall have full and exclusive power and discretion
to manage the day-to-day business and affairs of the Partnership, including the
construction, equipping, management, control, operation, maintenance and repair
of the Project, and to engage in all activities and transactions and all other
acts and things that in its judgment are necessary, appropriate, proper,
advisable or desirable to effect, or incidental or convenient to, the
furtherance of the Partnership Business, including, but not limited to, the
power to:
(i) Accounting Records. Maintain the accounting books and records of
------------------
the Partnership, and have charge and supervision over and care and custody
of all moneys, securities, and disbursements of the Partnership;
(ii) Contracts. Negotiate the terms of and make, enter into, execute,
---------
deliver and perform any and all agreements, contracts, commitments,
arrangements and undertakings, and amendments thereto, all as may be
necessary, convenient or incidental to carry out the Partnership's objects
and purposes, including, but not limited to, the following:
(1) construction, term loan and working capital agreements;
(2) notes, including, but not limited to, construction notes, term
notes and working capital notes;
(3) capital contribution agreements;
(4) borrower indemnity agreements;
(5) collateral security documents, including, but not limited to,
mortgages, security agreements, security deposit agreements,
assignments and security agreements, pledge agreements,
assignments regarding contracts and consents to assignments
regarding contracts;
(6) power purchase contracts;
(7) equipment supply contracts;
(8) additional contracts, including, but not limited to, site lease
agreements, gas transportation agreements, steam supply
agreements, gas service agreements, gas sourcing agreements, gas
purchase agreements, turnkey contracts, operation and maintenance
agreements, water agreements and easement agreements;
<PAGE>
43
(9) recognition agreements;
(10) reimbursement agreements;
(11) the granting, on behalf of the Partnership, of security
interests, liens, and other encumbrances on, in and against the
Partnership's properties;
(12) causing the Partnership to have letters of credit issued for
the Partnership's account;
(13) Midlantic Agreements;
(14) any (a) assignment, (b) consent to assignment, (c) consent and
agreement, and (d) consent and/or recognition agreement relating
to types of contracts, agreements, commitments, arrangements or
other undertakings set forth in this Section 7.1(b);
(15) certificates and notices, including, but not limited to,
construction loan borrowing certificates, term loan borrowing
certificates, completion certificates, cost certificates and
notices of borrowing;
(16) collateral agency agreements;
(17) tax indemnity agreements;
(18) Project Documents and Project Contracts;
(19) Operative Documents;
(2O) letter agreements; and
(21) non-compete agreements.
(iii) Authorization. Grant special or limited authority to employees
-------------
and agents of the Partnership to make, execute, deliver and perform the
agreements described in paragraph (ii) of this subsection 7.1(b);
(iv) Investments. Invest and reinvest available funds of the
-----------
Partnership in Cash Equivalents in accordance with the terms of the Security
Deposit Agreement and subsection 6.4 hereof;
(v) Proceedings. Pursue or defend any claim, action, proceeding or
-----------
debt due to, owned by or asserted against the Partnership, by litigation or
otherwise; provided, however, that (1) the Managing General Partner shall permit
-------- -------
any Partner, at such Partner's sole option,
<PAGE>
44
to intervene and participate in any arbitration proceeding under any Project
Document and (2) without the approval of the Limited Partner, the Managing
General Partner shall not initiate any lawsuit except to collect debts or to
enforce contractual obligations in the ordinary course of business or unless the
Managing General Partner reasonably determines that there exists a threat of
irreparable and immediate harm to the Project and the convening of a meeting is
not practicable. The Managing General Partner shall seek ratification from the
Limited Partner as soon as practicable thereafter;
(vi) Accounts. Open, maintain and close depositories and bank
--------
accounts for the deposit and withdrawal of money and give signatory powers to
designated Persons in accordance with the terms of the Security Deposit
Agreement and subsection 6.4 hereof;
(vii) Advisors. Select, retain, direct, consult and discharge
--------
attorneys, accountants, engineers, financial advisors, consultants and other
experts, agents and advisors for the Partnership and determine their
compensation and the terms of their engagement on behalf of the Partnership in
accordance with the Operating Budget; and
(viii) Reports. Prepare and file any reports, returns, requests,
-------
applications or other filings relating to taxes, legal requirements or
governmental regulations pertaining to the Partnership or the business or
activities of the Partnership, and act as TMP.
7.2 Certain Management Duties and Responsibilities of the Managing
--------------------------------------------------------------
General Partner. Prior to the Flip Date (except with respect to paragraphs (e)
- ---------------
and (h) of this subsection 7.2), the Managing General Partner shall do the
following:
(a) Payment of Obligations. To the extent of available Partnership
----------------------
funds, pay, discharge or otherwise satisfy at or before maturity or before
they become delinquent, as the case may be, all the Partnership's
obligations and liabilities of whatever nature, except when the amount or
validity thereof is currently being diligently contested in good faith by
appropriate proceedings timely instituted, cash reserves in conformity with
GAAP with respect thereto have been provided on the books of the Managing
General Partner or the Partnership, as the case may be, and the Partnership
or the Managing General Partner, as the case may be, is complying with the
other relevant provisions of paragraphs (b) and (1) of this subsection.
<PAGE>
45
(b) Taxes; Charges; Laws. (i) To the extent of available Partnership
--------------------
funds promptly cause the Partnership to pay all applicable taxes except to
the extent that (1) such taxes are being diligently contested in good faith,
by appropriate proceedings timely instituted, (2) a bond has been posted and
a cash reserve in conformity with GAAP has been established in an amount at
least equal to such taxes and any interest and penalty that may be payable
thereon, (3) during the period of such contest the enforcement of any
contested item is effectively stayed and (4) such contest does not involve
any substantial danger of the sale, forfeiture or loss of any part of the
Project, title thereto or any interest therein and does not interfere with
the operation of the Facility; and (ii) comply and cause the Partnership to
comply with all Requirements of Law.
(c) Chief Place of Business. Maintain its chief place of business at
-----------------------
1600 Smith Street, Houston, Texas; not permit the Partnership to keep any
place of business outside of the States of New Jersey, New York and Texas;
not permit the Partnership to keep any assets outside of the States of New
Jersey, New York and Texas; not change its name; and not do business under
any name other than Camden Cogen L.P. or Cogen Technologies Camden GP
Limited Partnership, or in the State of New Jersey, Camden Cogen Limited
Partnership or, with respect to the Gas Service Agreement, Camden Cogen
Inc., without, in each case, the prior written consent of each of the
Partners, which consent shall not be unreasonably withheld.
(d) Performance of Obligations; Enforcement of Rights. Fully and
-------------------------------------------------
faithfully carry out all of its obligations, and cause the Partnership to
fully and faithfully carry out all of the Partnership's obligations, from
time to time under or in respect of the Operative Documents, except to the
extent that the failure to comply therewith could not reasonably be expected
to have a material adverse effect on the business, properties, operations,
condition (financial or otherwise) or prospects of the Managing General
Partner or the Partnership, as the case may be, and, without limiting the
generality of the foregoing, to the extent of available Partnership funds
(including, without limitation, proceeds of loans under the Midlantic
Agreements or under such other working capital facility as may be approved
by the Limited Partner), pay all amounts payable by the Partnership
thereunder. The Managing General Partner will use its best efforts to take
any and all such action as may be necessary to enforce its and the
Partnership's rights and to collect any and all sums due it or the
Partnership under the Project Documents and will use its best efforts to
obtain all necessary Permits and other approvals of Governmental Authorities
to keep such Project
<PAGE>
46
Documents in full force and effect. Without limiting the generality of the
foregoing, it will:
(i) do or cause to be done all things reasonably necessary to
preserve and keep unimpaired in all material respects its and the
Partnership's rights and those of its assignees under the Project
Documents and to prevent any default under any thereof or any
termination, surrender, cancellation, forfeiture or impairment in any
material respect of any thereof, including, without limitation, all
things necessary to defend any appeal of the FERC Order; and
(ii) not receive or collect any payments under the Project
Documents in advance of the time when the same become due and payable
thereunder unless such money is held by the Security Agent pursuant to
the Security Deposit Agreement until due and payable.
(e) Maintenance of Existence. Preserve, renew and keep in full force
------------------------
and effect its and the Partnership's existence and to the extent of available
Partnership funds (including, without limitation, proceeds of loans under the
Midlantic Agreements), take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of the
Partnership business and its business on behalf of the Partnership; comply and
to the extent of available Partnership funds (including, without limitation,
proceeds of loans under the Midlantic Agreements or under such other working
capital facility as may be approved by the Limited Partner), cause the
Partnership to comply with all Requirements of Law and with all Contractual
Obligations except to the extent that the failure to comply with any such
Contractual Obligation could not reasonably be expected to have a material
adverse effect on the business, operations, financial or other condition or
prospects of the Managing General Partner, the Project or the Partnership or on
the ability of the Managing General Partner or the Partnership to perform its
obligations hereunder or under the other Operative Documents; and not merge or
consolidate with any other Person nor sell convey or otherwise dispose of any
part of its assets to any Person except as permitted by the Operative Documents.
(f) Maintenance of Property: Insurance. Keep all of the Partnership's
----------------------------------
material property useful and necessary in its business in good working order and
condition except for normal wear and tear; to the extent of available
Partnership funds (including, without limitation, proceeds of loans under the
Midlantic Agreements or under such other working capital facility as may be
approved by the Limited Partner), maintain insurance on all the property
<PAGE>
47
of the Partnership in accordance with the provisions of Schedule 7; comply and
cause the Partnership to comply in all material respects with all warranties,
covenants and agreements made, given or undertaken by it in favor of insurers in
connection with such insurance policies; and furnish to the Limited Partner,
upon written request, full information as to the insurance carried for any
purpose reasonably related to the interest of such Partner as a partner in the
Partnership.
(g) Further Assurances. Promptly and duly execute and deliver to each
------------------
Partner such documents and assurances to take such further action as any Partner
may from time to time reasonably request in order to carry out more effectively
the intent and purpose of the Operative Documents and to establish, protect and
perfect the right and remedies created or intended to be created in favor of
each Partner.
(h) Governmental Regulation. (i) Take all actions as may from time to
-----------------------
time be reasonably necessary so that none of the Partners, their respective
Affiliates or the Partnership will, as a result of the construction, ownership
or operation of the Project, the supply of fuel or water thereto or the sale of
steam or electricity therefrom or the entering into or performance of any
Operative Document or any transaction contemplated hereby or thereby, become
subject to the jurisdiction of any federal, state or local Governmental
Authority or regulatory commission or group to whose jurisdiction the same would
not otherwise be subject (including, without limitation, the Securities and
Exchange Commission, FERC and any PUC) or be deemed to be, or be subject to
regulation as, a public utility, an electric utility, an electric company or a
public utility holding company under any Applicable Law (including, without
limitation, the Public Utility Holding Company Act of 1935, as amended, the
Federal Power Act and the laws under which any PUC is empowered to act) other
than as an operator of a "qualifying cogeneration facility" under PURPA, except
where (x) the effect of such determination would result only in the imposition
of reporting or safety requirements which, in the reasonable opinion of the
Limited Partner, are non-burdensome in nature and (y) in the event that steam
from the Project is supplied, directly or indirectly, to Persons other than the
Steam Host under the Steam Supply Agreement or otherwise, the Partnership has
obtained a declaratory order or other official assurance, in each case in form
and substance reasonably satisfactory to the Limited Partner, from the New
Jersey Board Regulatory Commissioners to the effect that such sales will not
result in any Partner, Affiliate thereof or the Partnership being deemed to be,
or subject to regulation as, a "public utility" under any Applicable Law (other
<PAGE>
48
than regulation of the nature described in clause (x) above) and (ii) promptly
and duly prepare and, if necessary, execute and file, and prepare for execution
and filing by any Partner, any of its Affiliates or the Partnership, such
notices, applications and other documents as shall be necessary so that the
construction, ownership or operation of the Project, the supply of fuel and
water thereto and the sale of steam and electricity therefrom and the entering
into and performance of any Operative Document shall not subject any such
Partner, its Affiliates or the Partnership to any such regulation.
(i) Compliance with FERC Order. etc. At all times cause the
-------------------------------
Partnership to comply in all material respects with the terms and conditions of
the FERC Order and of each other license required for the ownership or operation
of the Project; not amend, modify, terminate, transfer, pledge or otherwise
dispose of, or forfeit, surrender, permit or consent to the amendment,
modification, termination, transfer, pledge, other disposition, forfeiture, or
surrender of, any such license; or take any other action under any such license
having a material adverse effect on any Partner; provided, however, that the
-------- -------
Managing General Partner shall have the power to amend or modify any such
license (other than the FERC Order or any other order or license affecting the
exemption of the Project from regulation as a utility), (x) after providing the
Limited Partner with 30 days' advance written notice of the proposed amendment
or modification and all information reasonably necessary to analyze the
consequences thereof (except, if the Managing General Partner reasonably
determines that there is an emergency requiring immediate action and the giving
of such notice is not practicable, the Managing General Partner shall give the
Limited Partner such notice not later than the close of business on the Business
Day immediately following the date of commencement of such emergency), and (y)
so long as such amendment or modification could not reasonably be expected to
have a material adverse effect on the business, operations, property or
financial or other condition or prospects of the Partnership, the Managing
General Partner or the Project, the projected availability of Distributable Cash
in excess of the distributions required to be made to the Limited Partner
pursuant to subsection 4.3(a), or on the ability of the Managing General Partner
or the Partnership to perform its obligations under this Agreement or any other
Operative Document.
(j) Notices. Promptly (in the case of paragraphs (i)(y), (ii), (iv),
-------
(v), (vii), (ix) and (x)) and within five days (in the case of paragraphs
(i)(x), (iii), (vi) and (viii)) give notice to each Partner:
<PAGE>
49
(i) of the occurrence of (x) any Special Event or (y) any event
which, with the passage of time or the giving of notice or both, would
constitute a Special Event;
(ii) of any default or event of default under any Indebtedness,
Guarantee Obligation or other Contractual Obligation of the Managing General
Partner or the Partnership, that, if not cured, could have a material adverse
effect on the business, operations, property or financial or other condition or
prospects of the Partnership, the Managing General Partner or the Project, on
the projected availability of Distributable Cash in excess of the distributions
required to be made to the Limited Partner pursuant to subsection 4.3(a) or on
the ability of the Managing General Partner or the Partnership to perform its
obligations under this Agreement or under any other Operative Document;
(iii) of any litigation or proceeding affecting the Partnership, the
Managing General Partner or the Project in which the amount involved is
$1,000,000 or more and not covered by insurance or in which injunctive or
similar relief is sought;
(iv) of the receipt by the Partnership or the Managing General Partner
of any Environmental Notice or of any notice of any event that creates a
material likelihood of the occurrence of an Adverse Environmental Event;
(v) of the following events, as soon as possible and in any event
within 30 days after the Managing General Partner knows or has reason to know
thereof: (x) the occurrence or expected occurrence of any Reportable Event with
respect to any Plan, or any withdrawal from, or the termination, Reorganization
or Insolvency of any Multiemployer Plan, or (y) the institution of proceedings
or the taking of any other action by the PBGC or the Partnership or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the withdrawal from,
or the termination, Reorganization or Insolvency of, any Plan;
(vi) of the receipt by the Managing General Partner or the Partnership
of any material notice, demand or declaration from any other party to any of the
Project Documents relating to any default or event of default thereunder, the
termination thereof or the renewal or nonrenewal thereof;
<PAGE>
50
(vii) of any request by a party to a Project Document for an
arbitration proceeding under and pursuant to the provisions of such
Project Document;
(viii) of the institution by FERC or any other Governmental
Authority of any proceeding to revoke or modify the FERC Order or any
other license required for the ownership or operation of the Project;
(ix) of the receipt by the Managing General Partner or the
Partnership of any notice or declaration by any Governmental Authority
which relates to, or could result in, Public Utility Status with
respect to the Partnership, the Managing General Partner, the Limited
Partner or any of their respective Affiliates; and
(x) of any change which could reasonably be expected to have a
material adverse effect on the business, operations, financial or
other condition or prospects of the Partnership, the Managing General
Partner or the Project.
Each notice pursuant to this paragraph (j) shall be accompanied by a statement
of the Responsible Officer of the Managing General Partner setting forth details
of the occurrence referred to therein and stating what action the Managing
General Partner proposes to take with respect thereto.
(k) Operation and Maintenance. To the extent of available Partnership
-------------------------
funds maintain the Project in such condition that the Facility will have the
capacity and functional ability to perform, on a continuing basis (ordinary wear
and tear excepted), in normal commercial operation, the functions and
substantially all the ratings for which it was specifically designed in
accordance with the Plans and Specifications; operate, service, maintain and
repair all necessary or useful components thereof so that the condition and
operating efficiency thereof will be maintained and preserved (ordinary wear and
tear excepted) in all material respects in accordance with (i) Prudent Utility
Practice and good commercial practice for items of a similar size and nature,
(ii) such operating standards as shall be required to enforce any material
warranty claims against dealers, manufacturers, vendors, contractors and
subcontractors and (iii) the terms and conditions of all insurance policies
maintained by the Partnership or the Managing General Partner in effect at any
time with respect thereto.
(l) Liens. To the extent of available Partnership funds (including,
-----
without limitation, proceeds of loans under the Midlantic Agreements), protect
and defend the
<PAGE>
51
Partnership's interest in the Project against any Lien for the performance of
work or the supply of materials filed against the Project, and remove any such
Lien, except to the extent that (i) the claim giving rise to such Lien is being
diligently contested in good faith, by appropriate proceedings timely
instituted, (ii) the Partnership has posted a bond and established a cash
reserve in an amount at least equal to such claim on the books of the
Partnership, (iii) during the period of such contest the enforcement of any
contested item is effectively stayed and (iv) such contest does not involve any
substantial danger of the sale, forfeiture or loss of any part of the Project,
title thereto or any interest therein and does not interfere with the operation
of the Facility.
(m) Gas Supply Arrangements. (i) Use and cause the Partnership to use
-----------------------
reasonable efforts to pursue a gas procurement policy which (x) takes into
consideration the gas purchasing policies of PSE&G so that on a long-term basis
the risk that the Project's weighted average cost of gas will exceed the
weighted average cost of gas of PSE&G is minimized and (y) provides for
reasonable diversity in the sources of supply of natural gas to the Project; and
prior to the execution of any Gas Purchase Agreement that has a term of two
years or more, use and cause the Partnership to use reasonable efforts to obtain
verification by an independent engineer of the natural gas reserves of any
supplier with whom the Managing General Partner or the Partnership proposes to
enter into a Gas Purchase Agreement (or any group of Gas Purchase Agreements
from the same or related suppliers) representing more than 5% of the projected
annual gas requirements of the Facility; provided, however, that neither the
-------- -------
Managing General Partner nor the Partnership need obtain independent
verification of the natural gas reserves of any supplier which has an investment
grade rating and is a party to a Gas Purchase Agreement which contains a
"keep-whole" provision, reasonably acceptable to the Limited Partner, with
respect to the supplier's failure to deliver the nominated quantity of gas.
(ii) In connection with the obligation set forth in subsection (i)(x)
above, at the end of each Annual Period, (x) review the gas procurement policy
pursued during such Annual Period to ascertain if such policy tracked the gas
procurement policy of PSE&G and (y) review the gas procurement policy for the
succeeding Annual Period to ascertain what adjustments, if any, will be
necessary to cause the Partnership and the Managing General Partner to comply
with the obligation set forth in subsection (i)(x) above. A summary of the
results of such review and proposed adjustments, if any, shall be provided to
the Limited Partner in partial satisfaction of subsection (i)(x) above, together
with any supporting data or
<PAGE>
52
explanation of the methodology used which the Limited Partner may
reasonably request.
7.3 Restrictions on Powers of the Managing General Partner. (a) The
------------------------------------------------------
Managing General Partner shall not do any of the following unless it shall have
the prior written approval of the Limited Partner (unless otherwise provided
herein):
(i) Certain Contracts. Prior to the Flip Date, enter, or permit the
-----------------
Partnership to enter, into any agreement or commitment specified
in subsection 8.19 or 8.20 of the Construction Loan Agreement; or
appoint, or permit, the Partnership to appoint, any operator of
the Facility other than the operator in existence on the Initial
Capital Contribution Date; provided, that the Limited Partner
--------
shall not unreasonably withhold its consent to the appointment of
any operator which is financially capable of performing its
obligations as the operator of the Facility and has the
personnel, experience, equipment and other resources reasonably
required to perform its obligations as the operator of the
Facility;
(ii) Contracts with Affiliates. Except as permitted by the General
-------------------------
Partner Term Loan Agreement, approve the terms of any agreement,
contract, instrument or other transaction between the Partnership
and any Partner, or between the Managing General Partner or the
Partnership and any Affiliate, in each case on terms more
favorable to such Partner or such Affiliate than would have been
obtainable in an arm's-length dealing;
(iii) Sale of Assets. Authorize or permit any sale, lease, exchange,
--------------
transfer or other disposition of the Project or any other assets
of the Partnership, in each case with a value in excess of
$1,000,000;
(iv) Indebtedness. Prior to the Flip Date, authorize the incurrence,
------------
assumption or guaranty by the Partnership of any Indebtedness,
except the Indebtedness listed in Schedule 4, Indebtedness
contemplated by subsections 10.5 and 14.2(g) hereof or Sections
12 and 15 of the Capital Contribution Agreement and any other
Indebtedness which arises out of an emergency requiring immediate
action or is contained in a budget previously approved by the
Limited Partner (any such Indebtedness permitted hereunder being
"Permitted Indebtedness");
----------------------
<PAGE>
53
(v) No Other Business. Engage prior to the Flip Date, or cause the
-----------------
Partnership to engage at any time, in any activity other than the
activities contemplated to be engaged in by it under the
Operative Documents or the General Partner Term Loan Agreement or
enter into, or permit the Partnership to enter into, any contract
or agreement other than as explicitly provided for herein, in the
other Operative Documents or in the General Partner Term Loan
Agreement;
(vi) Liens. Create or otherwise allow any Lien to be on or otherwise
-----
to affect any property included in the Project, except Permitted
Liens;
(vii) No Amendments or Assignments. Except for change orders to or
----------------------------
final settlement of any EPC Contract and for which there will be
no recourse against the Project or the Partners and which do not
affect in any material respect the operating capacity,
performance, cost efficiency, utility, remaining economic useful
life, reliability, value or residual value of the Project, amend
in any material respect, modify in any material respect, waive
compliance with any material provision of, terminate, assign any
rights the Partnership may have under, consent to or permit the
assignment by any other Person of any right such Person may have
under, give consents or exercise rights under or agree to any
such amendment, modification, termination, consent or waiver of
compliance with any material provision of, or any such assignment
or exercise of any rights under, any Project Document without the
prior written consent of each of the Partners. Each of the
Partners shall respond to any request for its consent under this
paragraph (vii) within 30 days after receipt of all information
necessary to analyze the consequences thereof (or within such
shorter period as may be reasonably requested by the Managing
General Partner if the Managing General Partner reasonably
determines that there is an emergency requiring immediate action)
and shall not unreasonably withhold its consent to any such
amendment, modification, waiver, termination, assignment,
consent, exercise or agreement which could not have a material
adverse effect on the business, operations, properties, financial
or other condition or prospects of the Partnership or the Project
or could not materially adversely affect the projected
availability of Distributable Cash in excess of the distributions
required to be made
<PAGE>
54
to the Limited Partner pursuant to subsection 4.3(a);
(viii) Private Placement. Take, or permit any of its Affiliates to
-----------------
take, any action which would subject any interest in the
Partnership to the provisions of Section 5 of the Securities Act
of 1933;
(ix) Settlement of Proceedings. Compromise, settle or abandon any
-------------------------
claim, action, proceeding or debt due to, owned by or asserted
against the Partnership, in each case, in an amount equal to
$500,000 or more; and
(x) Gas Purchase Agreements. Prior to the Flip Date, (x) enter into,
-----------------------
or permit the Partnership to enter into, any Gas Purchase
Agreement (1) with any of their respective Affiliates on terms
that are less favorable than terms available with non-affiliated
Persons or (2) which provides for the payment of burdensome
liquidated damages by the Managing General Partner or the
Partnership or (y) enter into, or permit the Partnership to
enter into, any Gas Purchase Agreement with a term (including
any renewal terms) of six months or more (1) if the price which
the Partnership is obligated to pay for gas thereunder is fixed
for a period of six months or more unless the Partnership can
demonstrate to the Limited Partner's reasonable satisfaction
that PSE&G has entered into a gas purchase agreement or
agreements (i) for a term coincidental with such Gas Purchase
Agreement and (ii) with respect to a quantity of gas which bears
the same proportion to PSE&G's total gas requirements for the
period of such agreements as the quantity of gas subject to such
Gas Purchase Agreement bears to the Facility's total gas
requirements for the period of such Gas Agreement and (iii)
which otherwise contains substantially similar terms and
provisions of such Gas Purchase Agreement, (2) which contains
any material restrictions on assignment by the Managing General
Partner or the Partnership or which (3) contains any provision
that would result in the termination, cancellation or suspension
of such Gas Purchase Agreement upon the exercise by the Limited
Partner of any of its remedies hereunder or by the Agent under
the Construction Loan Agreement or upon the sale of the
Facility.
<PAGE>
55
(b) The Managing General Partner shall be prohibited from taking any
action in connection with the governance of the Partnership which is
inconsistent with the express provisions of this Agreement, without the approval
of the Limited Partner. In furtherance of the foregoing, except as permitted by
subsections 7.3 and 7.7 of the General Partner Term Loan Agreement, neither the
Managing General Partner, nor the General Partner shall, after the Second
Capital Contribution Date, make any loans or capital contributions to the
Partnership without the express prior written consent of the Limited Partner.
7.4 Fee. The Managing General Partner or its designee shall be entitled
---
to the payment each month of a management fee equal to 1.51 of the gross
revenues of the Project for such month (the "Management Fee").
--------------
7.5 Limitations on Liability of Managing General Partner. Neither the
----------------------------------------------------
Managing General Partner, any Affiliate thereof nor the partners, shareholders,
directors, officers, employees or agents thereof or of any Affiliate thereof
(jointly and severally, the "Managing General Partner Group") shall be liable,
------------------------------
responsible or accountable in damages or otherwise to the Partnership or any
other Partner for any loss, damage or liability sustained by the Partnership or
any such other Partner, including, without limitation, a loss resulting from a
breach of fiduciary duty, duty of care or duty of loyalty (a "Loss"), arising
out of (a) an error of judgment made, or an action taken or omitted, which such
Person in good faith reasonably believed to be in accordance with Prudent
Utility Practice, as applicable, and otherwise in accordance with good
commercial practice, (b) the error of judgment made, action taken or omitted,
dishonesty or bad faith, of any agent or independent contractor selected or
retained in good faith in the reasonable exercise of the Managing General
Partner's duties hereunder, and in accordance with Prudent Utility Practice, as
applicable, and otherwise in accordance with good commercial practice, other
than independent contractors or agents which are Affiliates of the Managing
General Partner in which case the standards of clause (a) above shall apply as
to whether the Managing General Partner Group shall have liability for a Loss,
(c) action taken or omitted in good faith by any member of the Managing General
Partner Group in accordance with the advice of legal counsel and accountants as
to matters that such member reasonably believes to be within such Person's
professional competency or (d) in cases not involving actions or failure to act
comprising Prudent Utility Practice or good commercial practice, actions taken
or omitted in good faith by any member of the Managing General Partner Group
which such member reasonably believed to be in or not opposed to the best
interests of the Partnership, and not materially detrimental to the best
interests of any other Partner. The Partners further agree that (i) unless the
Managing General Partner Group's action or failure to act (including, without
limitation, breach of fiduciary duty, duty of care or duty of loyalty)
constitutes
<PAGE>
56
fraud or a willful and deliberate intent to cause injury to the Partnership or
any Partner, or any member of the Managing General Partner Group shall have
knowingly made a misrepresentation herein, in any other Operative Document or in
any certificate or other document delivered pursuant hereto or thereto, any Loss
shall include only actual damages suffered by the Limited Partner, and shall not
include special, punitive or other penal damages, lost profits or damage to the
general business reputation of the Limited Partner or any of its Affiliates, and
(ii) any liability of the Managing General Partner Group for any Loss not
involving fraud, a willful and deliberate intent to cause injury to the
Partnership or any Partner or knowing misrepresentation on the part of the
Managing General Partner Group shall be limited to the Managing General
Partner's interest in the Partnership.
7.6 Partnership Information Meetings. Following the Initial Capital
--------------------------------
Contribution Date and until the end of the first calendar quarter after the
commencement of commercial operation of the Facility, the Managing General
Partner shall once each calendar quarter, with the first such meeting to be held
during the first calendar quarter after the date hereof, call a meeting with the
Limited Partner to discuss and report on Facility operations. Thereafter, the
Managing General Partner shall call such a meeting at least semi-annually.
7.7 Limitations on the Partners. No Partner other than the Managing
---------------------------
General Partner shall have any right or authority to act on behalf of or in the
name of the Partnership or to bind the Partnership in any manner except with the
prior written consent of the Managing General Partner, as provided in Article
XIV, as provided in any Recognition Agreement or as provided pursuant to a
contract approved as required under subsection 7.3. No Partner shall have any
right or authority to act for or bind the Partnership except as expressly set
forth herein. No Partner shall take any action in conflict with the foregoing
provisions of this subsection 7.7 or represent, directly or by course of
conduct, that it has any right, power or authority to take any such action.
Notwithstanding anything in this Agreement to the contrary, the Limited Partner
is hereby authorized to enter into any agreement under which the Limited Partner
has rights, duties or obligations relating to contracts entered into by the
Partnership, including any such agreement denominated as a "Recognition
Agreement," all without affecting the Limited Partner's limited liability as a
limited partner of the Partnership. The Managing General Partner shall use its
best efforts to cause the Partnership to cooperate to the fullest extent
necessary to assure the Limited Partner's ability to perform under any
recognition agreement relating to contracts entered into by the Partnership.
7.8 Cooperation Regarding Permits and Power Purchase Agreement. The
----------------------------------------------------------
General Partner agrees to cooperate fully with
<PAGE>
57
the Partnership and with the Managing General Partner so as to keep the Permits
(including, without limitation, the FERC Order) and the Power Purchase Agreement
in full force and effect. As promptly as practicable after it is permitted by
Applicable Law, agreement or contract, as the case may be, the General Partner
shall cause the Partnership (and shall cooperate with the Partnership and the
Managing General Partner, to the extent necessary) to apply for a renewal of the
Permits and a renewal or replacement of the Power Purchase Agreement for the
periods available and to actively prosecute such application.
7.9 Time Devoted to Partnership. Each of the General Partner and the
---------------------------
Managing General Partner shall devote whatever time and attention to the
business, affairs and operations of the Partnership is reasonably appropriate
for Partnership purposes and is necessary to carry out the provisions of this
Agreement.
7.10 Other Business Activities. Except as expressly provided herein,
-------------------------
nothing in this Agreement shall be deemed to restrict in any way the right of
any Partner to manage, conduct, be employed by, operate, participate in or have
an interest in any other business, activity, venture or organization of any
nature or description independently or with others, without accountability to
the Partnership or any other Partner(s); provided, that each Partner shall
--------
conduct its business in a manner so as to avoid Public Utility Status as
described in subsection 10.5 hereof. Each Partner shall be entitled to receive
and hold, without being accountable to the Partnership or to any other Partner,
any fees, compensation, salary, income, dividends, share of profits or other
distribution, gain or income which it may receive from any other business,
activity, venture or organization.
ARTICLE VIII
CALLS FOR AND PAYMENT OF FUNDS
------------------------------
Except as set forth in Articles III, VII, X or XIV hereof, the Capital
Contribution Agreement, the General Partner Term Loan Agreement and the
Construction Loan Agreement, or as otherwise mutually agreed by the Partners, no
Partner shall make (or be required to make) a capital contribution or loan of
funds to the Partnership.
ARTICLE IX
CONDITIONS PRECEDENT
--------------------
9.1 Conditions to the Contributions on the Initial Capital Contribution
-------------------------------------------------------------------
Date. The obligation of GE Capital to
- ----
<PAGE>
58
make a capital contribution to the Partnership on the Initial Capital
Contribution Date is subject to the satisfaction immediately prior to or
concurrently with the making of such contribution of the conditions precedent
set forth in subsection 2(b) of the Capital Contribution Agreement.
9.2 Conditions to the Contributions on or prior to the Second Capital
-----------------------------------------------------------------
Contribution Date. The obligation of GE Capital to make additional capital
- -----------------
contributions to the Partnership in respect of the Limited Partnership Interest
on or prior to the Second Capital Contribution Date is subject to the
satisfaction immediately prior to or concurrently with the making of such
contributions of the conditions precedent set forth in subsection 2(c) of the
Capital Contribution Agreement.
ARTICLE X
TRANSFER AND ENCUMBRANCE
10.1 Transfer of Partnership Interest: General Provisions. (a) Except
----------------------------------------------------
as security for the Indebtedness incurred pursuant to (i) the Construction Loan
Agreement and (ii) prior to the Second Capital Contribution Date, as security
for the Linden GP Term Loan Agreement and any refinancing thereof and the
General Partner Term Loan Agreement, the General Partner may not sell, assign,
transfer, mortgage, pledge or otherwise directly or indirectly (by merger,
consolidation, sale of assets and business or stock, whether by operation of law
or otherwise) dispose of or encumber, or suffer the disposition or encumbrance
of, all or any portion of its interest in the Partnership unless all of the
other Partners consent to such transfer and the terms thereof. Notwithstanding
the foregoing, interests in the General Partner may be sold, assigned,
transferred or otherwise disposed of, so long as (i) Robert C. McNair or his
wife or children shall own and control, directly or indirectly, a beneficial
interest of at least 8.2% in the General Partner for a period of seven years
after the Second Capital Contribution Date and (ii) either (x) Robert C. McNair
or his wife or children or (y) an entity with a net worth of not less than
$100,000,00O, shall own and control, directly or indirectly, a beneficial
interest of at least 8.2% of such interest thereafter. The Limited Partner may
sell, assign, transfer, mortgage, pledge or otherwise dispose of the Limited
Partnership Interest; provided, however, that the transferee of any such
-------- -------
interest will not become a substitute limited partner in the Partnership unless
the Managing General Partner, in its sole and absolute discretion, consents to
such substitution.
(b) Notwithstanding any other provision of this Agreement, no Partner
shall transfer any interest in the Partnership, if any of the following would be
true:
<PAGE>
59
(i) such transfer would violate any Permit;
(ii) such transfer would cause the Project to lose its status as a
"qualifying cogeneration facility" under PURPA or any similar
statute of the State of New Jersey:
(iii) such transfer would violate the terms of any agreement binding
upon the Partnership;
(iv) such transfer would violate any Applicable Law, including,
without limitation, applicable Federal or state securities laws
or require any registration under such securities laws:
(v) such transfer would cause the Partnership to be classified
otherwise than as a partnership for Federal income tax purposes;
(vi) the transferee has not agreed in writing to be bound by this
Agreement: or
(vii) such transfer would cause a dissolution of the Partnership under
the Partnership Act.
10.2 Additional Partners. (a) Except upon prior written consent of all
-------------------
the Partners, or as may be permitted by the next two following sentences and
by subsections 10.1 and 14.2 of this Agreement, no new Partners may be admitted
to the Partnership. Immediately prior to the sale of the Limited Partnership
Interests pursuant to subsection 10.5, 11.1 or 14.2(g), the Managing General
Partner shall have the right to cause one of its Affiliates to be admitted as a
limited partner of the Partnership upon terms and conditions mutually acceptable
to the Managing General Partner and the Limited Partner. If, by reason of the
exercise of remedies under any pledge or security agreement to which the General
Partner is a party, the General Partner's General Partnership Interest is
transferred to the pledgee or assignee of the General Partner, or any transferee
of such pledgee or assignee, the assigning General Partner shall cease to be the
General Partner hereunder upon such transfer and such pledgee, assignee or
transferee shall be deemed admitted as a General partner of the Partnership
effective immediately prior to such transfer. Any additional Partner, whether
such Partner obtained its interest from Cogen Camden or GE Capital or otherwise,
shall expressly be bound by all the terms and conditions hereof and shall
expressly so acknowledge upon becoming a Partner by execution of this Agreement
or a counterpart hereof.
(b) Notwithstanding anything else in this Agreement to the contrary,
(i) upon the grant of any pledge, hypothecation, security interest, lien or
other encumbrance by a Partner against such Partner's interest in the
Partnership,
<PAGE>
60
such Partner shall continue to be a partner of the Partnership, (ii) any
transferee of an interest in the Partnership who satisfies the requirements
necessary to become a substituted or additional partner of the Partnership
(including the requirement that it receive the consent of the Managing General
Partner) shall be admitted as a substitute or additional partner of the
Partnership immediately prior to the withdrawal of the withdrawing Partner, if
such Partner shall be withdrawing, and (iii) the Partnership shall not be
dissolved upon the withdrawal of a general partner of the Partnership if there
is at least one other remaining general partner of the Partnership who is hereby
authorized to and shall continue the business of the Partnership, but the
Partnership shall not be dissolved upon the withdrawal of the last remaining
general partner of the Partnership if within 90 days after the occurrence of
such event, all Partners unanimously agree in writing to continue the business
of the Partnership and to the appointment, effective as of the date of such
event, of one or more additional general partners who is authorized to and shall
continue the business of the partnership.
(c) Any transfer made by any Partner which violates any provision of
this Agreement shall be null and void and of no effect, and any such transferor
Partner shall remain and continue as a partner of the Partnership.
10.3 Revisions to this Agreement Upon Transfer or Encumbrance. If
--------------------------------------------------------
pursuant to the provisions of subsection 10.1, Cogen Camden is permitted to
sell, assign, or otherwise transfer, in whole or in part, any of its interests
in the Partnership, or, if additional Partners are admitted pursuant to
subsection 10.2 or otherwise, then contemporaneously with such sale, assignment,
transfer, or admission, the Capital Accounts of the Partners shall be adjusted
to accurately reflect the interests of each and every Partner.
10.4 Amendment to Certificate of Limited Partnership. If a Person has
-----------------------------------------------
otherwise qualified under this Agreement to become a substitute or new General
Partner, such Person shall become a General Partner upon the filing with the
Secretary of State of the State of Delaware of an amendment to the Certificate
of Limited Partnership in proper form, duly executed by such Person. Any such
admission shall be deemed to have occurred immediately prior to the withdrawal
of any General Partner who is withdrawing from the Partnership in connection
with the admission of a new General Partner.
10.5 Voluntary Withdrawal by Limited Partners. (a) If at any time, any
----------------------------------------
Limited Partner or any Affiliate of any Limited Partner, solely by reason of its
interest in the Partnership or any transaction contemplated by this Agreement
or any other Operative Document and not as a result of any other interest or
activity of such Limited Partner or such Affiliate, shall be deemed by any
Governmental Authority having
<PAGE>
61
jurisdiction to be an "electric utility" or an "electric utility holding
company" as such terms are used in PURPA and the regulations thereunder (18
C.F.R. Part 292), or any wholly or partially owned direct or indirect subsidiary
of any "electric utility" or "electric utility holding company", as such terms
are so used, or any similar entity (including without limitation a "public
utility" as such term is defined in the Federal Power Act, or a "holding
company," a "subsidiary company," an "affiliate" of a "holding company" or a
"subsidiary company" of a "holding company" as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended) subject to regulation
under the Federal Power Act, the Public Utility Holding Company Act of 1935, as
amended, the Department of Public Utilities Act of 1948, NJSA 48:1-1, et seq.,
-- ---
or any other comparable federal, state or local law or regulation (any such
classification being called "Public Utility Status"), then, upon demand made by
---------------------
such Limited Partner to the Managing General Partner, the Partnership shall
forthwith redeem such Limited Partner's right, title and interest in the
Partnership for a redemption price equal to the higher of (i) the Stipulated
Redemption Value of its interest and (ii) the Fair Market Sales Value of its
interest, in each case, as of the date of redemption.
(b) If at any time, any Limited Partner or any Affiliate of any Limited
Partner, as a result of any interest or activity of such Limited Partner or such
Affiliate (other than its interest in the Partnership or any transaction
contemplated by this Agreement or any other Operative Document), shall be deemed
by any Governmental Authority having jurisdiction to have Public Utility Status,
then, upon demand by the Managing General Partner to such Limited Partner, the
Partnership shall have the right to call such Limited Partner's right, title and
interest in the Partnership for a call price equal to the lesser of (i) the
Stipulated Redemption Value of its interest and (ii) the Fair Market Sales Value
of its interest, in each case, as of the call date.
(c) The redemption price or the call price, as the case may be, shall
be paid with the proceeds of a loan to be made by such Limited Partner to the
Partnership on the proposed purchase date. Such loan will be evidenced by a note
which will mature on the earlier of (i) 15 years after the date thereof and (ii)
seventeen years after the Second Capital Contribution Date, be payable in
consecutive quarterly equal installments in the aggregate of principal and
interest for the period commencing with the first quarter after the date of such
note, and bear interest at a rate equal to that which the Limited Partner in its
reasonable discretion and after consultation with the Managing General Partner
and its advisors determines is the rate, and have other terms and conditions
which the Limited Partner in its reasonable discretion determines to be,
available from independent third parties for obligations having a comparable
tenor and a comparable
<PAGE>
62
structure. The loan will be secured by a first (second so long as the
Construction Loan Agreement or the General Partner Term Loan Agreement is in
effect) pledge of the interests of the General Partner in the Partnership
pursuant to a pledge agreement in form and substance reasonably satisfactory to
such Limited Partner and by a first (second so long as the Construction Loan
Agreement or any refinancing thereof is in effect) priority lien on the assets
of the Partnership (including, without limitation, the Project) pursuant to a
security agreement and a mortgage, each in form and substance reasonably
satisfactory to the Limited Partner.
(d) In the case of a purchase of a Limited Partnership Interest by the
Partnership pursuant to this Agreement, an amount of the purchase price equal to
the portion of the goodwill of the Partnership allocable to such Limited
Partnership Interest shall be payment for such portion of the goodwill, and the
purchase agreement shall so provide, unless the Limited Partner agrees
otherwise.
ARTICLE XI
OPTIONS TO PURCHASE
-------------------
11.1 Fair Market Sales Value Purchase Options. (a) Unless the Limited
----------------------------------------
Partner's right, title and interest in the Partnership shall have been
previously sold or otherwise disposed of in accordance with subsection 10.5, or
unless a Special Event shall have occurred and be continuing at the time of the
proposed purchase, the Managing General Partner shall have the option to
purchase the Limited Partners' right, title and interest in the Partnership on
the seventeenth (17th) anniversary of the Second Capital Contribution Date, for
a cash purchase price equal to the Net Cash from Sales that would be payable to
the Limited Partner upon the sale of the Project at a price equal to the Fair
Market Sales Value of the Project as of such seventeenth anniversary.
(b) In order to exercise the option provided for in this subsection
11.1, the Managing General Partner shall give the Limited Partner a Tentative
Purchase Notice of its interest in exercising any such option at least 360 days
prior to such seventeenth anniversary, and shall give the Limited Partner a
Purchase Notice of its intent to exercise any such option at least 30 days prior
to such seventeenth anniversary. The Managing General Partner and the Limited
Partner agree to negotiate in good faith to determine the Fair Market Sales
Value of the Project by mutual agreement following receipt of the Tentative
Purchase Notice from the Managing General Partner. If the Managing General
Partner and the Limited Partner shall fail to reach agreement within 30 days
after receipt by the Limited Partner of the Tentative Purchase Notice
<PAGE>
63
from the Managing General Partner, the Fair Market Sales Value of the Project
shall be determined by the Appraisal Procedure.
ARTICLE XII
NOTICES
-------
12.1 Notices. Any notice, request, demand or other communication which
-------
any Partner, the Managing General Partner or the Partnership is to give under
this Agreement shall be in writing and shall be sufficient for all purposes
hereof if delivered in person or by registered or certified mail, by courier
service, or by telecopier or telex, in each case addressed as provided in
subsection 12.2. Any such notice, request, demand or other communication shall
be deemed given and made effective on the date received.
12.2 Addresses. For the purposes hereof, the addresses are:
---------
In the case of Cogen Camden or the Partnership:
Cogen Technologies Camden GP Limited Partnership
1600 Smith Street
Suite 5000
Houston, Texas 77002
Attention: Robert C. McNair
Telecopy: (713) 951-7747
In the case of the Limited Partner:
General Electric Capital Corporation
1600 Summer Street
Stamford, Connecticut 06927-1560
Attention: Vice President Energy Project
Operations -- Transportation
and Industrial Division
Telecopy: (203) 357-6970
Any party may upon written notice to the others given in accordance with this
Article XII change the address to which notices, requests, demands or other
communications are to be sent or add such additional addresses as it may
reasonably request.
ARTICLE XIII
WITHDRAWAL
----------
Except as otherwise provided in this Agreement, no Partner may withdraw
from the Partnership without the consent of each of the Partners. To the fullest
extent permitted by
<PAGE>
64
law, each Partner hereby waives any right or remedy at law or in equity that it
may have to obtain dissolution or to dissolve the Partnership, except as
provided in this Agreement. If the General Partner shall withdraw, be removed,
or an event occurs that causes the General Partner to cease to be a general
partner of the Partnership under the Partnership Act and this Agreement, the
Partnership shall be dissolved and its affairs shall be wound up unless (i) at
such time there is at least one other general partner of the Partnership, who is
hereby authorized to and shall continue the business of the Partnership, or (ii)
if there is no remaining general partner of the Partnership, within 90 days
after the occurrence of such event, all Partners unanimously agree in writing to
continue the business of the Partnership and to the appointment, effective as of
the date of such event, of one or more additional general partners who is hereby
authorized to and shall continue the business of the Partnership.
ARTICLE XIV
SPECIAL EVENTS AND DISSOLUTION: LIQUIDATION: TERMINATION
--------------------------------------------------------
14.1 Special Events. Prior to the Flip Date, the occurrence of any of
--------------
the following events shall constitute a special event (each, a "Special Event")
-------------
hereunder:
(a) The General Partner shall violate any of the restrictions upon
its rights to transfer its Partnership interest set forth in Article X of
this Agreement; or
(b) Any representation or warranty made by the General Partner in the
Capital Contribution Agreement by the Partnership or any other Partner in
any other Operative Document (other than any Project Document) to which it
is a party, or any representation, warranty or statement in any certificate,
financial statement or other document furnished to the Limited Partner by or
on behalf of the Partnership or the General Partner hereunder or the
Partnership or any Partner under any Operative Document, (other than any
Project Document) shall prove to have been false or misleading as of the
time made or deemed made; or
(c) The General Partner or the Partnership shall fail to perform or
observe any of its covenants contained in this Agreement (other than that
referred to in paragraph (a) above) or in any other Operative Document
(other than any Project Document) to which it is a party and such failure
shall continue unremedied for a period of 30 days after written notice
thereof from the Limited Partner to the General Partner; provided, however,
-------- -------
that if such Special Event is susceptible of cure, such 30 day period shall
be extended for such period of time (not to exceed 60 days) during which the
General Partner shall be
<PAGE>
65
diligently using its best efforts to cure such failure: or
(d) (i) The General Partner, with respect to the General Partner Term
Loan Agreement, or (ii) the Partnership or the General Partner, with respect
to the Construction Loan Agreement or any other Indebtedness or Guarantee
Obligation, the principal amount of which exceeds $500,000 and a default in
respect of which, if incurred, could reasonably be expected to have a
material adverse effect on the business, properties, operations, condition
(financial or otherwise) or prospects of the Partnership or the General
Partner, as the case may be, or could reasonably be expected to materially
adversely affect the ability of the Partnership or the General Partner to
perform its obligations under the Operative Documents to which it is a
party, shall (x) default in any payment of principal of or interest on any
such Indebtedness or Guarantee Obligation beyond the period of grace, if
any, provided in the instrument or agreement under which such Indebtedness
or Guarantee Obligation was created, or (y) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) or
the beneficiary or beneficiaries of such Guarantee Obligation (or a trustee
or agent on behalf of such beneficiary or beneficiaries) to cause, with the
giving of notice if required or the passage of time, or both, such
Indebtedness to become due prior to its stated maturity or such Guarantee
Obligation to become payable; or
(e) (i) Any Participant, other than the Partnership or the General
Partner, shall fail to perform or observe in any material respect any of its
covenants or obligations contained in any of the Project Documents to which
it is a party within the grace period, if any, provided for in such Project
Documents, which failure shall continue unremedied for a period of 30 days
after notice by any Limited Partner to the General Partner or (ii) (x) any
material provision of any Operative Document shall at any time for any
reason cease to be valid and binding or in full force and effect (other than
as a result of any action by any Limited Partner) or any party thereto
(other than a Limited Partner) shall so assert in writing, (y) any material
provision of any Operative Document shall be declared to be null and void
(other than as a result of any action by any Limited Partner) or (z) any
party thereto shall deny that it has any further
<PAGE>
66
liability or obligation under any Operative Document to which it is a party;
provided that it shall not be a Special Event under this paragraph (e) if, (1)
- --------
within 30 days after the occurrence of any of the foregoing events with respect
to any Project Document (other than the Power Purchase Agreement or the Gas
Service Agreement), the Managing General Partner shall have submitted a plan to
the Limited Partner to execute and deliver a document in substitution for such
Project Document, which plan shall be reasonably satisfactory in form and
substance to the Limited Partner, and (2) within 90 days after the occurrence of
any of the foregoing events with respect to any Project Document (other than the
Power Purchase Agreement or the Gas Service Agreement), such Project Document
shall have been replaced with another document (x) which is executed and
delivered by parties acceptable to the Limited Partner in its reasonable
discretion and (y) which has terms and conditions similar to, and in the
reasonable opinion of the Limited Partner, at least as favorable to the Project
as, the substituted Project Document; or
(f) The Partnership or the General Partner shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its property, (ii) admit in writing its inability, or be generally unable, to
pay its debts as such debts become due, (iii) make a general assignment for the
benefit of its creditors, (iv) commence a voluntary case under the Federal
Bankruptcy Code (as now or hereafter in effect), (v) file a petition seeking to
take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding up, or composition or readjustment of debts, (vi) fail
to controvert in a timely and appropriate manner, or acquiesce in writing to,
any petition filed against such Person in an involuntary case under the Federal
Bankruptcy Code, or (vii) take any partnership or corporate action for the
purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced without the application or
consent of the Partnership or the General Partner in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution, winding-
up, or the composition or readjustment of debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of the Partnership or the
General Partner under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts or (iii) a
warrant of attachment, execution or similar process against all or a substantial
part of the assets of the Partnership or the General Partner and such proceeding
or case shall continue undismissed, or any
<PAGE>
67
order, judgment or decree approving or ordering any of the foregoing
shall be entered and continue unstayed and in effect, for a period of 60 or
more days, or any order for relief against such Person shall be entered in
an involuntary case under the Federal Bankruptcy Code (as now or hereafter
in effect); or
(h) A judgment or judgments for the payment of money in excess of
$1,000,000 shall be rendered against the Partnership or the General Partner
and such judgment or judgments shall remain in effect and unstayed and
unbonded for a period of 60 or more consecutive days; or
(i) During the period from and including the Initial Capital
Contribution Date to but excluding the date which is seven years after the
Second Capital Contribution Date, Robert McNair or his wife or children
shall fail to own and control, directly or indirectly, a beneficial interest
of at least 8.2% in the General Partner and thereafter, Robert C. McNair or
his wife or children or an entity with a net worth of at least $100,000,000
shall fail to own and control, directly or indirectly, a beneficial interest
of at least 8.2% of such interest; or
(j) The Partnership shall abandon the Project or otherwise cease to
diligently pursue the development or construction of the Project for a
period longer than 30 consecutive days; or
(k) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan, or
(iii) a Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate any Single Employer Plan, which Reportable Event
or institution of proceedings is, in the reasonable opinion of the Limited
Partner, likely to result in the termination of such Plan for purposes of
Title IV of ERISA, or (iv) any Single Employer Plan shall terminate under
Section 4041(c) of ERISA, or (v) the Managing General Partner or any
Commonly Controlled Entity shall, or is, in the reasonable opinion of the
Limited Partner, likely to incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan, or (vi) any other event or condition shall occur or exist with respect
to a Plan; and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any, could
subject the Managing General Partner or the Partnership to any tax, penalty
or other liabilities in the aggregate material in relation to the
<PAGE>
68
business, operations, property or financial or other condition of
the Managing General Partner or the Partnership; or
(l) (i) The Partnership shall fail to pay, satisfy or otherwise obtain
a release of any bond or lien for the performance of work or the supply of
materials filed against the Site within 20 days of the Managing General
Partner's becoming aware of the filing thereof unless, if any such Lien
arose in connection with a claim referred to in subsection 7.2(1), the
Managing General Partner shall be diligently contesting the same in
accordance with, and subject to, subsection 7.2(1) or (ii) any right, title
or interest of the Partnership in and to the Site or any beneficial
ownership interest of the General Partner in the Partnership shall be levied
upon, attached or seized pursuant to a court order and such order is not
vacated or stayed within 20 days of entry of such order; or
(m) The dissolution and liquidation of the General Partner without the
prior written consent of the Limited Partner unless (i) an entity meeting
the requirements of subsection 10.1 succeeds to the General Partner's
interest hereunder in accordance with subsection 10.2 or (ii) the ultimate
result of such dissolution and liquidation is the incorporation of the
General Partner and the ownership provisions of subsection 10.1 apply to
such corporation which shall be admitted as a general partner of the
Partnership in accordance with subsection 10.2; or
(n) The resignation or withdrawal of the General Partner from the
Partnership or the resignation of the General Partner as Managing General
Partner, in each case without the prior written consent of the Limited
Partner; or
(o) The Partnership shall cease to have good and marketable title to
the Project and the Site, in each case, free and clear of all Liens other
than Permitted Liens; or
(p) An Event of Loss described in clause (a) of the definition thereof
shall have occurred; or
(q) (i) The aggregate amount on deposit in the Quarterly Arrears
Account shall be equal to or greater than 99% of the then applicable monthly
distribution described in subsection 4.3(a) (without giving effect to the
proviso thereto), multiplied by three or (ii) a positive balance in the
Quarterly Arrears Account shall exist as of the end of two consecutive
calendar quarters or such a positive balance shall occur as of the end of
more than four calendar quarters; provided, that the Managing General
--------
Partner shall have the right to make
<PAGE>
69
capital contributions to the Partnership to eliminate anticipated
positive balances in the Quarterly Arrears Account as of the end of two
consecutive calendar quarters and anticipated positive balances in the
Quarterly Arrears Account as of the end of four cumulative calendar
quarters, but shall not otherwise have the right to eliminate, directly or
indirectly, any existing or anticipated positive balance in the Quarterly
Arrears Account; or
(r) At any time, the Partnership shall fail to (i) keep in force the
insurance required by subsection 7.2(f) and Schedule 7 hereto or (ii) comply
with and conform to all provisions and requirements of the insurance
policies and the insurers thereunder which would affect the Partnership's
ability to keep in force the insurance required by subsection 7.2(f) and
Schedule 7 hereto or to collect any proceeds therefrom.
14.2 Certain Remedies Following Special Event. (a) If a Special Event
----------------------------------------
occurs and is continuing, the Limited Partner shall have the right, exercisable
by, and effective upon, notice to the Managing General Partner, to appoint or
become substitute Managing General Partner as provided in subsection (b) hereof.
Any substitute Managing General Partner is authorized to and shall continue the
business of the Partnership and shall, without any act or deed by any Person, be
admitted to the Partnership as a general partner of the Partnership in
accordance with subsection 10.2.
(b) (i) If a Special Event occurs and is continuing, the Limited
Partner may appoint a substitute Managing General Partner or designate itself or
its nominee as the substitute Managing General Partner, whereupon, without any
further act or deed by any Person, the existing Managing General Partner shall
cease to serve as such but shall continue to be a General Partner. In the event
the Limited Partner appoints a substitute Managing General Partner said
substitute Managing General Partner shall have a 1% interest in the Partnership,
and the interest of the Limited Partner shall be reduced by the same amount. The
interest of said substitute Managing General Partner shall be a General
Partnership Interest in the Partnership and such substitute Managing General
Partner shall, without any further act or deed by any Person, succeed to all the
powers, privileges and obligations of a General Partner and of the Managing
General Partner under this Agreement, except to the extent accrued or
attributable to the period prior to the allocation of such interest and except
that the transfer and related provisions of Article X pertaining to the Limited
Partner shall be applicable to the substitute Managing General Partner rather
than those pertaining to the General Partner. The Managing General Partner
hereby consents to such a partial conversion of the Limited Partnership Interest
and hereby consents to the admission as a General Partner of said
<PAGE>
70
substitute Managing General Partner so designated by the Limited Partner.
(c) If a Special Event occurs and is continuing, in addition to the
other remedies available to the Limited Partner pursuant to this subsection
14.2, the Limited Partner shall receive 99% of all Distributable Cash (after
deducting from such amount all payments of principal and interest made by the
Partnership with respect to the Partnership Term Loan and the first refinancing
thereof since the previous distribution of Distributable Cash), the Limited
Partner's allocable share of Operating Profits, Gain and other items of income
and gain shall be 99% (in both cases, subject to reduction to 98% under
subsection 14.2(b), and with the remaining 1% of such items going to the General
Partner), until the earlier of (i) the date of receipt by the Limited Partner of
99% of Stipulated Redemption Value and (ii) the date on which such Special Event
has ceased to exist, provided, that, at such time, the Arrears Account does not
--------
have a positive balance.
(d) If a Special Event occurs and is continuing, in addition to the
other remedies available to the Limited Partner pursuant to this subsection
14.2, the Limited Partner may elect by written notice to the General Partner
that all powers of the General Partner (including the Managing General Partner)
hereunder with respect to any matter shall thereupon, automatically, and without
any further act or deed by any Person, vest in the Limited Partner.
(e) Upon the occurrence of a Special Event that may be cured, the
Limited Partner shall be entitled to, but shall have no obligation to, cure such
Special Event and all costs and expenses incurred by the Limited Partner in
connection therewith shall be in the form of a demand loan to the Partnership.
(f) If a Special Event occurs and is continuing, the Limited Partner
may appoint, in the name and on behalf of the Managing General Partner and the
Partnership, a project manager to construct, equip, maintain, manage, control,
operate and repair the Project. The reasonable fees of any such project manager
shall be an operating expense of the Partnership.
(g) (i) If a Special Event occurs and is continuing and the Limited
Partner shall have exercised any of its remedies pursuant to this subsection
14.2, the General Partner shall have the right to purchase the Limited Partner's
right, title and interest in the Partnership for a cash purchase price equal to
the greater of (A) the Fair Market Sales Value of such interest as of such
purchase date and (B) the amount by which the sum of (x) the positive balance,
if any, in the Arrears Account plus (y) 99% of Stipulated Redemption Value as of
such purchase date exceeds the principal of and accrued interest on the
Partnership Term Loan.
<PAGE>
71
(ii) In order to exercise the option provided in paragraph (i) above,
the General Partner shall give the Limited Partner the Tentative Purchase Notice
to such effect within 10 days of the General Partner's receipt of notice of the
exercise by the Limited Partner of any of its remedies pursuant to subsection
14.2. The General Partner and the Limited Partner agree to negotiate in good
faith to determine the Fair Market Sales Value of the Limited Partnership
Interest by mutual agreement following receipt of the Tentative Purchase Notice
from the General Partner. If the General Partner and the Limited Partner shall
fail to reach agreement with respect to the Limited Partnership Interest within
5 Business Days after receipt by the Limited Partner of the Tentative Purchase
Notice from the General Partner, the Fair Market Sales Value of the Limited
Partnership Interest shall be determined by the Appraisal Procedure. If the
General Partner intends to exercise such purchase option, it shall give the
Purchase Notice within 5 Business Days of the earlier to occur of (a) the
General Partner and the Limited Partner agreeing to the Fair Market Sales Value
and (b) the completion of the Appraisal Procedure. If the General Partner shall
deliver such Purchase Notice, it shall complete the purchase of the Limited
Partnership Interest within 180 days of the date of the Tentative Purchase
Notice."
(iii) To the extent that the Fair Market Sales Value of the Limited
Partnership Interest exceeds the amount set forth in clause (B) of paragraph (i)
above, such excess shall be paid with the proceeds of a loan to be made by the
Limited Partner to the Partnership on the proposed purchase date. Such loan will
be evidenced by a note which will mature on the earlier of (x) 15 years after
the date thereof and (y) seventeen years after the Second Capital Contribution
Date, be payable in consecutive quarterly equal installments in the aggregate of
principal and interest for the period commencing with the first quarter after
the date of such note, and bear interest at a rate equal to that which the
Limited Partner in its reasonable discretion and after consultation with the
Managing General Partner and its advisors determines is the rate, and have other
terms and conditions which the Limited Partner in its reasonable discretion
determines to be, available from independent third parties for obligations
having a comparable tenor and a comparable structure. The loan will be secured
by a pledge of the interests of the General Partner in the Partnership pursuant
to a first (second so long as the Construction Loan Agreement, the Midlantic
Agreements, the General Partner Term Loan Agreement or any agreement or any
refinancing thereof pursuant to which the General Partner obtains financing to
purchase the Limited Partnership Interests under this subsection 14.2(g) is in
effect) pledge agreement in form and substance reasonably satisfactory to the
Limited Partner and by a first (second as long as the Construction Loan
Agreement or any refinancing thereof is in effect) priority lien on the assets
of the Partnership (including, without
<PAGE>
72
limitation, the Project) pursuant to a security agreement and a
mortgage, each in form and substance reasonably satisfactory to the Limited
Partner.
(h) The rights of the Limited Partner hereunder are not the exclusive
remedies upon the occurrence of a Special Event but are in addition to any other
remedies which may at the time be available hereunder, at law or in equity.
14.3 Events of Dissolution. The Partnership shall be dissolved and its
---------------------
affairs shall be wound up:
(a) if, the Partners agree in writing to terminate the Partnership;
(b) upon the sale, transfer or other irrevocable disposition of all or
substantially all of the property of the Partnership;
(c) if, the Partnership is terminated in accordance with the terms of
this Agreement;
(d) if, dissolution is otherwise required by law (except as (S) 17-402
of the Partnership Act is modified by the provisions of this Agreement) or
by a decree of judicial dissolution; or
(e) on December 31, 2031 unless the Partners agree in writing to extend
the term of the Partnership beyond such date.
Notwithstanding the preceding provisions of this subsection 14.3, upon
dissolution of the Partnership as a result of the withdrawal of the last
remaining general partner of the Partnership, the business of the Partnership
shall not be terminated and its affairs wound up if, within 90 days after such
event, all remaining Partners unanimously elect in writing to continue the
business of the Partnership and shall designate a substitute Managing General
Partner and/or General Partner(s), as the case may be, in the manner set forth
in subsection 14.2(b) and in accordance with subsection 10.2, in which event the
further provisions of said subsection 14.2(b) shall be fully applicable. In the
event that the Partners so agree to continue the Partnership with a substitute
Managing General Partner and/or General Partner, as the case may be, the
substituted Managing General Partner and/or the General Partner is hereby
authorized to and shall continue the business of the Partnership under the terms
of this Agreement.
14.4 Procedure in Dissolution and Liquidation. (a) Winding Up. Upon
---------------------------------------- ----------
dissolution of the Partnership pursuant to subsection 14.3 hereof, the
Partnership immediately shall commence to wind up and liquidate the affairs and
business of the Partnership in an orderly manner.
<PAGE>
73
(b) Management Rights During Winding Up. During the period of the
-----------------------------------
winding up of the affairs of the Partnership, the rights and obligations of the
Partners set forth herein with respect to the management of the Partnership
shall continue. For purposes of winding up, and subject to subsection 14.2
hereof, the Managing General Partner shall act as liquidator to wind up the
Partnership and shall make all decisions relating to the conduct of any business
or operations during the winding up period and to the sale or other disposition
of the Partnership assets with the advice of the Limited Partner, except that if
the dissolution results from the occurrence of a Special Event, the Limited
Partner shall act as liquidator and make all such decisions.
(c) Distributions in Liquidation. The assets of the Partnership shall
----------------------------
be applied or distributed in liquidation in the following order:
(i) First, to the payment and discharge of all of the Partnership's
debts and liabilities, including the establishment of any reasonably
necessary reserves;
(ii) Second, to the Partners in accordance with the positive balances
in their respective Capital Accounts as determined after taking into account
all adjustments to Capital Accounts for the year during which the
liquidation occurs.
(d) Non-Cash Assets. Every reasonable effort shall be made to dispose
---------------
of the interests of the Partnership in the assets of the Partnership, so that
the distribution may be made to the Partnership in cash. If at the time of the
liquidation of the Partnership, the Partnership owns any assets in the form of
notes, deeds of trust or other non-cash assets, such assets, if any, shall be
distributed in kind to the Partners, in lieu of cash, in accordance with
subsection 14.4(c), in proportion to their right to receive the assets of the
Partnership on an equitable basis reflecting the net fair market value of the
assets so distributed.
14.5 Disposition of Documents and Records. A11 documents and records of
------------------------------------
the Partnership, including, without limitation, all financial records, vouchers,
cancelled checks and bank statements, shall be delivered to the Managing General
Partner upon termination of the Partnership. Copies thereof shall be prepared,
by microfiche process if requested, and made available to each Partner as
requested for any purpose reasonably related to the interest of such Partner as
a partner in the Partnership and at such Partner's cost and expense. Unless
otherwise approved by the Partners, the Managing General Partner shall retain
such documents and records for a period of not less than seven years and shall
make such documents and records available for any purpose reasonably related to
the interest of a Partner as a partner in the Partnership during normal business
<PAGE>
74
hours to any other Partner for inspection and copying at such other Partner's
cost and expense; provided, however, that if there is an audit or threat of
-----------------
audit, such documents and records shall be retained until the audit is completed
and any tax liability finally determined. Said documents and records shall be
available for inspection, examination and copying by the Managing General
Partner upon reasonable notice.
14.6 Termination. Upon the completion of the liquidation of the
-----------
Partnership and the distribution of all Partnership funds, the Partnership shall
terminate. The Managing General Partner shall execute and file a Certificate of
Cancellation of the Certificate of Limited Partnership as well as any and all
other documents required to effect the dissolution and termination of the
Partnership.
ARTICLE XV
RIGHTS AND OBLIGATIONS OF LIMITED PARTNER
-----------------------------------------
15.1 Management of the Partnership. Except as provided in Article XIV
-----------------------------
and the Recognition Agreements, a Limited Partner in its capacity as such shall
not (a) take part in the management or control of the business of the
Partnership or transact any business in the name of the Partnership, (b) have
the power or authority to bind the Partnership or to sign any agreement or
document in the name of the Partnership, or (c) have any power or authority with
respect to the Partnership except insofar as the consent of such Limited Partner
shall be expressly required. Notwithstanding anything herein to the contrary,
after the Flip Date, the rights specified in clauses (a), (b) and (c) above
shall not be applicable to, or exercisable by, the Limited Partner. If a Limited
Partner is a lender, in exercising its rights as a lender, including in making
its decision on whether to foreclose on property of the Partnership, such lender
will have no duty to consider (i) its status as a partner of the Partnership,
(ii) the interests of the Partnership, or (iii) any duty (including fiduciary
duties, if any) it may have to any Partner or the Partnership.
15.2 Limitation on Liability of Limited Partners. Except as otherwise
-------------------------------------------
provided by law, the liability of a Limited Partner shall be limited to its
Capital Contribution as and when it is payable under the provisions of the
Capital Contribution Agreement. A Limited Partner, in its capacity as such,
shall have no other liability to contribute money to, or in respect of the
liabilities or obligations of, the Partnership, nor shall any Limited Partner be
personally liable for any obligations of the Partnership. Except as provided in
subsection 10.5, Article XIV, the General Partner Term Loan Agreement, the
Construction Loan Agreement, or the Capital Contribution Agreement, no Limited
Partner shall be obligated to make loans to the Partnership.
<PAGE>
75
ARTICLE XVI
MISCELLANEOUS
-------------
16.1 Further Assurances. Each Partner shall execute and deliver such
------------------
other certificates, agreements and documents, and take such other actions as may
be reasonably requested by the Managing General Partner or any Limited Partner
in connection with the formation of the Partnership and the achievement of its
purposes and the placement of any debt and equity relating to the Project
authorized pursuant to this Agreement (whether by or on behalf of the
Partnership).
16.2 Amendments and Waivers. Any term of this Agreement may be amended
----------------------
only with the written consent of all the Partners. The observance of any term of
this Agreement may be waived only if such waiver is in writing signed by the
Partner waiving such term.
16.3 Successors and Assigns. Subject to the provisions of Article X,
----------------------
the terms and provisions hereof shall be binding on and inure to the benefit of
and be enforceable by the successors and assigns of the parties hereto, whether
so expressed or not.
16.4 Indemnification. To the fullest extent permitted by law, the
---------------
Partnership agrees to pay, indemnify and hold each Partner and its Affiliates,
directors, officers, successors and assigns harmless from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at any
time be imposed on, incurred by or asserted against any such Person in any way
relating to or arising out of this Agreement, the other Basic Documents, the
other Operative Documents or any documents contemplated by or referred to herein
or therein or the transactions contemplated hereby or thereby, or as a result
of such Partner's acting as a partner of the Partnership hereunder, (all of the
foregoing, collectively, the "indemnified liabilities", provided, that, with
----------------------- --------
respect to the Managing General Partner Group, "indemnified liabilities" shall
not include the liabilities set forth in subsection 7.5 for which the Managing
General Partner Group is liable), provided, that the Partnership shall have no
--------
obligation hereunder to any such Person with respect to indemnified liabilities
arising from (i) the gross negligence, fraud or willful misconduct of any such
Person, (ii) legal proceedings commenced against any such Person by any security
holder or creditor other than in its capacity as a security holder or creditor
of the Partnership arising out of and based upon rights afforded any such
security holder or creditor solely in its capacity as such security holder or
creditor, or (iii) legal proceedings commenced against any such Person by any
assignee of such Person's interest herein. The agreements in this subsection
shall survive the making by each Partner of its
<PAGE>
76
initial capital contributions to the Partnership and the termination of the
Operative Documents.
16.5 Incorporation By Reference. The provisions of the Capital
--------------------------
Contribution Agreement are hereby incorporated by reference herein with the same
effect as if such provisions were fully set forth herein.
16.6 Severability. If any term or provision of this Agreement or the
------------
application thereof to any circumstance shall be held invalid or unenforceable,
to any extent, by a court of competent jurisdiction, the remainder of this
Agreement, other than that portion determined to be invalid or unenforceable,
shall not be affected thereby, and each valid provision hereof shall be enforced
to the fullest extent permitted by law.
16.7 Headings and Table of Contents. The headings in and the table of
------------------------------
contents of this Agreement are for purposes of reference only and shall not
limit or otherwise affect the meaning hereof.
16.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute on instrument.
16.9 Submission to Jurisdiction; Waivers. (A) Each Partner hereby
-----------------------------------
irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any other Operative Document, or
for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the States of New York
and Delaware, the courts of the United States of America for the Southern
District of New York and for the District of Delaware, and appellate courts
from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that any
such action or proceeding was brought in any inconvenient court and agrees
not to plead or claim the same;
(iii) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Partner at its address set forth in subsection 12.2 or any such other
address of which the other Partners shall have been notified pursuant
thereto; and
(iv) agrees that nothing herein shall affect the right to effect the
service of process in any other manner
<PAGE>
77
permitted by law or shall limit the right to sue in any other jurisdiction.
(B) Each Partner hereby irrevocably and unconditionally waives trial by
jury in any legal action or proceeding referred to in paragraph (A) above.
16.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
-------------
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE.
16.11 Entire Agreement. This Agreement sets forth the entire agreement
----------------
of the parties hereto with respect to its subject matter, and supersedes all
previous understandings, written or oral, with respect thereto.
<PAGE>
78
IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first above written.
GENERAL PARTNER:
COGEN TECHNOLOGIES CAMDEN GP LIMITED
PARTNERSHIP
By: Cogen Technologies Camden, Inc., its
general partner
By: /s/ [ILLEGIBLE SIGNATURE]
-------------------------------------
Title: Vice President/Treasurer
LIMITED PARTNER:
GENERAL ELECTRIC CAPITAL CORPORATION
By:
-------------------------------------
Title:
<PAGE>
78
IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first above written.
GENERAL PARTNER:
COGEN TECHNOLOGIES CAMDEN GP LIMITED
PARTNERSHIP
By: Cogen Technologies Camden, Inc., its
general partner
By:
----------------------------------
Title:
LIMITED PARTNER:
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ [ILLEGIBLE SIGNATURE]
----------------------------------
Title: Operations Manager
<PAGE>
AMENDMENT NO. 1 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
AMENDMENT NO. 1, dated as of April 1, 1993, to THE AMENDED AND
RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF CAMDEN COGEN L.P.(this
"Amendment"), dated as of February 9, 1993, between COGEN TECHNOLOGIES CAMDEN GP
---------
LIMITED PARTNERSHIP, a Delaware limited partnership (the "General Partner"), and
---------------
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation (together with its
successors and assigns hereunder, "GE Capital").
----------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the General Partner is the sole general partner and GE
Capital is the sole limited partner of Camden Cogen L.P. (the "Limited
-------
Partnership"), a limited partnership established pursuant to (a) the Amended and
- -----------
Restated Certificate of Limited Partnership of the Limited Partnership, dated as
of March 24, 1988, filed with the Secretary of State of the State of Delaware on
March 25, 1988, (b) the Limited Partnership Agreement, dated March 25, 1988 (as
amended by the first amendment thereto, dated December 28, 1990, the second
amendment thereto, dated December 31, 1990 and the third amendment thereto,
dated July 26, 1991), (c) the Amended and Restated Certificate of Limited
Partnership, dated as of December 31, 1990, as filed in the office of the
Secretary of State of the State of Delaware on January 11, 1991, (d) the Amended
and Restated Certificate of Limited Partnership, dated as of July 26, 1991, as
filed in the office of the Secretary of State of the State of Delaware on July
31, 1991, (e) the Amendment to and Restatement of Limited Partnership, dated as
of December 1, 1991 and (f) the Amended and Restated Agreement of Limited
Partnership between the General Partner and GE Capital dated February 9, 1993
(as amended by Amendment Number 1 thereto dated as of April 1, 1993) (as amended
supplemented, restated or otherwise modified from time to time, the "Partnership
-----------
Agreement"); and
- ---------
WHEREAS, GE Capital and the General Partner desire to amend the
Partnership Agreement in the manner hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. Definitions. Unless otherwise defined herein, all terms used herein
-----------
which are defined in the Partnership Agreement shall have their respective
meanings as therein defined.
2. Amendment to Section 1.1 (Defined Terms). Section 1.1 of the
----------------------------------------
Partnership Agreement is hereby amended by (a) deleting the defined term
"Construction Loan Agreement" and inserting in lieu thereof, the following:
<PAGE>
2
"`Construction Loan Agreement' shall mean the Amendment and
---------------------------
Restatement, dated as of April 1, 1993, of the Construction and Term
Loan Agreement, dated as of February 4, 1992, among the Partnership,
the lenders parties thereto, GE Capital, as Agent, Senior Tranche
Agent, Junior Tranche Agent and Letter of Credit Issuer, as amended,
supplemented, restated or otherwise modified from time to time.";
(b) deleting clause "(vii)" of the definition of "Permitted Liens" and
inserting, in lieu thereof, the following clause:
"(vii) Liens created by the Midlantic Agreements;";
and (c) adding the following definition in the appropriate alphabetical order:
"`Recognition Agreements' shall mean the recognition agreements
----------------------
executed and delivered by Limited Partner and each party (other than
the Partnership) to the Power Purchase Agreement, the Equipment
Supply Contract, the Turnkey Contract, the Steam Supply Agreement, the
Gas Service Agreement and the Operation and Maintenance Agreement."
3. Amendment to Section 3.1 (Partners and Contributions). Section 3.1
----------------------------------------------------
of the Partnership Agreement is hereby amended by (i) adding after "Section
2(a)(ii)" appearing in the third sentence "or Section 2(f)" and (ii) inserting
at the end thereof the following sentence: "If the Limited Partner shall,
pursuant to Section 7.12, request the General Partner to prepay the Tranche A
Term Loans, the Tranche B Term Loans or the Tranche C Term Loans in whole or in
part, the Limited Partner shall make a capital contribution to the Partnership
in an amount equal to the principal amount to be prepaid plus, unless an Event
of Default shall have occurred and be continuing, any Yield Maintenance Premium
or Settlement Amount (as defined in the Interest Rate Hedging Agreement) payable
as a result of such prepayment."
4. Amendment to Section 4.2 (Distributions Prior to Second Capital
---------------------------------------------------------------
Contribution Date). Section 4.2 of the Partnership Agreement is hereby amended
- -----------------
in its entirety as follows:
"(a) Within 30 days after the Second Capital Contribution Date
there shall be distributed to the Limited Partner cash in an amount
equal to the Operating Profits allocated to it in respect of the
period prior to the Second Capital Contribution Date pursuant to
subsection 5.1.
(b) The General Partner shall be paid $11,486,000 on the Second
Capital Contribution Date. Such payment
<PAGE>
3
consists of a distribution in an amount equal to the credit balance in the
General Partner's Capital Account as of such date and the remainder is in
payment of the Development Fee."
5. Amendment to Section 4.3 (Distributions After the Second Capital
----------------------------------------------------------------
Contribution Date and Prior to the Flip Date). Section 4.3 of the Partnership
- ---------------------------------------------
Agreement is hereby amended by (i) deleting the phrase "shall be distributed
within 15 days after the end of such month" and inserting, in lieu thereof, the
following phrase: "on each Transfer Date (as defined in the Security Deposit
Agreement)" and (ii) deleting the proviso in paragraph (a) thereof and
inserting, in lieu thereof, the following phrase:
"provided, however, that the amount of Distributable Cash
-------- -------
distributable to the Limited Partner pursuant to this subsection
4.3(a) shall be (i) decreased by (A) amounts transferred by the
--------- --
Partnership to the Debt Service Account on such Transfer Date pursuant
to the provisions of Section 4.02(a), (b), (d) and (e) of the Security
Deposit Agreement, (B) without duplication of amounts referred to in
the preceding clause (A) and to the extent not paid from amounts
transferred to the Debt Service Account on such Transfer Date pursuant
to the provisions of Section 4.02(a), (b), (d) and (e) of the Security
Deposit Agreement or from drawings under any Senior Debt Service
Letter of Credit or Junior Debt Service Letter of Credit (as such
terms are defined in the Security Deposit Agreement) substituted for
such transferred amounts pursuant to the provisions of Section
4.02(a), (b), (d) or (e) of the Security Deposit Agreement, amounts of
principal of and interest (including amounts payable pursuant to
subsections 4.8 and 4.10 of the Construction Loan Agreement) on the
Tranche A Term Loans, Tranche B Term Loans and Tranche C Term Loans
(or any refinancing of the Tranche A Term Loans, Tranche B Term Loans
and Tranche C Term Loans pursuant to Section 12 of the Capital
Contribution Agreement) paid by the Partnership on such Transfer Date
and since the preceding Transfer Date, (C) Agency Fees paid by the
Partnership on such Transfer Date and since the preceding Transfer
Date, (D) Interest Rate Hedging Obligations paid by the Partnership
(other than Interest Rate Hedging Obligations paid pursuant to Section
6(e) of an Interest Rate Hedging Agreement) on such Transfer Date and
since the preceding Transfer Date and (E) reimbursement obligations
with respect to the Senior Debt Service Reserve Letter of Credit paid
by the Partnership on such Transfer Date and since the preceding
Transfer Date and (ii) increased by amounts paid by the Counterparty
--------- --
to the Partnership under any Interest Rate Hedging Agreement on such
Transfer Date and since the preceding Transfer Date."
<PAGE>
4
6. Amendment to Section 4.7 (Net Cash From Sales or Refinancing.
------------------------------------------------------------
Section 4.7 of the Partnership Agreement is hereby amended by deleting paragraph
(b) thereof in its entirety and substituting in lieu thereof the following:
"(b) On or prior to the Flip Date (which for the purposes of this
subsection 4.7 will be deemed to have occurred on the date when the
Limited Partner shall have received the maximum amount of Tranche A
Distributions distributable to it pursuant to subsection 4.3(a) to and
including the Transfer Date on which the Limited Partner shall have
received Net Cash From Sales or Refinancing in an aggregate amount
equal to the amount set forth on Schedule 6 hereto opposite such
Transfer Date), any Net Cash from Sales or Refinancing (other than
pursuant to the refinancing referred to in subsection 4.7(a) above)
shall be distributed 99% to the Limited Partner and 1% to the General
Partner until the Partners have received pursuant to this subsection
4.7(b) an aggregate amount equal to the amount set forth in Schedule 6
hereto and any Net Cash from Sales in excess of such amount shall be
distributed 10% to the Limited Partner and 90% to the General Partner
until the Partners shall have received pursuant to this subsection
4.7(b) an aggregate amount equal to 125% of Project Cost and any Net
Cash from Sales in excess of such amount shall be distributed 1% to
the Limited Partner and 99% to the General Partner: provided, however,
-------- -------
that in determining the amount of Net Cash from Sales to be paid to
the Limited Partner, (i) there shall be deducted from such cash
proceeds the portion thereof applied to the payment of (A) principal
of and interest on the Tranche A Term Loans, Tranche B Term Loans and
Tranche C Term Loans (or any refinancing of the Tranche A Term Loans,
Tranche B Term Loans and Tranche C Term Loans pursuant to Section 12
of the Capital Contribution Agreement), (B) Agency Fees, (C) Interest
Rate Hedging Obligations (other than Interest Rate Hedging Obligations
paid pursuant to Section 6(e) of an Interest Rate Hedging Agreement)
and (D) reimbursement obligations with respect to the Senior Debt
Service Reserve Latter of Credit and (ii) there shall be added to such
proceeds all amounts paid by the Counterparty to the Partnership under
any Interest Rate Hedging Agreement since the Transfer Date next
preceding the receipt of such Net Cash From Sales or Refinancing;
and".
7. Amendment to Section 5.1 (Operating Profits Subsequent to the
-------------------------------------------------------------
Initial Capital Contribution Date and Prior to the Second Capital Contribution
- ------------------------------------------------------------------------------
Date). Section 5.1 of the Partnership Agreement is hereby amended in its
- -----
entirety as follows:
<PAGE>
5
"Operating Profits of the Partnership subsequent to the Initial
Capital Contribution Date and prior to the Second Capital Contribution
Date shall be allocated 30% to the Limited Partner and 70% to the
General Partner."
8. Amendment to Section 5.2 (Operating Profits Subsequent to the
-------------------------------------------------------------
Second Capital Contribution Date). Section 5.2(a) of the Partnership Agreement
- ---------------------------------
is hereby amended in its entirety as follows:
"(a) First, 99% to the Limited Partner, and 1% to the General
Partner until the Limited Partner has been allocated on a cumulative
basis pursuant to this subsection 5.2(a) an amount of Operating
Profits equal to the aggregate amount of Distributable Cash it has
received over the term of the Partnership pursuant to subsections
4.3(a) hereof plus the amounts of principal (other than interest) paid
by the Partnership with respect to the Partnership Term Loan or any
refinancing thereof; provided, however, Operating Profits with regard
-------- -------
to payments described in clause (ii) of the proviso to Section 4.3(a)
shall be allocated 100% to the Limited Partner."
9. Amendment to Section 5.9 (Special Allocation of Certain
-------------------------------------------------------
Expenses). Section 5.9 of the Partnership Agreement is hereby amended in its
- ---------
entirety as follows:
"Organizational Expenses and payments described in clause (i)(D)
of the proviso to Section 4.3(a) shall be allocated 100% to the
Limited Partner until such allocation creates an Adjusted Capital
Account Deficit of the Limited Partner."
10. Amendment to Article VII (MANAGEMENT). Article VII of the
-------------------------------------
Partnership Agreement is hereby amended (i) by deleting the "and" and the end of
paragraph (ix) of Section 7.3(a) thereof, deleting the period at the end of
paragraph (x) of Section 7.3(a) thereof, and inserting in lieu of such period:
"; and
(xi) Prepayment of Tranche A Term Loans, Tranche B Term Loans and
------------------------------------------------------------
Tranche C Term Loans. Prepay any principal of the Tranche A Term
--------------------
Loans, the Tranche B Term Loans or the Tranche C Term Loans other than
a mandatory prepayment pursuant to subsection 4.2(a) of the
Construction Loan Agreement."
and (ii) by adding thereto a new Section 7.11 and Section 7.12 as follows:
"7.11 Development Fee Clawback. In the event that the amounts
------------------------
deposited in the Completion Account and the capital contributions
referred to in Section 2(f) of the Capital Contribution Agreement
shall be insufficient to pay all costs incurred by the Partnership to
complete the
<PAGE>
6
Facility, the General Partner shall, from time to time, refund to the
Limited Partnership a portion of the Development Fee paid to it as of
the Second Capital Contribution Date equal to the amount (not to
exceed the amount of the Development Fee) of such insufficiency. Such
refund shall not be a capital contribution by the General Partner and
shall not result in any addition to the Capital Account of the General
Partner.
7.12 Prepayment of Tranche A Term Loans, Tranche B Term Loans
--------------------------------------------------------
and Tranche C Term Loans. At the request of the Limited Partner, the
------------------------
General Partner shall cause the Partnership to prepay all or such
portion of the Tranche A Term Loans, Tranche B Term Loans and/or
Tranche C Term Loans as the Limited Partner may specify in writing,
from time to time, to the General Partner. To facilitate such
prepayment, the Limited Partner shall make a capital contribution to
the Partnership in an amount equal to the principal amount to be
prepaid plus, unless an Event of Default shall have occurred and be
continuing, any Yield Maintenance Premium or Settlement Amount (as
defined in the Interest Rate Hedging Agreement) payable as a result of
such prepayment."
11. Amendment to Section 12.2 (Addresses). Section 12.2 of the
-------------------------------------
Partnership Agreement is hereby amended by deleting the address of the Limited
Partner and inserting, in lieu thereof, the following address:
"General Electric Capital Corporation
1600 Summer Street
Stamford, Connecticut 06905
Attention: Compliance Officer, Energy Projects
-- Transportation and Industrial
Funding Corporation
Telecopy: (203) 357-4329".
12. Schedule 1. Schedule 2. Schedule 5 and Schedule 6. Schedules
-------------------------------------------------
1, 2, 5 and Schedule 6 of the Partnership Agreement are hereby replaced by Annex
A, Annex B, Annex C and Annex D hereto.
13. Amendment to Schedule 7 (Operating Period Insurance).
----------------------------------------------------
Schedule 7 of the Partnership Agreement is hereby amended by (i) adding to the
end of paragraph 1(c) thereof the following sentence:
"Such policy shall be written on a project specific basis and shall
apply solely to the construction, use, operation and maintenance of
the Facility.": and
(ii) adding to the end of paragraph 1(f) thereof the following sentence:
<PAGE>
7
"Such policy shall be written on a project specific basis and shall
apply solely to the construction, use, operation and maintenance of
the Facility."
14. Governing Law: Counterparts. Except as or to the extent
---------------------------
expressly amended or waived hereby, the Partnership Agreement is hereby in all
respects ratified and confirmed and remains in full force and effect. THIS
AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF DELAWARE, and may be executed in any number of counterparts,
all of which counterparts, taken together, shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed and delivered as of the date first above written.
GENERAL PARTNER:
COGEN TECHNOLOGIES CAMDEN GP LIMITED
PARTNERSHIP
By: Cogen Technologies Camden, Inc.,
its general partner
By: [SIGNATURE APPEARS HERE]
-------------------------------
Title: Vice President
LIMITED PARTNER:
GENERAL ELECTRIC CAPITAL CORPORATION
By: [SIGNATURE APPEARS HERE]
-------------------------------
Title: Manager - Operations
<PAGE>
AMENDMENT NO. 2 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
AMENDMENT NO. 2, dated as of December 22, 1993, to THE AMENDED AND
RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF CAMDEN COGEN L.P.(this
"Amendment"), dated as of February 9, 1993, between COGEN TECHNOLOGIES CAMDEN GP
---------
LIMITED PARTNERSHIP, a Delaware limited partnership (the "General Partner"), and
---------------
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation (together with its
successors and assigns hereunder, "GE Capital").
----------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the General Partner is the sole general partner and GE
Capital is the sole limited partner of Camden Cogen L.P. (the "Limited
-------
Partnership"), a limited partnership established pursuant to (a) the Amended and
- -----------
Restated Certificate of Limited Partnership of the Limited Partnership, dated as
of March 24, 1988, filed with the Secretary of State of the State of Delaware on
March 25, 1988, (b) the Limited Partnership Agreement, dated March 25, 1988 (as
amended by the first amendment thereto, dated December 28, 1990, the second
amendment thereto, dated December 31, 1990 and the third amendment thereto,
dated July 26, 1991), (c) the Amended and Restated Certificate of Limited
Partnership, dated as of December 31, 1990, as filed in the office of the
Secretary of State of the State of Delaware on January 11, 1991, (d) the Amended
and Restated Certificate of Limited Partnership, dated as of July 26, 1991, as
filed in the office of the Secretary of State of the State of Delaware on July
31, 1991, (e) the Amendment to and Restatement of Limited Partnership, dated as
of December 1, 1991 and (f) the Amended and Restated Agreement of Limited
Partnership between the General Partner and GE Capital dated February 9, 1993
(as amended by Amendment Number 1 thereto dated as of April 1, 1993) (as amended
supplemented, restated or otherwise modified from time to time, the "Partnership
-----------
Agreement"); and
- ---------
WHEREAS, GE Capital and the General Partner desire to amend the
Partnership Agreement in the manner hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. Definitions. Unless otherwise defined herein, all terms used herein
-----------
which are defined in the Partnership Agreement shall have their respective
meanings as therein defined.
2. Schedules 2, 5 and 6. Schedules 2, 5 and 6 of the Partnership
--------------------
Agreement are hereby replaced by Annexes A, B and C hereto.
<PAGE>
2
3. Global Amendment to Partnership Agreement. The Partnership
-----------------------------------------
Agreement is hereby amended by deleting all references to "Tranche C Term Loan",
"Tranche C Term Loans", "Tranche C Lender" and "Tranche C Lenders" and
inserting, in lieu thereof, the phrases "Tranche C Term Loan, if any,", "Tranche
C Term Loans, if any", "Tranche C Lender, if any" and "Tranche C Lenders, if
any" respectively.
4. Governing Law; Counterparts. Except as or to the extent expressly
---------------------------
amended or waived hereby, the Partnership Agreement is hereby in all respects
ratified and confirmed and remains in full force and effect. THIS AMENDMENT AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
DELAWARE, and may be executed in any number of counterparts, all of which
counterparts, taken together, shall constitute one and the same instrument.
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered as of the date first above written.
GENERAL PARTNER:
COGEN TECHNOLOGIES CAMDEN GP LIMITED
PARTNERSHIP
By: Cogen Technologies Camden,
Inc., its general partner
By: [SIGNATURE APPEARS HERE]
------------------------------
Title:
LIMITED PARTNER:
GENERAL ELECTRIC CAPITAL CORPORATION
By: [SIGNATURE APPEARS HERE]
------------------------------
Title:
<PAGE>
OPERATION AND MAINTENANCE AGREEMENT
By and Between
CAMDEN COGEN L.P.,
AS "OWNER"
AND
GENERAL ELECTRIC COMPANY,
AS "OPERATOR"
June 6, 1997
<PAGE>
TABLE OF CONTENTS
Section Page
------- ----
I. DEFINITIONS
Actual kWh...................................................... 2
Affiliate....................................................... 2
Agreement....................................................... 2
Annual Fee Adjustment Amount or "AFAA".......................... 2
Annual Operating Plan........................................... 2
Applicable Adjustment Amount.................................... 2
Approved Annual Operating Plan.................................. 2
Approved O&M Plan............................................... 2
Approved Operating Budget....................................... 2
Base Index...................................................... 2
Bayonne Approved Operating Budget............................... 2
Bayonne Facility................................................ 2
Bayonne O&M Agreement........................................... 2
Camden Approved Operating Budget................................ 3
Camden Paperboard............................................... 3
Capital Improvements............................................ 3
Confidential Information........................................ 3
Construction and Term Loan Agreement............................ 3
Constant Personnel.............................................. 3
Consumables..................................................... 3
CPI Adjusted Payments........................................... 3
Defaulting Party................................................ 3
Default Rate.................................................... 3
Denominator..................................................... 3
Direct Costs.................................................... 3
Effective Hourly Rate........................................... 4
Equipment....................................................... 4
Event of Default................................................ 4
Execution Date.................................................. 4
Existing O&M Agreement.......................................... 4
Existing O&M Agreement Termination Date......................... 4
Facility........................................................ 4
Facility Data................................................... 4
Facility Manager................................................ 4
FERC............................................................ 4
FM kWh.......................................................... 4
Force Majeure................................................... 4
Forced Outage................................................... 4
-i-
<PAGE>
Section Page
------- ----
Fourth Year Termination Fee..................................... 5
Fuel............................................................ 5
Gas Service Agreement........................................... 5
GE.............................................................. 5
GE Equipment.................................................... 5
GE O&M Personnel................................................ 5
GE O&M Personnel Overhead....................................... 5
Key Personnel................................................... 5
Key Regional Office Personnel................................... 5
kWh............................................................. 5
Lender.......................................................... 5
Linden Approved Operating Budget................................ 6
Linden Facility................................................. 6
Linden O&M Agreement............................................ 6
Major Inspection................................................ 6
Major Overhauls................................................. 6
Net Electrical Power Output..................................... 6
Non-Defaulting Party............................................ 6
North American.................................................. 6
Numerator....................................................... 6
O&M Fee......................................................... 6
O&M Plan........................................................ 6
Operating Budget................................................ 6
Operating Procedures............................................ 6
Operator........................................................ 6
Operator Confidential Information............................... 6
Operator Indemnitees............................................ 6
Operator Personnel.............................................. 6
Operator Personnel Overhead..................................... 7
OSHA............................................................ 7
Overhead Percentage Rate........................................ 7
Owner........................................................... 7
Owner Confidential Information.................................. 7
Owner Indemnitees............................................... 7
Parts........................................................... 7
Parts Discount.................................................. 7
Permitted Transferee............................................ 7
PJM Net Capability Verification Test............................ 7
Plant Capacity.................................................. 7
Plant Manager................................................... 7
POPI............................................................ 7
-ii-
<PAGE>
Section Page
------- ----
Power Purchase Agreement........................................ 7
Project Year.................................................... 7
Prudent Utility Practices....................................... 8
PSE&G........................................................... 8
Published Price................................................. 8
PURPA........................................................... 8
Qualifying Cogeneration Facility................................ 8
Rated Capacity.................................................. 8
Regional Office................................................. 8
Reimbursable Costs.............................................. 8
Related Agreements.............................................. 8
Repairs......................................................... 9
Scheduled Outages............................................... 9
Security Deposit Agreement...................................... 9
Services........................................................ 9
Services Discount............................................... 9
Seventh Year Termination Fee.................................... 9
Site............................................................ 9
Special Improvements............................................ 9
Steam Purchase Contracts........................................ 9
Steam Purchasers................................................ 9
Target Rated Capacity........................................... 9
Test Plan....................................................... 10
Transition Stage................................................ 10
Transition Stage Operating Budget............................... 10
Transition Stage Operating Plan................................. 10
Transition Stage Plan........................................... 10
Unscheduled Maintenance......................................... 10
W-2 Wages....................................................... 10
Water Supply Agreement.......................................... 10
Work............................................................ 10
II. RESPONSIBILITIES OF OPERATOR................................... 10
2.1 Services Generally......................................... 10
2.2 Compliance with Related Agreements......................... 16
2.3 QF Status.................................................. 16
2.4 Annual Operating Plan...................................... 16
2.5 Monthly Summary............................................ 17
2.6 Emergencies................................................ 18
2.7 Inspections................................................ 18
2.8 Operating Procedures and Training.......................... 19
-iii-
<PAGE>
Section Page
------- ----
2.9 Transition Stage........................................... 20
2.10 Limited Authority.......................................... 21
III. RESPONSIBILITIES OF OWNER..................................... 21
3.1 Services, Operation, Obligations........................... 21
3.2 Payments................................................... 21
3.3 Right to Perform Upon Operator's Default................... 22
IV. OPERATING COSTS AND EXPENSES................................... 22
4.1 Procedure for Incurring Costs.............................. 22
4.2 Procedure for Payment of Direct Costs...................... 22
4.3 Limitation on Ability to Incur Direct Costs................ 23
4.4 Payment for Special Improvements........................... 23
4.5 Payment for Unscheduled Maintenance........................ 23
4.6 Payment for Major Overhauls................................ 24
4.7 Payment for Capital Improvements........................... 24
4.8 GE Equipment............................................... 24
4.9 Wage Increases in Excess of CPI............................ 25
V. PAYMENTS TO OPERATOR............................................ 25
5.1 O&M Fee.................................................... 25
5.2 Reimbursable Costs......................................... 26
5.3 CPI Adjustment............................................. 28
5.4 Procedure for Payment of Reimbursable Costs................ 29
5.5 Late Payments.............................................. 29
VI. FACILITY PERFORMANCE, LIQUIDATED DAMAGES AND BONUS............. 29
6.1 Annual Fee Adjustment Amount............................... 29
6.2 Quarterly Meetings......................................... 34
6.3 Partial Project Year....................................... 34
6.4 Payment of Annual Fee Adjustment Amount.................... 34
6.5 Application of CPI Adjustment.............................. 35
6.6 Change in Conditions or Circumstances...................... 35
6.7 First and Second Project Years............................. 35
6.8 Employee Bonuses........................................... 35
VII. WARRANTY; CORRECTION OF DEFECTS............................... 35
7.1 Warranty................................................... 35
7.2 Consequence of Breach...................................... 35
7.3 Vendor Warranties.......................................... 35
-iv-
<PAGE>
Section Page
------- ----
VIII. TERM......................................................... 36
IX. TERMINATION.................................................... 37
9.1 Event of Default........................................... 37
9.2 Termination upon Breach.................................... 38
9.3 Termination for Insolvency................................. 38
9.4 Owner's Additional Remedies................................ 38
9.5 Transfer of Operations Upon Termination.................... 39
9.6 Condition of Facility Upon Termination..................... 39
9.7 Survival of Obligations.................................... 39
X. INSURANCE....................................................... 39
10.1 Operator Insurance Coverage................................ 39
10.2 Owner Insurance Coverage................................... 40
10.3 Form and Content of Insurance.............................. 42
10.4 Additional Requirements.................................... 43
XI. NOTIFICATIONS.................................................. 44
XII. ASSIGNMENT; LENDER'S RIGHTS................................... 46
12.1 Assignment................................................. 46
12.2 Lender's Rights............................................ 46
12.3 Estoppel Certificates...................................... 47
12.4 Legal Opinion.............................................. 48
XIII. INDEMNIFICATION.............................................. 48
13.1 Operator Indemnity......................................... 48
13.2 Owner Indemnity............................................ 49
13.3 No Limitation.............................................. 49
XIV. REPRESENTATIONS AND WARRANTIES................................ 49
14.1 Representations and Warranties of Owner.................... 49
14.2 Representations and Warranties of Operator................. 50
XV. BOOKS, RECORDS AND REPORTS..................................... 50
15.1 Books and Records.......................................... 50
15.2 Reports.................................................... 51
XVI. FORCE MAJEURE................................................. 51
16.1 Force Majeure.............................................. 51
16.2 Effect of Force Majeure.................................... 52
-v-
<PAGE>
Section Page
------- ----
16.3 Extended Force Majeure..................................... 52
16.4 Payments to Operator During an Event of Force Majeure...... 53
XVII. LIMITATION OF LIABILITY...................................... 53
17.1 Operator................................................... 53
17.2 Owner...................................................... 53
XVIII. RESOLUTION OF DISPUTES...................................... 54
18.1 Resolution by Parties...................................... 54
18.2 Mediation by Expert........................................ 54
18.3 Arbitration................................................ 56
18.4 Selection of Arbitrators................................... 57
18.5 Notice..................................................... 57
18.6 Award...................................................... 57
18.7 Survival................................................... 57
XIX. CONFIDENTIALITY AND INTELLECTUAL PROPERTY..................... 57
19.1 Confidential Information................................... 57
19.2 Return of Confidential Information......................... 58
19.3 Continuation of Confidentiality Obligations................ 59
19.4 Ownership of Confidentiality Information................... 59
19.5 Intellectual Property...................................... 59
XX. MISCELLANEOUS.................................................. 59
20.1 Governing Law.............................................. 59
20.2 Severability............................................... 60
20.3 Entire Agreement........................................... 60
20.4 Amendments................................................. 60
20.5 Waiver..................................................... 60
20.6 Original and Counterparts.................................. 60
20.7 Independent Contractor..................................... 60
20.8 Limited Recourse........................................... 60
20.9 Captions................................................... 61
20.10 Exhibits................................................. 61
20.11 Effectiveness of Agreement............................... 61
-vi-
<PAGE>
Section Page
------- ----
Exhibit A Monthly O&M Report Format
Exhibit B Assignment
Exhibit C Consent and Agreement
Exhibit D Recognition Agreement
Exhibit E Site Description
Exhibit F Schedule of Parts and Services for GE Equipment
-vii-
<PAGE>
OPERATION AND MAINTENANCE AGREEMENT
This Agreement is entered into effective as of June 6, 1997 (the
"Execution Date"), by and between Camden Cogen L.P., a Delaware limited
partnership, doing business in New Jersey as Camden Cogen, Limited Partnership
("Owner"), and General Electric Company, a corporation organized and existing
under the laws of the State of New York ("Operator").
W I T N E S S E T H :
WHEREAS, Owner owns the Facility (as defined herein); and
WHEREAS, Owner and North American Energy Services Company ("North
American") entered into that certain Operation and Maintenance Agreement dated
February 4, 1993 (the "Existing O&M Agreement"), pursuant to which North
American operates and maintains the Facility for Owner in accordance with the
terms thereof; and
WHEREAS, Owner and North American entered into that certain Agreement
to Terminate Operation and Maintenance Agreement dated June 4, 1997 (the
"Termination Agreement"), pursuant to which Owner has the right to terminate the
Existing O&M Agreement by delivery of written notice to North American in
accordance with the terms thereof; and
WHEREAS, Owner intends to terminate the Existing O&M Agreement
pursuant to the terms of the Termination Agreement; and
WHEREAS, Owner desires to engage the services of an entity qualified
and competent to operate and maintain the Facility after the Existing O&M
Agreement Termination Date; and
WHEREAS, Operator has represented that it is qualified and capable to
operate and maintain gas-fired, combined cycle cogeneration facilities such as
the Facility; and
WHEREAS, Owner desires to appoint Operator and Operator desires to
operate and maintain the Facility after the Existing O&M Agreement Termination
Date, and
WHEREAS, Owner and Operator desire to enter into this Agreement in
order to set forth their agreements relative to the operation and maintenance of
the Facility starting on the Existing O&M Agreement Termination Date;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
I.
DEFINITIONS
The following definitions shall apply to this Agreement:
Actual kWh shall have the meaning set forth in Section 6.1(a)
hereof.
Affiliate shall mean any person or corporation or other entity that,
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, another person or corporation or
entity. The term "control" with respect to any entity means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such entity, whether through the ownership of voting
securities, by contract or otherwise.
Agreement shall mean this Operation and Maintenance Agreement,
including all Exhibits attached hereto, as the same may be amended from time to
time in accordance herewith.
Annual Fee Adjustment Amount or "AFAA" shall have the meaning set
forth in Section 6.1 hereof.
Annual Operating Plan shall have the meaning set forth in Section
2.4(a) hereof.
Applicable Adjustment Amount shall have the meaning set forth in
Section 5.3 hereof.
Approved Annual Operating Plan shall, have the meaning set forth in
Section 2.4(a) hereof.
Approved O&M Plan shall have the meaning set forth in Section 2.4(a)
hereof.
Approved Operating Budget shall have the meaning set forth in Section
2.4(a) hereof.
Base Index shall have the meaning set forth in Section 5.3 hereof.
Bayonne Approved Operating Budget shall mean an Approved Operating
Budget for the Bayonne Facility as set forth in Section 2.4 of the Bayonne O&M
Agreement.
Bayonne Facility shall mean the cogeneration plant owned by Cogen
Technologies NJ Venture located in Bayonne, New Jersey.
Bayonne O&M Agreement shall mean that certain Operation and
Maintenance Agreement dated of even date herewith, by and between Cogen
Technologies NJ Venture, as "Owner," and Operator, as "Operator," relating to
the Bayonne Facility.
-2-
<PAGE>
Camden Approved Operating Budget shall mean an Approved Operating
Budget for the Facility as set forth in Section 2.4 hereof.
Camden Paperboard shall mean Camden Paperboard Corporation, a New
Jersey corporation.
Capital Improvements shall have the meaning set forth in Section
2.1(2) hereof.
Confidential Information shall have the meaning set forth in Section
19.1 hereof.
Construction and Term Loan Agreement shall mean that certain
Construction and Term Loan Agreement dated as of February 4, 1992, among Owner,
the lenders parties thereto and General Electric Capital Corporation, as Agent
and as Lender, as amended from time to time.
Constant Personnel shall mean, at the time of determination, such
Operator Personnel and GE O&M Personnel as were employed on the first day of the
then current Project Year and are also scheduled to be employed in the same
positions on the first day of the next Project Year pursuant to the Approved
Annual Operating Plan for such next Project Year.
Consumables shall mean, collectively, all items consumed or needing
regular periodic replacement during operation and maintenance of the Facility,
including, but not limited to, spare parts, water treatment chemicals,
lubricants, office supplies, air filters, gaskets, hand tools, and all other
consumable materials and parts required for the normal operation of the
Facility, but not including Fuel and water.
CPI Adjusted Payments shall have the meaning set forth in Section 5.3
hereof.
Defaulting Party shall have the meaning set forth in Section 9.2
hereof.
Default Rate shall mean the lesser of (i) the rate of interest
announced by The Chase Manhattan Bank, N.A., from time to time, at its
principal office located at 1 Chase Manhattan Plaza, New York, New York 10081
(or any successor financial institution), as its prime commercial lending rate,
plus 1% or (ii) the maximum lawful nonusurious rate of interest that may be
charged under applicable law.
Denominator shall have the meaning set forth in Section 6.1(a)
hereof.
Direct Costs shall mean those costs incurred by Operator for goods and
services in connection with the operation and maintenance of the Facility which
are paid directly by Owner to the vendor of such goods and services.
-3-
<PAGE>
Effective Hourly Rate shall mean, as of the date of determination, the
sum of (i) the aggregate then current effective hourly rate for all salaried
Constant Personnel and (ii) the aggregate then current straight time hourly
rates for all hourly paid Constant Personnel.
Equipment shall mean any and all materials, supplies, equipment and
facilities, of whatever nature, intended to become or which are a part of the
Facility.
Event of Default shall have the meaning set forth in Section 9.1
hereof.
Execution Date shall have the meaning set forth in the preamble of
this Agreement.
Existing O&M Agreement shall have the meaning set forth in the
preamble of this Agreement.
Existing O&M Agreement Termination shall mean the date, if ever, on
which Owner terminates the Existing O&M Agreement pursuant to the Termination
Agreement.
Facility shall mean (i) the 146 megawatt (name plate) natural gas
fired, combined cycle cogeneration plant owned by Owner located on the Site for
the export and sale of electric power and steam, including all buildings,
interconnections, utilities and Equipment located on the Site and other related
facilities furnished by Owner and located on the Site, (ii) Camden Paperboard's
auxiliary Boilers and (iii) steam pipelines and condensate return pipelines
connected to Steam Purchasers' facilities.
Facility Data shall mean all facility and equipment design data
pertaining to the Facility, including, without limitation, plant data manuals,
equipment user/maintenance manuals, facility drawings and system descriptions,
inspection reports and operating plans.
Facility Manager shall mean Operator's employee, who shall be present
on the Site during regular business hours on all business days to oversee the
operation, maintenance, inspection and repair of the Facility and all parts
thereof, and who shall be authorized to make decisions on behalf of Operator.
The Facility Manager shall serve as Operator's single point of contact for all
matters regarding the operation, maintenance, inspection and repair of the
Facility.
FERC shall mean the Federal Energy Regulatory Commission.
FM kWh shall have the meaning set forth in Section 6.1(a) hereof.
Force Majeure shall have the meaning set forth in Section 16.1 hereof.
Forced Out shall mean outage of the Facility which is not a Scheduled
Outage.
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Fourth Year Termination Fee shall have the meaning set forth in
Article VIII hereof.
Fuel shall mean natural gas, kerosene or any other fuel suitable for
operating the Facility.
Gas Service Agreement shall mean that certain Gas Service Agreement
dated effective May 15, 1991, between Owner and PSE&G, as amended from time to
time.
GE shall mean General Electric Company, a New York corporation.
GE Equipment shall mean the gas and steam turbine generation equipment
and associated electrical and control systems components, now existing or
hereafter installed or located at the Facility, and which were supplied by GE
prior or during the term of this Agreement, including, without limitation,
steam turbines; gas turbines (including components supplied in connection with
uprate packages); generators; load gears; speedtronic controls; steam turbine
controls; admission/extraction valves; stop valves; control consoles;
datatronics; accessory system compartment containing heavy duty, multi-shaft,
accessory gear, electric motor starting system, combined lube and hydraulic oil
system and all terminal boxes, conduit and wiring; generator auxiliary
compartment which contains all static excitation equipment, metering and
relaying current and potential transformers, lightning arrestors and generator
neutral grounding system; and any future improvements and/or enhancements to any
of the foregoing.
GE O&M Personnel shall mean all employees of Operator involved in the
performance of the Work, including, without limitation, all employees located at
the Regional Office, but expressly excluding the Operator Personnel.
GE O&M Personnel Overhead shall have the meaning set forth in Section
5.2 hereof.
Key Personnel shall mean the Key Regional Office Personnel, the
Facility Manager and all other personnel reporting directly to the Facility
Manager.
Key Regional Office Personnel shall mean the following personnel who
will be located in the Regional Office: the general manager, the financial
analyst, the plant engineer, the environmental, health and safety engineer, the
sourcing specialist and such other personnel as Owner may designate.
kWh shall mean kilowatt-hour.
Lender shall mean the entity or entities providing Owner with the
construction, term, permanent or other debt or equity financing for the Facility
and/or the operation thereof and/or any entity or entities providing a letter of
credit or other security in connection with the financing of the Facility and/or
the operation thereof.
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Linden Approved Operating Budget shall mean an Approved Operating
Budget for the Linden Facility as set forth in Section 2.4 of the Linden O&M
Agreement.
Linden Facility shall mean the cogeneration plant owned by Cogen
Technologies Linden Venture, L.P. located in Linden, New Jersey.
Linden O&M Agreement shall mean that certain Operation and Maintenance
Agreement dated of even date herewith, by and between Cogen Technologies Linden
Venture, L.P., as "Owner," and Operator, as "Operator," relating to the Linden
Facility.
Major Inspection shall have the meaning set forth in Section 6.1(a)
hereof.
Major Overhauls shall have the meaning set forth in Section 2.1(2)
hereof.
Net Electrical Power Output shall have the meaning ascribed to such
term in the Power Purchase Agreement.
Non-Defaulting Party shall have the meaning set forth in Section 9.2
hereof.
North American shall have the meaning set forth in the preamble of
this Agreement.
Numerator shall have the meaning set forth in Section 6.1(a) hereof.
O&M shall have the meaning set forth in Section 5.1 hereof.
O&M Plan shall have the meaning set forth in Section 2.4(a) hereof.
Operating Budget shall have the meaning set forth in Section 2.4(a)
hereof.
Operating Procedures shall have the meaning set forth in Section
2.8(a) hereof.
Operator shall have the meaning set forth in the preamble of this
Agreement.
Operator Confidential Information shall have the meaning set forth in
Section 19.1 hereof.
Operator Indemnitees shall have the meaning set forth in Section 13.2
hereof.
Operator Personnel shall mean all employees of POPI involved in the
performance of the Work or, in the event that during the term of this Agreement
POPI ceases to provide Personnel for performance of the Work, then such
personnel who perform the functions that were previously performed by the
employees of POPI.
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Operator Personnel Overhead shall have the meaning set forth in
Section 5.2 hereof.
OSHA shall mean the Occupational Safety and Health Administration.
Overhead Percentage shall have the meaning set forth in Section 5.2
hereof.
Owner shall have the meaning set forth in the preamble of this
Agreement.
Owner Confidential Information shall have the meaning set forth in
Section 19.1 hereof.
Owner Indemnitees shall have the meaning set forth in Section 13.1
hereof.
Parts shall mean replacement parts and/or assemblies (either in kind
or improved) to replace existing parts and/or assemblies which are removed from
service, and any future improvements and/or enhancements to any such parts
and/or assemblies.
Parts Discount shall have the meaning set forth in Section 4.8 hereof.
Permitted Transferee shall mean (i) any Affiliate of Lender or (ii)
any other person or entity who succeeds to the rights and interests of Lender
under any mortgage.
PJM Net Capability Verification shall have the meaning set forth in
Section 6.1(b) hereof.
Plant Capacity shall have the meaning set forth in Section 6.1(a)
hereof.
Plant Manager shall mean the person designated by Owner, pursuant to
Section 3.1(4) hereof, to serve as Owner's administrative representative at the
Site.
POPI shall mean Plant Operating Personnel, Inc., a Delaware
corporation.
Power Generation Factor shall have the meaning set forth in
Section 6.1(a) hereof.
Power Purchase Agreement shall mean that certain Power Purchase
Agreement dated as of April 15, 1988, executed by and between Owner and PSE&G,
providing for the sale by Owner to PSE&G of electric power generated by the
Facility, as the same has heretofore been and may hereafter be amended and
supplemented from time to time.
Project shall mean any calendar year during the term of this
Agreement, provided that the first Project Year shall be deemed to begin on the
Existing O&M Agreement Termination Date and extend through the next occurring
December 31.
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Prudent Utility Practices shall mean those practices, methods, acts,
techniques, standards and equipment, as changed from time to time, that are then
generally accepted by the electric utility industry and commonly used in prudent
electric utility engineering and operations to operate and maintain equipment
lawfully, safely, dependably and economically, and as would have been (i)
expected to accomplish the desired result in a manner consistent with applicable
laws, applicable governmental permits, reliability, safety, environmental
protection, economy and expediency and (ii) implemented using that degree of
skill, diligence and foresight which would reasonably and ordinarily be expected
from a skilled and experienced operator complying with all applicable laws and
engaged in the same type of undertaking, including, without limitation, those
established by the North American Electric Reliability Council, as applicable to
units of the size and service of the Facility.
PSE&G shall mean Public Service Electric & Gas Company, a corporation
organized under the laws of the State of New Jersey.
Published Price shall mean (i) with respect to Parts, the published
prices provided by Operator's or any of its Affiliates' parts centers and/or
available through Operator's or any of its Affiliates' computerized pricing
systems, or if at any time during the term of this Agreement Operator and its
Affiliates do not have such published prices for any Parts, then the normal and
customary charges that are paid by Operator's and its Affiliates' other
customers for such Parts in the United States and (ii) with respect to Services
and/or Repairs, the published prices or rates that Operator or any of its
Affiliates' charge for such Services and/or Repairs, or if at any time during
the term of this Agreement Operator and its Affiliates do not have published
prices or rates for any Services and/or Repairs, then the normal and customary
charges that are paid by Operator's and its Affiliates' other customers for such
Services and/or Repairs in the United States.
PURPA shall mean the Public Utility Regulatory Policies Act of 1978
(U.S.C.A., Title 16, Section 824a-3, subsection 6)), as amended, a law of the
United States of America.
Qualifying Cogeneration Facility shall have the meaning set forth in
PURPA.
Rated Capacity shall have the meaning set forth in Section 6.1(b)
hereof.
Regional Office shall mean the office established by Operator at a
location designated by Owner for the sole purpose (and no others) of
administering and performing its obligations under (i) this Agreement, (ii) the
Bayonne O&M Agreement and (iii) the Linden O&M Agreement.
Reimbursable Costs shall have the meaning set forth in Section 5.2
hereof.
Related Agreement shall mean and include the Power Purchase Agreement,
all easements used in connection with the Facility, the Steam Purchase
Contracts, the Gas Service
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Agreement, the Water Supply Agreement, the Security Deposit Agreement and the
order of FERC granting the Facility status as a Qualifying Cogeneration
Facility.
Repairs shall mean services for assembly, disassembly and/or repair
provided by GE Apparatus Service Department, or if at any time during the term
of this Agreement GE Apparatus Service Department does not provide such
services, then such successor entity or other division of GE providing such
services.
Scheduled Outages shall mean a planned outage of the Facility or any
portion thereof necessary for regular inspection and maintenance.
Security Deposit Agreement shall mean the Amended and Restated
Security Deposit Agreement dated as of April 1, 1993, by and among Owner,
General Electric Capital Corporation, Cogen Technologies, Camden GP Limited
Partnership and Midlantic National Bank, the form of which is set forth as
Exhibit B to the Capital Contribution Agreement dated as of February 4, 1992, by
and among Owner, Cogen Technologies Camden GP Limited Partnership and General
Electric Capital Corporation.
Services shall mean services for assembly, disassembly, diagnosis
and/or repair provided by GE Power Generation Services, or if at any time during
the term of this Agreement GE Power Generation Services does not provide such
services, then such successor entity or other division of GE providing such
services.
Services Discount shall have the meaning set forth in Section 4.8
hereof.
Seventh Year Termination shall have the meaning set forth in Article
VIII hereof.
Site shall mean the certain tract of land located at 570 Chelton
Avenue in Camden, New Jersey, upon which the Facility is constructed, such tract
being more particularly described on Exhibit E attached hereto and made a part
hereof for all purposes, together with easements appurtenant thereto or used in
connection therewith.
Improvements shall have the meaning set forth in Section 4.4 hereof.
Steam Purchase Contracts shall mean (i) that certain Energy Purchase
Agreement dated December 18, 1989, executed by and between Owner and Camden
Paperboard, and (ii) any other agreements which Owner may execute in the future
for the sale of steam produced at the Facility, as each of such agreements may
be amended from time to time.
Steam Purchasers shall mean Camden Paperboard and any other future
purchasers of steam produced at the Facility.
Target Rated Capacity shall have the meaning set forth in
Section 6.1(b) hereof.
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Test Plan shall have the meaning set forth in Section 6.1(b) hereof.
Transition Stage shall have the meaning set forth in Section 2.9(a)
hereof.
Transition Stage Operating Budget shall have the meaning set forth in
Section 2.9(a) hereof.
Transition Stage Operating Plan shall have the meaning set forth in
Section 2.9(d) hereof.
Transition Stage Plan shall have the meaning set forth in Section
2.9(d) hereof.
Unscheduled Maintenance shall mean all maintenance, repair and
replacement requirements of the Facility during each Project Year which are not
contemplated in the Approved Annual Operating Plan, or any approved revision
thereof, for each such Project Year.
W-2 Wages shall mean the amount listed in box 1 on Internal Revenue
Service Form W-2, or if such form ceases to be used, then the sum of such
amounts as would have been included in the calculation of the number to be
inserted in such box 1 if such form were still in use.
Water Supply Agreement shall mean and refer to that certain water
supply commitment letter dated December 29, 1992, from the City of Camden, New
Jersey, to Owner.
Work shall mean all obligations, services, duties and responsibilities
assigned to or agreed to be undertaken by Operator and its subcontractors
pursuant to this Agreement.
II.
RESPONSIBILITIES OF OPERATOR
2.1 Services Generally. Operator hereby agrees to provide all
operations and maintenance services necessary or advisable in order to safely,
dependably and efficiently operate and maintain the Facility (as contemplated
by the Related Agreements). Without limiting the generality of the foregoing,
Operator shall perform the following services on behalf of Owner in connection
with the operation and maintenance of the Facility:
(i) Provide all services necessary or advisable to use, operate and
maintain the Facility's one (i) gas turbine unit and associated waste heat steam
generator arranged in combined cycle with one (i) steam turbine in good
operating condition with the objective of maximizing output of steam and
electricity while minimizing Fuel consumption consistent with (i) Prudent
Utility Practices, (ii) the thermal and mechanical limits and other
requirements specified in the nameplates thereon or in vendor and manufacturer
warranty requirements or recommendations relating thereto so as to maximize the
residual value of the Facility, (iii) the applicable terms of the Related
Agreements and all easements
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related to the operation of the Facility and the sale of steam and Net
Electrical Power Output, (iv) all applicable federal, state and local laws,
regulations, orders, licenses, approvals, certificates and permits, including
all Qualifying Cogeneration Facility requirements, (v) procedures established
pursuant to the Facility Data and the Operating Procedures as revised from time
to time, (vi) the requirements of insurance policies required hereunder and
Owner's insurance carrier so as to maintain insurance coverage in full force and
effect with respect to the Facility or any part thereof, (vii) the applicable
Annual Operating Plan, and (viii) the reasonable instructions of Owner;
(2) Maintain the Facility, including, without limitation, its associated
facilities, structures, buildings and offices, all interconnections with Steam
Purchasers' facilities, all interconnections with PSE&G, all mechanical and
electrical systems and controls, drainage system, air pollution control and
water treatment facilities, access roads, security fencing and all other
Equipment, and (i) develop, implement and maintain a maintenance management
program which (a) meets all applicable vendor and manufacturer warranty and
preventive and predictive maintenance requirements and specifications, (b) meets
Prudent Utility Practices, and (c) includes provisions for continuously
improving such program, (ii) develop, implement and maintain emergency
preparedness procedures that allow an immediate and appropriate response to
events such as fires, explosions, bomb threats, release of toxic chemicals,
employee illnesses and other accidents, (iii) perform or cause to be performed
routine and scheduled inspections and monitoring of the Facility and daily
maintenance work (such as cleaning the Equipment and maintaining levels of
liquids), (iv) perform or cause to be performed all necessary Unscheduled
Maintenance, subject to Owner's approval when required pursuant to Section 4.5
hereof, and (v) perform or cause to be performed such overhaul or repair of
major components of the Equipment (the "Major Overhauls") and perform such
replacement of major components of the Equipment (the "Capital Improvements")
as may be recommended or required by the manufacturer of any such Equipment or
requested by Owner or as may become, in Operator's reasonable discretion, upon
consultation with and approval from Owner, otherwise necessary or appropriate;
(3) Establish and maintain an effective work force required for the
operation and maintenance of the Facility in accordance with the terms of this
Agreement and the Related Agreements through proper hiring, training,
supervising and qualifying procedures, and administer all matters pertaining to
labor relations, salaries, wages, working conditions, hours of work, termination
of employment, employee benefits, safety and a related matters in connection
with these duties in accordance with applicable laws;
(4) Maintain or cause to be available a sufficient number of personnel
adequately trained in effective operation and maintenance such that the Facility
can be operated in accordance with the terms of this Agreement and the Related
Agreements in the event of a strike by or other labor problem with Operator's
normal work force;
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(5) Maintain an inventory of spare parts, Consumables and items of
equipment as Owner requires or, subject to Owner's prior approval, as Operator
determines are necessary or advisable to perform the operation and maintenance
services required hereunder, provided that (i) Operator shall surrender such
inventory to Owner upon termination of this Agreement and (ii) the cost of
maintaining such inventory shall be a Reimbursable Cost to Operator;
(6) Coordinate with Owner all deliveries and services under and monitor the
contracts with respect to Consumables, water, and Fuel; review performance under
such contracts and determine compliance therewith; and to the extent not
hereinafter undertaken by Owner, perform Owner's obligations under such
contracts;
(7) Maintain a spare parts and tools inventory control and reporting
system, which system shall include, without limitation, (i) procedures for
receiving, storing, trending the history of and cataloging spare parts and
tools, (ii) the ability to access the inventory of spare parts and tools for the
Bayonne Facility and (iii) the ability to access the inventory of spare parts
and tools for the Linden Facility; and store spare parts and tools on the Site
and at a central location in conjunction with the storage of spare parts and
tools for the Bayonne Facility and the Linden Facility in a manner reasonably
calculated to assure their continued good condition, including storage in
accordance with vendors' and manufacturers' warranty requirements and
recommendations in order to insure them against risks reasonably expected to
occur during periods of such storage. The decision as to which spare parts will
be stored on Site and which spare parts will be stored at a central location
shall be mutually agreed upon by Owner and Operator;
(8) Schedule, hire, and supervise subcontractors and vendors as may be
necessary for the performance of the services required hereunder and regularly
provide Owner with an updated list of all such subcontractors and vendors;
provided that (i) Operator shall obtain Owner's prior written approval of any
subcontractor or vendor intended to be, used for Major Overhauls, Capital
Improvements or operation of the Facility, (ii) Operator shall remain fully
liable for the management and satisfactory performance of its subcontractors and
vendors, (iii) Operator shall use reasonable efforts to ensure that all
contracts and sub-contracts, can be freely assigned to Owner or a successor
operator on termination of this Agreement, and (iv) Owner may, upon delivery of
written notice to Operator, require that a subcontractor or vendor be replaced
in the event that Owner considers that such subcontractor's or vendor's
performance has been unsatisfactory;
(9) Assist Owner in maintaining good community relations;
(10) Maintain good labor relations and, to the extent the work force at the
Facility is or becomes affiliated with labor unions, use best efforts to obtain
a no strike clause in any collective bargaining agreement and consult with and
obtain approval from
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Owner before taking any action inconsistent with any such collective bargaining
agreement;
(11) On behalf of Owner, generate, maintain and store all operating
and maintenance logs (which shall include an up-to-date record of (i) real and
reactive power production for each clock hour, (ii) Fuel consumption, (iii)
steam output, (iv) emission outputs, (v) water consumption, (vi) changes in
operating status, Scheduled Outages and Forced Outages, (vii) all OSHA
reportable and lost time accidents, and (viii) any unusual conditions found
during inspections) relating to the use, operation and maintenance of the
Facility. All such information shall be considered proprietary and confidential
information and shall not be disclosed to any third party for any reason without
the prior written consent of Owner;
(12) Maintain current revisions of all Facility drawings and
specifications, technical documents, instruction books, equipment diagrams and
other information illustrating a material, product or system relating to the
Facility;
(13) Keep accurate cost ledgers regarding the Work pursuant to the
terms of Section 15.1 hereof and in accordance with generally accepted
accounting principles, consistently applied, in such forms as shall be
reasonably required by Owner;
(14) Maintain records and provide to Owner all data and/or reports
required of Owner and/or Operator to federal, state and local agencies
(excluding any reports to be filed for federal, state and local income tax
purposes);
(15) Assist Owner in the renewal and maintenance of all licenses,
approvals and permits required in connection with the operation and maintenance
of the Facility, as modified from time to time;
(16) Collect, handle, transport and dispose of all waste and refuse
from the Site in accordance with all applicable laws, provided that Owner signs
all manifests prior to waste leaving the Site;
(17) Provide reasonable access to the Facility and all records
relating to the operation and maintenance of the Facility to all agents,
representatives and inspectors of Owner, Lender and governmental authorities;
(18) Monitor the sufficiency of the Fuel, water and backup electrical
power supplied to the Facility in terms of quality and quantity and advise Owner
of any deficiency thereof and any noncompliance of Fuel with the appropriate
specifications; work directly with suppliers of the Fuel, water and backup
electrical power to ensure adequate deliveries and likely future requirements
for the Facility; and verify invoices with respect thereto for payment by Owner;
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(19) Supply all tools, materials and services necessary or advisable
for the operation and maintenance of the Facility, including, but not limited
to, (i) all such materials, tools, equipment and services required for the day
to day operation and maintenance of the Facility and (ii) all Consumables,
including, without limitation, lubricating oils, chemicals, filters and greases
recommended by equipment manufacturers and suppliers or as required to operate,
maintain and protect the Facility;
(20) Take reasonable precautions for the safety of personnel
performing operations and maintenance services and comply with (i) all safety
rules and guidelines outlined in the Facility Data and (ii) all applicable
federal, state and local safety laws, regulations, orders, licenses, approvals,
certificates, permits, and other safety requirements (including, without
limitation, applicable requirements under OSFIA) necessary or advisable to
prevent accidents or injury to persons or damage to property on, about or
adjacent to the Site, including erecting and properly maintaining guards and
barriers as needed for the protection of workers and the public and posting
danger signs warning against any hazards on the Site; and strive to eliminate or
abate safety hazards created by or otherwise resulting from the performance of
its operations and maintenance services hereunder;
(21) Conduct, and allow Owner to participate in, the process of
interviewing, selecting and hiring individuals to fill the Key Personnel
positions and complete such process no later than the Existing O&M Agreement
Termination Date, all such individuals being subject to Owner's approval, and in
the event any such Key Personnel positions become vacated during the term of
this Agreement, Operator shall conduct, and allow Owner to participate in, the
process of interviewing, selecting and hiring replacements to fill such
vacancies, all such replacements being subject to Owner's approval. Without the
prior written approval of Owner, Operator shall not remove any individual from a
Key Personnel position prior to such individual being in such position for a
minimum of two (2) years; provided, however, if Owner notifies Operator that the
performance of an individual is unsatisfactory, then Operator shall promptly
replace such individual in accordance with the terms hereof;
(22) Participate in and provide services during the Transition Stage,
as set forth in Section 2.9 hereof;
(23) Exercise Owner's rights under subcontractor and vendor
warranties, monitor and report to Owner concerning the remaining term of all
warranties and, prior to the expiration of any such warranty, perform such
inspections as are reasonable to ensure that any final warranty work is not
required; provided, however, Operator shall not file suit to enforce any such
warranty without the prior written consent of Owner;
(24) Keep and maintain the Facility free and clear of all liens and
encumbrances resulting from performance of the Work by Operator or its
subcontractors;
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(25) Keep Owner informed of the operating status of the Facility
through daily, weekly and monthly reports, as may be agreed on from time to
time, and through ongoing written and verbal communication;
(26) Determine and recommend to Owner for approval any necessary or
advisable Capital Improvements, modifications or alterations to the Facility;
(27) Determine the need for any change, deletion or addition to the
obligations, services or duties performed by Operator pursuant to this Section
2.1 and the change in cost attributable thereto, if any, where such change,
deletion or addition is caused by a reason outside of the control of Operator,
including, without limitation, a Capital Improvement or change in Operating
Procedures. Except as provided in Section 2.6 hereof, any change, deletion or
addition to the obligations, services or duties specifically enumerated in this
Section 2.1 shall be submitted to Owner for approval, prior to implementation,
as a modification to the Approved Annual Operating Plan for the given Project
Year;
(28) Work diligently to operate and maintain the Facility in a first-
class manner and provide all other work as is reasonably necessary or advisable
to perform Operator's operations and maintenance services pursuant to this
Agreement;
(29) Maintain all insurance coverage as required to be provided by
Operator under Article X hereof;
(30) Comply with the terms and conditions of each Approved Annual
Operating Plan, this Agreement and the Related Agreements;
(31) Operate and maintain Camden Paperboard's auxiliary Boiler in
accordance with all of the terms and provisions of that certain Energy Purchase
Agreement dated December 18, 1989, by and between Owner and Camden Paperboard,
including, without limitation, Section 2.2(d) thereof;
(32) Maintain a document control system for documents critical to
Facility operation and maintenance;
(33) Without any duty of inquiry, notify Owner if Operator becomes
aware of (i) a default by any of the parties to the Related Agreements, (ii) any
breach of consents, licenses or permits which are required in connection with
operation of Facility, (iii) any occurrence which constitutes a violation of law
or (iv) the occurrence of any event of force majeure under the Related
Agreements;
(34) Be responsible for payment in respect of fines and penalties
imposed or on Owner for breaches of applicable laws, permits or licenses where
such fines penalties result from a failure by Operator to comply with Prudent
Utility Practices;
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(35) Assist and cooperate with Owner in maintaining Owner's status
"qualified business" under and complying with the New Jersey Urban Enterprise
Zones Act;
(36) As soon as reasonably practicable notify Owner and PSE&G of any
outage, whether or not such outage is scheduled; and
(37) Setup, staff, operate and maintain the Regional Office.
2.2 Compliance with Related Agreements. Operator (i) has reviewed
the Related Agreements, (ii) shall abide by all of the terms thereof applicable
to the operation and maintenance of the Facility pursuant to the terms of this
Agreement and (iii) shall not operate and maintain the Facility in a manner
which would cause Owner to be in breach of any of the terms of the Related
Agreements. Owner shall provide Operator with written notice of any changes to
such terms that may affect Operator's provision of operation and maintenance
services hereunder, and such notice, unless otherwise agreed in writing by the
parties, shall modify Operator's obligation hereunder. This Section 2.2 shall
not be deemed to make Operator a party to any or all of the Related Agreements.
2.3 QF Status. Operator shall operate and maintain the Facility so as
to maintain its status as a Qualifying Cogeneration Facility.
2.4 Annual Operating Plan. (a) Subject to the terms of the next
succeeding sentence hereof, not later than one hundred twenty (120) days prior
to the first day of each Project Year, Operator shall prepare and submit to
Owner for approval a proposed operating and maintenance plan providing
information for each month during the upcoming Project Year (the "O&M Plan").
The O&M Plan for the first Project Year shall be submitted to Owner for approval
on the date on which this Agreement is executed unless previously submitted. The
O&M Plan shall describe, in detail acceptable to Owner and on a monthly basis,
anticipated maintenance and overhaul schedules, staffing plans, equipment
acquisitions and spare parts and Consumables inventories (including a breakdown
of capital items and expense items), schedules of subcontract services, plant
performance data regarding required environmental performance, projected Fuel
usage and such other matters as Owner may reasonably require. Any actions
proposed under the O&M Plan shall be consistent with the Facility Data, the
Operating Procedures, Prudent Utility Practices, the Related Agreements and this
Agreement. Contemporaneously with the delivery of the O&M Plan, Operator shall
submit to Owner a proposed budget for operating and maintaining the Facility
during the upcoming Project Year (the "Operating Budget"), which shall include
the estimated cost, based on time and materials and all fees contemplated in
this Agreement, for all anticipated operating and maintenance services to be
provided by Operator during each month of the upcoming Project Year in the
account structure and format provided by Owner (the O&M Plan and the Operating
Budget are hereinafter sometimes together called the "Annual Operating Plan").
When approved pursuant to subparagraph (b) below, the Annual Operating Plan
shall be an "Approved Annual Operating Plan" and shall consist of an "Approved
O&M Plan" and an "Approved Operating Budget".
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(b) Owner shall give its approval or disapproval of the Annual
Operating Plan no later than thirty (30) days after receipt thereof from
Operator. If Owner objects to all or any portion of the proposed Annual
Operating Plan, Owner shall furnish its objections in writing to Operator, and
Owner and Operator shall amend such Annual Operating Plan in order to
accommodate to Owner's satisfaction those items to which Owner objects.
(c) An Approved Annual Operating Plan shall constitute authorization
for Operator to operate and maintain the Facility in accordance with such
Approved Annual Operating Plan and the terms of this Agreement, it being
recognized and agreed that Operator shall operate and maintain the Facility in a
prudent and efficient manner so as to maximize both the current performance and
the residual value of the Facility and shall endeavor to ensure that the actual
costs of operating and maintaining the Facility are as low as reasonably
practicable and in any event do not exceed the Approved Operating Budget either
in total or, to the extent reasonably practicable, in any one budgetary
category, Operator shall notify Owner as soon as reasonably possible of any
significant deviations or discrepancies between the costs and expenses actually
incurred by Operator during each Project Year and the costs and expenses
projected to be incurred by Operator as set forth in the Approved Operating
Budget for each such Project Year.
(d) In the event Operator desires to request an adjustment to an
Approved Annual Operating Plan at any time during the Project Year, Operator
shall submit a proposed revised Annual Operating Plan for Owner's consideration,
which Owner shall approve or disapprove within fifteen (15) days after
submission thereof. If the proposed revised Annual Operating Plan is disapproved
by Owner within such fifteen (15) day period, Owner shall furnish Operator with
the reasons for such disapproval and shall immediately begin discussions with
Operator in an effort to reach a mutually agreeable revised Annual Operating
Plan. Upon such agreement, Operator shall revise the Annual Operating Plan with
respect thereto. Until the revised Annual Operating Plan is approved in writing
by Owner, Operator shall not, except in an emergency as described in Section 2.6
hereof, act outside of the Approved Annual Operating Plan for such Project Year
without the prior written consent of Owner. Once approved, Operator's authority
as to the revised, or any additionally revised, Annual Operating Plan shall be
the same as that authorized for the original Approved Annual Operating Plan.
2.5 Monthly Summary. Within two (2) business days after the end of
each calendar month of each Project Year, Operator shall submit to Owner, in a
form reasonably acceptable to Owner, a preliminary report containing operating
data, meter readings, and other billing documentation for such month sufficient
to generate monthly invoices for the sale of Net Electrical Power Output and
steam produced at the Facility. In addition, within ten (10) days after the end
of each month of each Project Year, Operator shall submit to Owner, in a form
similar to Exhibit A attached hereto and made a part hereof for all purposes and
otherwise acceptable to Owner, a monthly operating report summarizing in
reasonable detail all areas of operation and maintenance and all activities
performed by Operator during such month. Operator shall submit the proposed
forms of such reports to Owner for approval on or before thirty (30) days after
the date on which this Agreement is executed.
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2.6 Emergencies. Immediately upon the occurrence or imminent
likelihood of an accident or emergency involving the Facility or adjoining
property and endangering the safety of any person or property, or materially
adversely affecting the performance of the Facility or the Facility's compliance
with applicable law, Operator shall, after consultation with the Plant Manager
if the circumstances allow, and without the necessity of obtaining any other
approvals which might otherwise be required hereunder and exercising reasonable
care without special instruction or authorization from Owner, take any
reasonable and necessary or advisable action deemed by Operator to be reasonably
necessary or advisable under the circumstances to prevent, avoid or mitigate
injury, damage or loss to persons or property or to avoid penalties, fines or
damages under applicable law. Operator shall notify Owner thereof as soon as
practicable.
2.7 Inspections.
(a) In addition to its daily activities associated with the operation
and maintenance of the Facility, Operator shall conduct inspections of the
Facility at regular intervals, as required by vendors' or manufacturers,
recommendations and prudent Utility Practices. Within ten (10) days after the
Execution Date for the first (lst) Project year and no later than one hundred
twenty (120) days prior to each Project Year thereafter, Operator shall submit
to Owner for approval Operator's proposed inspection schedule (which inspection
schedule shall be included as part of each O&M Plan to be submitted to Owner)
and shall incorporate into the proposed inspection schedule any reasonable
amendments proposed by Owner. Any inspection conducted pursuant to this Section
2.7 shall be conducted in such a manner so as to minimize the impact on the
production of electricity and steam from the Facility.
(b) During such inspections, Operator shall make any necessary
decisions and promptly perform all Work as may be necessary to effect (after
Owner's approval, if necessary) the maintenance, repair or replacement of any
part of the Facility the necessity of which becomes apparent during such
inspection.
(c) Within twenty (20) business days after (i) each inspection and
(ii) the completion of any maintenance or repair work performed after such an
inspection, Operator shall prepare and deliver to owner a report of the results
of such inspection or any Work completed after such inspection, as the case may
be, containing a summary of Operator's observations and recommendations relating
thereto. Operator shall arrange for its personnel to attend any meetings or
conferences with Owner's personnel as Owner may from time to time request to
review the results of Operator's inspections and maintenance work.
(d) Operator shall cooperate in connection with inspections of the
Facility by Owner, the Plant Manager, Lender and any other designees of Owner.
Such inspections may occur at any time, provided that they do not unreasonably
interfere with the performance of Operator's obligations hereunder, and further
provided that if Owner or Owner's designated representative desires to conduct
any such inspection after normal business hours, Owner shall give Operator
reasonable note thereof. Operator agrees to correct, in accordance with the
terms
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of Section 7.2 hereof, any failure to comply with the obligations and standards
set forth in this Agreement for the operation and maintenance of the Facility.
2.8 Operating Procedures and Training.
(a) Owner and Operator shall use due diligence to obtain from any
Equipment vendor or manufacturer all instruction manuals and spare parts lists
not timely submitted by such Equipment vendor or manufacturer, it being
understood that Owner shall coordinate this effort with Operator's assistance
and Owner may pursue all appropriate rights and remedies available to Owner
under any equipment supply agreements. To the extent any supplementary materials
are required for Operator training that are not provided by Equipment vendors or
manufacturers, Operator shall provide such materials, at Operator's sole cost
and expense, except where such supplementary materials are required in
connection with a Reimbursable Cost. Operator shall review the operating
procedures in effect at the Facility as of the Execution Date (the "Operating
Procedures") and shall prepare and submit to Owner a complete set of revisions
to the Operating Procedures sufficient to ensure the continued safe and
efficient operation and maintenance of the Facility in accordance with vendors'
and manufacturers' warranty requirements and recommendations, Prudent Utility
Practices, the Related Agreements and this Agreement. The Operating Procedures
shall, among other things, include Facility specific preventive and predictive
maintenance procedures integrating (i) vendor and manufacturer recommendations
and warranty requirements, (ii) requirements of the Related Agreements, (iii)
Operator's experience, (iv) adequate safety and fire prevention, response and
reporting measures and procedures, (v) adequate security measures and
procedures, and (vi) the monitoring of the performance of the Facility. In
addition, the Operating Procedures shall include, without limitation, (i)
employee manuals outlining proper employee conduct and general expectations,
rules and procedures, (ii) safety manuals, (iii) emergency preparedness and
response manuals, and (iv) environmental compliance manuals. Within twenty (20)
days of Owner's receipt thereof, Owner shall review revisions to the Operating
Procedures, provide reasonable written comments and suggestions, and Operator
shall duly consider such comments and suggestions in revising the Operating
Procedures. Owner's review and approval of the Operating Procedures shall not
relieve Operator of its obligation to operate and maintain the Facility in
accordance with this Agreement. Operator shall, as often as necessary but not
less often than annually, review and, if necessary, revise and update the
Operating Procedures, but shall not implement any amendments thereto without
Owner's prior written consent.
(b) Operator shall provide training materials, instructional personnel
and management Oversight as necessary to develop and implement a comprehensive
training program for operation of the Facility (including the auxiliary Boiler
located in Camden Paperboard's plant). Operator shall ensure that its personnel
are fully trained and qualified to operate and maintain the Facility in
accordance with vendors' and manufacturers' warranty requirements and
recommendations, Prudent Utility Practices, the Related Agreements and this
Agreement.
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2.9 Transition Stage.
(a) As the Existing O&M Agreement Termination Date approaches, an
orderly transition from North American to Operator must occur. Operator shall
participate in orderly process of transition from the operation and maintenance
of the Facility by North American to the operation and maintenance of the
Facility by Operator (the "Transition Stage"). For purposes of this Agreement,
the Transition Stage shall have commenced as of the Execution Date. During the
Transition Stage, Operator shall cooperate and coordinate with North American
and shall report to and be subject to the authority of Owner.
(b) During the Transition Stage, Operator shall (i) plan and prepare
for hiring of the personnel necessary for the operation and maintenance of the
Facility, (ii) establish the Annual Operating Plan for use during the first
(1st) Project Year and obtain approval of Owner thereof, (iii) establish the
inspection schedule for the Facility (which inspection schedule shall be
included as part of the first (lst) Annual Operating Plan and shall be the same
for the first Project Year as the inspection schedule established for such
period of time pursuant to the terms of the Existing O&M Agreement unless Owner
or Operator recommends a change to such inspection schedule) and obtain approval
of Owner thereon, (iv) prepare a detailed monthly report format as described in
Section 2.5 hereof and obtain approval of Owner thereon, and (v) set up and
staff the Regional Office.
(q) At such time as Owner has given written notice to Operator to
commence Transition Stage operations, Operator shall make available, on a phase-
in, basis, sufficient personnel experienced in the operation and maintenance of
cogeneration facilities such as the Facility. In addition, Operator shall
perform all such duties and obligations otherwise set forth in this Agreement to
the extent that such duties and obligations are not inconsistent with its
transition role.
(d) Using a format similar to that described in Section 2.4 hereof for
the development of the Annual Operating Plan, Operator shall prepare and submit
to Owner a "Transition Stage Operating Plan," comprised of the "Transition Stage
Plan" and the "Transition Stage Operating Budget." The Transition Stage
Operating Plan shall include expenditures and activities to occur during the
Transition Stage as described in this Section 2.9, and shall be submitted to
Owner for its review and comment on the Execution Date. If Owner objects to all
or any portion of the proposed Transition Stage Operating Plan, Owner shall
promptly furnish its objections to Operator, and Owner and Operator shall work
diligently to resolve such objections.
(e) During the Transition Stage, Operator shall review and report to
the Owner on the status of, and where appropriate, make written recommendations
to Owner with respect to (i) operation and maintenance facilities, tools,
equipment, supplies and spare parts inventories, (ii) reporting, accounting,
Maintenance management and communication systems necessary for Operator to
operate and maintain the Facility in accordance with the terms of this
Agreement, (iii) security and safety systems and plans, including any necessary
or desirable special clothing or safety gear for operations and maintenance
personnel, and (iv) such other facilities and systems
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as shall be necessary or desirable to operate and maintain the Facility and to
fulfill Operator's ongoing responsibilities under this Agreement.
(f) Upon the Existing O&M Agreement Termination Date, care, custody and
control of the Facility will pass from North American to Owner under the terms
of the Existing O&M Agreement and from Owner to Operator under the term of this
Agreement and the Transition Stage shall end. Operator shall thereafter operate
and maintain the Facility in accordance with this Agreement and provide any and
all technical and engineering support required for the safe and efficient
operation and maintenance of the Facility.
(g) During the Transition stage, operator or its authorized
representative shall, if reasonably requested by owner, attend any and all
review meetings between North American and Owner. Operator shall, if reasonably
requested by Owner, review and comment upon plans, specifications, documents, or
other data generated by North American.
2.10 Limited Authority. Operator shall not have any authority to (i)
negotiate any change to the tariff under the Power Purchase Agreement, (ii)
settle or compromise claims on behalf of Owner under any Related Agreement,
(iii) agree to any amendments to, or waivers, consents or approvals in
connection with, any Related Agreement, (iv) serve any notice of a breach under
any of the Related Agreements, or (v) transfer, dispose of, lease or create any
encumbrance on any assets of Owner.
III.
RESPONSIBILITIES OF OWNER
3.1 Services, Operation, Obligations. Except as otherwise provided in
Section 3.1(3) hereof, Operator shall have no obligation to provide any of the
following services or perform any of the following work, which services and work
shall be provided and performed by Owner:
(i) Arrange for a supply of Fuel and water, at no cost to Operator, in
such quantities as are necessary for the performance by Operator of the Work;
(2) Provide for the sale of steam and electricity generated by the
Facility and for the billing and collection of revenues therefrom;
(3) Obtain or cause to be obtained all governmental licenses, permits
and approvals necessary to operate the Facility, including environmental
licenses, permits and approvals; provided, however, that Operator shall (i)
provide to Owner such technical and other assistance as is required from time to
time to obtain licenses, permits or approvals or renewals or extensions thereof
and (ii) keep such records and provide such reports to appropriate governmental
agencies as may be required of Owner or operator by any such licenses, permits
and approvals;
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(4) Designate and advise Operator of the Plant Manager (who shall act
and be designated as Owner's authorized representative);
(5) Provide and grant to Operator full access to the Facility and such
portions of the Site as are necessary to allow Operator to perform the Work;
(6) Arrange for start-up power and back-up power in such quantities as
is necessary for the performance by Operator of the Work;
(7) Pay all applicable federal, state and local taxes (except for sales
taxes which are the responsibility of Operator) attributable to the Facility and
the sale of steam and electricity therefrom, including the preparation of all
tax returns and reports to be filed for federal, state and local income tax
purposes; and
(8) Maintain all insurance coverage as required to be provided by Owner
under Article X hereof.
3.2 Owner shall compensate Operator for the Work performed hereunder
pursuant to the terms of Articles IV, V and VI hereof.
3.3 Right to Perform Upon Operator's Default. If at any time Operator
fails to perform any obligation hereunder and such failure is likely to cause
injury to any person or damage to the Facility, to exceed or breach the terms or
conditions of any permit or easement, or to breach the term of any Related
Agreement, Owner, in addition to all other rights and remedies it has under this
Agreement, may, but shall have no duty to, perform or have performed by a third
party any such obligation not performed by Operator. Such performance by Owner
shall reduce any compensation payable to Operator hereunder during the
Transition Stage or in any Project Year by an amount equal to the cost to Owner
of effecting such performance.
IV.
OPERATING COSTS AND EXPENSES
4.1 Procedure for Incurring Costs. Owner, and not Operator, shall be
ultimately liable for all Reimbursable Costs and Direct Costs expended hereunder
in connection with the Facility and Operator shall receive payment for
Reimbursable Costs in accordance with the terms of Sections 5.2 and 5.4 hereof.
Operator shall submit a written requisition to Owner for any single item
requiring an expenditure in excess of Five Thousand and 00/100 Dollars
($5,000.00) or as otherwise may be required by Owner, and after receipt of
written approval from Owner, but not before, Operator shall be authorized to
prepare Operator's purchase order for such item. Operator shall (i) verify the
receipt at the Site of all materials and services to be delivered to the
Facility covered by Owner's and Operator's purchase orders, (ii) verify the
accuracy of vendors' invoices in connection therewith, and (iii) forward
invoices for Direct Costs to Owner for approval, processing, and payment by
Owner in accordance with the terms of Section 4.2 hereof.
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4.2 Procedure for Payment of Direct Costs. Operator shall
periodically, but not more often than once a week, deliver to Owner invoices
received by Operator from third parties for all Direct Costs, accompanied by a
summary of all such invoices which itemizes all, such invoices by operating cost
account number. Such invoices shall also be accompanied by a statement from
Operator confirming that all such invoices are accurate, due and payable,
together with all relevant documentation reasonably necessary for Owner to
verify the accuracy thereof. Each invoice submitted to Owner shall be paid by
Owner directly to the payee of such invoice on or before the date such invoice
is due, provided that if Owner disputes any amount set forth in any such
invoice, Owner shall pay the undisputed portion on or before such due date, and
Owner, Operator and such payee shall attempt in good faith to resolve all
disputed items as soon as reasonably practicable.
4.3 Limitation on Ability to Incur Direct Costs. Operator shall
prepare Operator's purchase order for costs and expenses incurred in connection
with the operation and maintenance of Facility during each month of a Project
Year pursuant to the terms hereof, to the extent and only to the extent such
costs and expenses:
(i) are included within the Approved Operating Budget, and any
approved revision thereof, for the applicable Project Year;
(ii) are incurred in connection with the performance of any
Unscheduled Maintenance, Special Improvements or Capital Improvements as
approved in writing by Owner;
(iii) are incurred in connection with an emergency under Section 2.6
hereof; or
(iv) are otherwise approved by Owner in writing.
4.4 Payment for Special Improvements. The actual cost of any
alterations, modifications, improvements or additions to the Facility Which are
required by any governmental or regulatory agency or are otherwise required to
comply with applicable laws, regulations or requirements ("Special
Improvements") shall be the sole responsibility of Owner. If any such costs are
necessary or advisable and become known to operator, operator shall promptly so
inform Owner who shall promptly determine the most feasible manner in which to
pay for such costs. Operator shall not be authorized to incur any expenditure in
relation to any special Improvements without the prior written consent of Owner.
4.5 Unscheduled Maintenance. The actual cost of Unscheduled
Maintenance shall be the sole responsibility of Owner. Operator shall not incur
any expenditure in relation to any Unscheduled Maintenance without the prior
written consent of Owner, except in the event of an emergency as described in
Section 2.6 hereof.
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4.6 Payment for Major Overhauls. The actual cost of Major Overhauls
shall be the sole responsibility of Owner. Operator shall not incur any
expenditure in relation to any Major Overhauls without the prior written consent
of Owner.
4.7 Payment for Capital Improvements. The actual cost of Capital
Improvements shall be the sole responsibility of Owner. Operator shall not incur
any expenditure in relation to any Capital Improvements without the prior
written consent of Owner.
4.8 GE Equipment. Owner agrees to purchase from Operator, and Operator
agrees to sell to Owner, (i) all Parts that Owner desires to purchase during the
term of this Agreement for GE Equipment, at a discount of thirty-five percent
(35%) less than the Published Price for such Parts (the "Parts Discount"), (ii)
all Services that Owner desires to purchase during the term of this Agreement
for GE Equipment, at a discount of fifteen percent (15%) less than the
Published Price for such Services (the "Services Discount") and (iii) all
Repairs that Owner desires to purchase during the term of this Agreement for GE
Equipment, at a discount of fifteen percent (15%) less than the Published Price
for such Repairs. The parties anticipate that, over the term of this Agreement,
Operator will sell to Owner, and Owner will purchase from Operator, Parts and
Services for GE Equipment based on the schedule set forth on Exhibit F attached
hereto and made a part hereof for all purposes, which Parts and Services have
an estimated value of approximately Ten Million and 00/100 Dollars
($10,000,000.00) based on current prices and including the Parts Discount and
Services Discount. The foregoing provisions of this Section 4.8 are expressly
made subject to the following:
(a) the foregoing shall not be construed as an obligation by Owner to
purchase from Operator any Parts, Services and/or Repairs for GE Equipment
during the term of this Agreement, but is only an obligation by Owner that if
Owner does, in fact purchase any Parts, Services and/or Repairs for GE Equipment
during the term of this Agreement, then Owner shall purchase such Parts,
Services and/or Repairs for GE Equipment from Operator;
(b) the decision whether to purchase Parts, Services and/or Repairs for
GE Equipment and the timing of any such purchases shall be made by Owner in
Owner's sole and absolute discretion;
(c) if at any time Operator is unable to provide Parts, Services and/or
Repairs for GE Equipment in a timely or cost effective manner, then Owner shall
have the right to obtain such Parts, Services and/or Repairs that Operator is
unable to provide in a timely or cost effective manner from alternate sources;
(d) Owner shall evaluate Operator on its performance in managing each
Forced Outage and Scheduled Outage in a cost effective and time efficient
manner, and, subject to Owner's sole and complete discretion, refund to Operator
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up to fifty percent (50%) of the Services Discount attributable to the
Services performed during such outage; and
(e) upon the expiration or other termination of this Agreement, Owner
shall have no further obligation to purchase from Operator, and Operator shall
have no further obligation to sell to Owner, Parts, Services and/or Repairs for
GE Equipment.
Owner shall have the right to have a financial audit of Operator's
books, accounts and records conducted by a third party selected by Owner which
is reasonably acceptable to Operator for the sole purpose of verifying the
accuracy of the Published Prices, including, without limitation, the right to
audit such books, accounts and records to determine the prices and rates for
Parts, Services and/or Repairs for GE Equipment paid by Operator's and its
Affiliates' other customers; provided, however, the results of such audit and
the books, accounts and records reviewed in connection therewith shall be deemed
to be Operator Confidential Information. If such audit reveals errors in the
calculation of any amounts paid by Owner, Operator shall promptly reimburse
Owner for any amounts improperly paid by Owner. Furthermore, if such audit
reveals errors of more than two percent (2%) in the calculation of the Published
Prices, then Operator shall pay to Owner the cost of the audit,
4.9 Wage Increases in Excess of CPI. In the event that Operator finds
it necessary to increase salaries and/or wages, then, without the prior written
consent of Owner, Operator shall not increase the Effective Hourly Rate from one
Project Year to the next Project Year by an amount which exceeds the percentage
increase in the Base Index from the beginning of such Project Year to the
beginning of such next Project Year; provided, however, there shall be no
obligation on behalf of Owner to approve any such increase in salaries and/or
wages.
V.
PAYMENTS TO OPERATOR
5.1 O&M Fees. As compensation for the performance of the Work by
Operator, Owner shall pay to Operator an operations and maintenance fee in the
amount of Fifteen Thousand Six Hundred Twenty-Five and 00/100 Dollars
($15,625.00) per month (the "O&M Fee"), beginning with the thirteenth (13th)
full calendar month after the month in which the Existing O&M Agreement
Termination Date occurs and continuing for each month thereafter throughout the
term of this Agreement. The O&M Fee shall be payable monthly, in arrears, with
the first such payment being due and payable on the last business day of the
thirteenth (13th full calendar month after the month in which the Existing O&M
Agreement Termination Date occurs, and with a like payment on the last business
day of each month thereafter throughout the term of this Agreement. If the last
day of the term of this Agreement does not fall on the last day of a month, the
O&M Fee for such partial month shall be prorated. If during the term of this
Agreement conditions or circumstances change from those in effect on the
Existing O&M Agreement Termination Date such that there is either a material
increase or decrease in the responsibilities and obligations of Operator
hereunder from those responsibilities and obligations of Operator as
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of the Existing O&M Agreement Termination Date, then Owner and Operator shall
meet and negotiate an equitable adjustment to the O&M Fee.
5.2 Reimbursable Costs. To the extent not paid by Owner as Direct
Costs pursuant to Article IV hereof, Owner shall reimburse Operator for those
costs and expenses actually incurred by Operator in connection with the
operation and maintenance of the Facility during each month of a Project Year or
during the Transition Stage pursuant to the terms hereof, to the extent and only
to the extent such costs and expenses (collectively, the "Reimbursable
Costs") are:
(i) included within the approved Transition Operating Budget and any
approved revision thereof;
(ii) included within the Approved Operating Budget, and any approved
revision thereof, for the applicable Project Year;
(iii) incurred in connection with the performance of any Unscheduled
Maintenance as approved in writing by Owner;
(iv) incurred in connection with an emergency under Section 2.6
hereof;
(v) subject to the limitations set forth in Section 4.9 hereof, the
actual salaries, straight time hourly wages and overtime hourly wages (including
vacation and holiday pay for hourly personnel) for all Operator Personnel
(whether employed directly by Operator or through a contractor) to the extent
pertaining to the Work, plus (a) the actual cost of associated payroll taxes,
unemployment and disability insurance, worker's compensation, fringe benefits
and other statutory compensation for all such Operator Personnel to the extent
pertaining to the Work and (b) five percent (5%) of the W-2 Wages for all such
Operator Personnel to the extent pertaining to the Work ((a) and (b) above
collectively referred to herein as "Operator Personnel Overhead"); provided,
however, the amount of Operator Personnel Overhead, other than such Overhead
that is required by law, that is allowed to be included in Reimbursable Costs
shall be limited to (x) twenty-three and 05/100 percent (23.05%) of the W-2
Wages for all such Operator Personnel per Project Year during each of the first
(1st) through fifth (5th) Project Years and (v) twenty-four and 05/100 percent
(24.05%) of the W-2 Wages for all such Operator Personnel per Project Year
during each of the sixth (6th) through twelfth (12th) Project Years;
(vi) (a) subject to the limitations set forth in Section 4.9 hereof,
the actual salaries for all GE O&M Personnel to the extent pertaining to the
Work, plus (b) thirty-six percent (36%) of the W-2 Wages for all such GE O&M
Personnel to the extent pertaining to the Work (the "Overhead Percentage
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Rate") to offset Operator's actual cost of associated payroll taxes,
unemployment and disability insurance, worker's compensation, fringe benefits
and other statutory compensation for all such GE O&M Personnel to the extent
pertaining to the Work (such actual cost collectively referred to herein as "GE
O&M Personnel Overhead"), whether such actual costs are more or less than such
percentage; provided, however, if the amount of GE O&M Personnel Overhead that
is required by law increases or decreases over that in effect as of the Existing
O&M Agreement Termination Date, then the Overhead Percentage Rate shall be
increased or decreased, as the case may be, to the extent of any such increase
or decrease in GE O&M Personnel Overhead that is required by law; or
(vii) otherwise approved by Owner in writing.
Subject to the limitations imposed in the immediately preceding
paragraph, the term Reimbursable Costs shall include, but not be limited to, the
following costs incurred by Operator in its performance of the Work:
(viii) the actual delivered cost of supplies, Consumables, spare parts
and/or replacement components and all other items Operator is required to
provide and does provide for the Facility under this Agreement;
(ix) special training costs conducted off-site or by non-Operator
personnel, as approved in advance and in writing by Owner;
(x) community and labor relations costs provided by non-Operator
personnel, as approved in advance and in writing by Owner;
(xi) relocation and recruitment costs of salaried employees and
recruitment costs (but not relocation costs) of non-salaried employees;
(xii) the actual costs of suppliers, subcontractors, attorneys,
certified accountants and other third party advisors, as approved in advance and
in writing by Owner;
(xiii) upon Owner's request and subject to Owner's prior written
approval, the cost of services (other than the Work) at mutually agreed upon
prices, terms and conditions;
(xiv) the actual delivered cost for the purchase of certain materials
such as tools, office equipment and office supplies; and
(xv) a fraction of the actual costs incurred by Operator to staff,
operate and maintain the Regional Office, the numerator of which fraction is the
total
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of all costs and expenses set forth in the Camden Approved Operating Budget for
the Project Year in question and the denominator of which fraction is the total
of all costs and expenses set forth in the Camden Approved Operating Budget, the
Bayonne Approved Operating Budget and the Linden Approved Operating Budget for
such Project Year.
Unless Owner shall otherwise agree in writing, or unless otherwise
included in the approved Transition Stage Operating Budget or an Approved
Operating Budget, the term Reimbursable Costs shall not include and Operator
shall not be entitled to reimbursement for:
(xvi) salaries or other compensation of Operator's officers,
executives, general managers, estimators, auditors, attorneys, labor
consultants, risk managers, accountants, purchasing and contracting agents and
other employees at Operator's principal office and branch offices, except
employees of Operator at the Facility and the Regional Office;
(xvii) expenses of Operator's principal and branch offices other than
the field office at the Facility and the Regional Office;
(xviii) any of Operator's general and administrative expenses of any
kind;
(xix) all costs of insurance paid by Operator and payments for
deductibles or self insured retentions associated with such insurance;
(xx) all costs and expenses incurred in connection with any
engineering services provided by Operator in connection with the performance of
the Work (e.g., maintaining Facility drawings, specifications and technical
documents up-to-date) to the extent performed by Operator's employees other than
the Operator Personnel or the GE O&M Personnel;
(xxi) all costs and expenses incurred in connection with the
preparation of all reports required to be made by Operator pursuant to the terms
of this Agreement to the extent performed by Operator's employees other than the
Operator Personnel or the GE O&M Personnel; and
(xxii) all employee bonuses paid by Operator to the Operator Personnel
and the GE O&M Personnel pursuant to Section 6.8 hereof.
5.3 CPI Adjustment. The O&M Fee and the Annual Fee Adjustment Amount
(together, the "CPI Adjusted Payments") shall be adjusted on the first day of
each Project Year (except the first Project Year) throughout the term of this
Agreement and any extensions hereof.
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On each such date each of the CPI Adjusted Payments shall be adjusted to a new
CPI Adjusted Payment calculated in accordance with the following equation:
New CPI Adjusted Payment = (Applicable Adjustment Amount)
multiplied by (A/B)
"Applicable Adjustment Amount" equals the original dollar amount set
forth in this Agreement for a given CPI Adjusted Payment.
"A" equals the average of the Consumer Price Index for all urban
consumers for the New York/New Jersey area (1982-84 = 100), published by the
Bureau of Labor Statistics, United States Department of Labor (the "Base Index")
for the last three full calendar months prior to the commencement of the Project
Year for which the new CPI Adjusted Payments are to be computed.
"B" equals the Base Index for the last calendar month prior to the
month in which the Existing O&M Agreement Termination Date occurs.
5.4 Procedure for Payment of Reimbursable Costs. On or before the
tenth (10th) day of each month commencing after the Existing O&M Agreement
Termination Date, Operator shall render an invoice to Owner for all Reimbursable
Costs, if any, paid by Operator during the preceding month. Such invoices shall
be accompanied by a certificate from Operator confirming that all such
Reimbursable Costs have been paid, together with all relevant documentation
necessary for Owner to verify the accuracy thereof, including all relevant
invoices for Consumables, spare parts and replacement components and labor costs
and benefits computations incurred by Operator for the relevant staff and
specialists. Each invoice submitted to Owner shall be paid by Owner by wire
transfer not later than the tenth (10th) day of the next calendar month after
the month in which such invoice was received, but in no event shall Owner be
required to pay an invoice earlier than thirty (30) days after receipt of such
invoice provided dig if Owner disputes any amount set forth in any such invoice,
(i) Owner shall promptly notify Operator of such dispute, (ii) Owner shall pay
the undisputed portion to Operator within said period and (iii) Owner and
Operator shall attempt in good faith to resolve all disputed items as soon as
reasonably practicable.
5.5 Late Payments. All payments that are past due and are not
disputed, or disputed and subsequently demonstrated to be payable to Operator,
shall accrue interest from the date such payments are due until such payments
are made at a per annum rate equal to the Default Rate.
VI.
FACILITY PERFORMANCE, LIQUIDATED DAMAGES AND BONUS
6.1 Annual Fee Adjustment Amount. To provide incentive for Operator to
operate and maintain the Facility in such a way so as to maximize profitability
and efficiency of
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operation, achieve target operating levels of performance, and protect the
overall life and viability of the Facility, the O&M Fee earned by Operator shall
be subject to an annual adjustment. The amount of such adjustment (the "Annual
Fee Adjustment Amount" or "AFAA") shall be the sum of bonuses earned by and/or
liquidated damages assessed against Operator in each of six (6) separate
categories of evaluation. The six (6) categories of evaluation are:
(i) Power Generation,
(ii) Change in Rated Capacity,
(iii) Steam Delivery,
(iv) Net Plant Heat Rate,
(v) O&M costs, and
(vi) Subjective Factors.
In each category the maximum bonus or liquidated damage will be
limited to a specific dollar amount. The AFAA shall be the sum of the bonuses
earned and liquidated damages assessed in each individual category and in any
Project Year shall never exceed One Hundred Twenty-Five Thousand and 00/100
Dollars ($125,000.00), plus or minus, as the case may be.
(a) Power Generation. The maximum bonus or liquidated damages capable
of being earned by or assessed against Operator in the Power Generation category
of the AFAA in any Project Year shall be Twenty-Five Thousand and 00/100 Dollars
($25,000.00). To determine the amount of bonus or liquidated damages
attributable to such category, a calculation will be made to determine the Power
Generation Factor (as defined herein below) for a Project Year. Subject to the
Twenty-Five Thousand and 00/100 Dollars ($25,000.00) limitation, if the Power
Generation Factor is greater than or equal to ninety-five percent (95%),
Operator shall be entitled to a bonus under the Power Generation category of the
AFAA calculated in accordance with the following formula:
Bonus = $12,500 + [(PGF - .95) x $416,667]
For a given Project Year, if the Power Generation Factor is less than
ninety-five percent (95%), but not less than ninety-two and one-half percent
(92.50%), the AFAA for the Power Generation category for such Project Year
shall be zero. Subject to the Twenty-Five Thousand and 00/100 Dollars
($25,000.00) limitation, if the Power Generation Factor is less than ninety-two
and one-half percent (92.50%), Operator shall be assessed liquidated damages
under the Power Generation category of the AFAA calculated in accordance with
the following formula:
Liquidated Damages = $12,500 + [(.925 - PGF) X $416,667)]
For purposes of the foregoing calculations, the following definitions
shall apply:
"Actual kWh" shall be equal to the Net Electrical Power Output
actually generated by the Facility in a Project Year.
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"FM kWh" shall be equal to the sum of the product, if any, for each
calendar month during a given Project Year, of (i) the applicable Plant Capacity
for a given calendar month for that portion of the Facility that, as a result of
Force Majeure, either is unable to generate electricity or, generates
electricity at a reduced capacity multiplied by (ii) the number of hours in such
calendar month that the Facility was affected by such event of Force Majeure.
Notwithstanding anything stated herein to the contrary, for purposes of
determining bonus, the FM kWh shall be expressly limited to that portion of the
FM kWh for which Owner actually received credit from PSE&G pursuant to Article
IV, Section F, Paragraph 3 of the Power Purchase Agreement.
"Power Generation Factor ("PGF")" shall be equal to the quotient of
(i) the sum of the Actual kWh and the FM kWh for a Project Year (the
"Numerator") divided by (ii) the sum of the product, for each calendar month
during such Project Year, of (x) the applicable Plant Capacity for a given
calendar month multiplied by (y) the number of hours in such calendar month (the
"Denominator"); provided, however, that the Denominator shall be reduced by the
sum total of, for each major inspection (such major inspections being
recommended by the original equipment manufacturer's turbine maintenance
procedures to be performed approximately every 24,000 and 48,000 operating
hours) (a "Major Inspection") performed in such Project Year, the product of the
applicable Plant Capacity for the calendar month in which the Major Inspection
occurs for that portion of the Facility that, as a result of a Major Inspection,
either is unable to generate electricity or generates electricity at a reduced
capacity multiplied by the actual number of hours in excess of one hundred
twenty (120) hours that the Facility was affected by such Major Inspection. The
Power Generation Factor shall be expressed as a decimal, rounded to the nearest
one-thousandth.
"Plant Capacity", for a given calendar month, shall mean the ambient
temperature and steam export adjusted output of the Facility, expressed in
kilowatts, based upon gas turbine output curves provided by the gas turbine
manufacturer.
(b) Change in Rated Capacity. The maximum bonus or liquidated damages
capable of being earned by or assessed against Operator in the Change in Rated
Capacity category of the AFAA in any Project Year shall be Twelve Thousand Five
Hundred and 00/100 Dollars ($12,500.00). As incentive to attain the level of
Rated Capacity required by Owner, Operator shall be entitled to receive a bonus
or, alternatively, be assessed liquidated damages in the Change in Rated
Capacity category of the AFAA based on the results of the semi-annual PJM Net
Capability Verification Test compared with the results of the semi-annual PJM
Net Capability Verification Test conducted during the corresponding period in
the immediately preceding Project Year (the "Target Rated Capacity"); provided,
however, if either Owner or Operator desires not to use the results of the semi-
annual PJM Net Capability Verification Test conducted during the corresponding
period in the immediately preceding Project Year as the Target Rated Capacity,
then the Target Rated Capacity shall be mutually agreed to by Owner and
Operator, but, if Owner and Operator can not agree prior to the running of such
test, then the Target Rated Capacity for such test shall be the Rated Capacity
as demonstrated by the semi-annual PJM Net Capability
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Verification Test conducted during the corresponding period in the immediately
preceding Project Year. By no later than forty-five (45) days prior to each
semi-annual PJM Net Capability Verification Test, Operator shall prepare and
submit for Owner's approval a plan for such PJM Net Capability verification Test
(the "Test Plan") which shall clearly identify the measures to be taken by
operator to meet the Target Rated Capacity. The Test Plan shall be subject to
Owner approval, provided, however, in the event that Owner objects to all or any
portion of the Test Plan, Owner shall notify Operator in writing and Owner and
Operator shall promptly meet to resolve any differences in order to establish an
approved Test Plan by no later than twenty (20) days prior to the annual PJM Net
Capability Verification Test.
For each PJM Net Capability Verification Test conducted during a
Project Year, Operator shall be entitled to receive a bonus of Six Thousand Two
Hundred Fifty and 00/100 Dollars ($6,250.00) in the Change in Rated Capacity
category of the AFAA if the Rated Capacity, as demonstrated by such PJM Net
Capability Verification Test, is greater than or equal to one hundred one
percent (101%) of the Target Rated Capacity for such PJM Net Capability
Verification Test. Operator shall be assessed liquidated damages of Six Thousand
Two Hundred Fifty and 00/100 Dollars ($6,250.00) in the Change in Rated Capacity
category of the AFAA if the Rated Capacity, as demonstrated by such PJM Net
Capability Verification Test, is less than ninety-nine percent (99%) of the
Target Rated Capacity for such PJM Net Capability Verification Test. In the
event the Rated Capacity, as demonstrated by such PJM Net Capability
Verification Test is greater than ninety-nine percent (99%) of the Target Rated
Capacity for such PJM Net Capability Verification Test, but less than one
hundred one percent (101%) of the Target Rated Capacity for such PJM Net
Capability Verification Test, Owner may, in Owner's sole discretion, pay
Operator a bonus in the Change in Rated Capacity category of the AFAA of up to
Six Thousand Two Hundred Fifty and 00/100 Dollars ($6,250.00).
If an event of Force Majeure prevents or disrupts the running of a
scheduled PJM Net Capability Verification Test, Operator shall neither be
assessed liquidated damages nor receive a bonus under such test. The sole effect
of Force Majeure under this Section 6.1(b) shall be to cause a rescheduling of
such PJM Net Capability Verification Test. After conducting four (4) PJM Net
Capability Verification Tests, and paying bonuses and/or liquidated damages in
accordance with this Section 6.l(b), in the first two (2) Project Years, Owner
and Operator shall meet and, in consideration of actual Facility operation,
actual PJM Net Capability Verification Test results and the amounts of bonuses
paid and/or liquidated damages assessed, reevaluate the method used in
determining the Change in Rated Capacity category of the AFAA.
For purposes of this Section 6.1(b), the following definitions shall
apply:
"Rated Capacity" shall mean the capacity of the Facility, expressed in
kilowatts, as determined by a PJM Net Capability Verification Test.
"PJM Net Capability Verification Test" shall mean a semi-annual test
conducted, in accordance with the Test Plan, to determine the Rated Capacity of
the Facility. Each PJM Net Capability Verification Test shall be conducted on
the date determined by Owner,
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but no later than June 30th for the first such test during a Project Year and no
later than December 31st for the second such test during a Project Year.
(c) Steam Delivery. The maximum bonus or liquidated damages capable of
being earned by or assessed against Operator in the Steam Delivery category of
the AFAA in any Project Year shall be Twelve Thousand Five Hundred and 00/100
Dollars ($12,500.00). If, over the course of a Project Year, fewer than two (2)
interruptions occur in the delivery of steam to Steam Purchasers, then Operator
shall receive a bonus in the amount of Twelve Thousand Five Hundred and 00/100
Dollars ($12,500.00) under the Steam Delivery category of the AFAA for such
Project Year. If two (2) or three (3) interruptions occur in the delivery of
steam to Steam Purchasers during a Project Year, then the AFAA for the Steam
Delivery category of the AFAA for such Project Year shall be zero. If more than
three (3) interruptions occur in the delivery of steam to Steam Purchasers
during a Project Year, Operator shall be assessed liquidated damages in the
amount of Twelve Thousand Five Hundred and 00/100 Dollars ($12,500.00) under the
Steam Delivery category of the AFAA for such Project Year. In no event shall the
amount of bonus earned or liquidated damages assessed in the Steam Delivery
category of the AFAA exceed Twelve Thousand Five Hundred and 00/100 Dollars
($12,500.00) in any Project Year. As used in this Section 6.1(c), "interruption"
shall not include any interruption caused by an event of Force Majeure that
affects the operation of both (x) the combined cycle cogeneration facility and
(y) Camden Paperboard's boilers.
(d) Net Plant Heat Rate. The maximum bonus or liquidated damages
capable of being earned by or assessed against Operator in the Net Plant Heat
Rate category of the AFAA in any Project Year shall be Eighteen Thousand Seven
Hundred Fifty and 00/100 Dollars ($18,750.00). Over the course of a Project
Year, operation of the Facility at the optimum net plant heat rate increases
profitability. Owner shall evaluate Operator on its ability to achieve the
optimum net plant heat rate, and, subject to Owner's sole and complete
discretion, award Operator a bonus of up to Eighteen Thousand Seven Hundred
Fifty and 00/100 Dollars ($18,750.00) or assess Operator with liquidated damages
of up to Eighteen Thousand Seven Hundred Fifty and 00/100 Dollars ($18,750.00)
in the Net Plant Heat Rate category of the AFAA. The initial net plant heat rate
shall be determined pursuant to a performance test conducted within sixty (60)
days after the Existing O&M Agreement Termination Date.
(e) O&M Costs. The maximum bonus or liquidated damages capable of
being earned by or assessed against Operator in the O&M Costs category of the
AFAA shall be Twenty-Five Thousand and 00/100 Dollars ($25,000.00). During each
Project Year, this Agreement contemplates the existence of an Approved Operating
Budget Developing reliable budgets based on obtainable forecasts and realistic
expectations, and receiving such budgets and any revisions thereof in a timely
manner, are essential elements of Owner's ability to monitor its investment in
the Facility. Owner shall evaluate and compare the Approved Operating Budget for
a given Project Year against the costs and expenses actually incurred and,
subject to Owner's sole and complete discretion, award Operator a bonus of up to
Twenty-Five Thousand and 00/100 Dollars ($25,000.00) or assess Operator with
liquidated damages of up to Twenty-Five Thousand and 00/100 Dollars ($25,000.00)
in the O&M Costs category of the AFAA.
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(f) Subjective Factors. The maximum bonus or liquidated damages
capable of being earned by or assessed against Operator in the Subjective
Factors category of the AFAA in any Project Year shall be Thirty-One Thousand
Two Hundred Fifty and 00/100 Dollars ($31,250.00). The Subjective Factors
category of the AFAA depends solely upon Owner's subjective evaluation of
Operator's overall performance of its obligations and services rendered
hereunder. Subject to Owner's sole and complete discretion, Owner shall evaluate
Operator's performance with respect to various qualitative factors, which, for
illustrative purposes only and not by way of limitation, may include: frequency
of insurance claims and increases in related insurance costs, community and
public relations, compliance with permits and easements, safety and
environmental records, turn-over of personnel, development of apprentice
programs, personnel management relevant to Urban Enterprise Zone criteria,
timeliness of response to and handling of events of Force Majeure, working
relationship with Owner and Lender, professionalism, profitability of the
Facility and overall handling and care of the Facility. Periodically but no more
often than every three (3) months during each Project Year, Owner shall deliver
to Operator a list of the various qualitative factors to be used by Owner in its
subjective evaluation of Operator's performance for the remainder of such
Project Year. Based on Owner's subjective evaluation of Operator's performance
during a Project Year, Owner shall, in Owner's sole and complete discretion,
either award Operator a bonus of up to Thirty-One Thousand Two Hundred Fifty and
00/100 Dollars ($31,250.00) or assess Operator liquidated damages of up to
Thirty-One Thousand Two Hundred Fifty and 00/100 Dollars ($31,250.00) under the
Subjective Factors category of the AFAA for such Project Year.
6.2 Quarterly Meetings. Owner and Operator shall schedule and attend
regular quarterly meetings to discuss Operator's performance of the Work and
Owner's evaluation thereof and, when necessary, to review and revise the list of
qualitative factors described in Section 6.l(f) above.
6.3 Partial Project Years. In any partial Project Year, the amounts
attributable to each category of the AFAA and the overall limitation placed on
the AFAA itself shall be prorated based on the number of calendar days in such
partial Project Year divided by 365 or 366, as the case may be.
6.4 Payment of Annual Fee Adjustment Amount. Not later than thirty
(30) days after the end of each Project Year, Owner shall render a statement to
Operator, with all necessary and appropriate supporting documentation,
calculating the amount of bonus payments due to Operator and/or the amount of
liquidated damages due to Owner under each category of the AFAA. If the AFAA
results in an amount payable by Operator to Owner, such amount shall be set off
against that portion of the O&M Fee for such Project Year that has not yet been
advanced to Operator, and the balance, if any, shall be paid by Operator to
Owner within thirty (30) days after Owner delivers the statement therefor to
Operator. If the AFAA results in an amount payable by Owner to Operator, such
amount shall be paid by Owner within thirty (30) days after Owner delivers the
statement therefor to Operator. A party's obligation to pay the AFAA to the
other party shall survive the termination of this Agreement, even though such
AFAA may not be capable of being calculated until after the termination of this
Agreement.
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6.5 Application of CPI Adjustment. Each of the dollar amounts
indicated in Section 6.1 above shall be adjusted in accordance with the
provisions of Section 5.3 hereof.
6.6 Change in Conditions or Circumstances. If during the term of this
Agreement conditions or circumstances change from those in effect on the
Existing O&M Agreement Termination Date such that there is either a material
increase or decrease in the responsibilities and obligations of Operator
hereunder from those responsibilities and obligations of Operator as of the
Existing O&M Agreement Termination Date, then Owner and Operator shall meet and
negotiate an equitable adjustment to the manner in which the AFAA is determined,
including, without limitation, revisions to the categories of evaluation used in
determining the AFAA, the relative weightings thereof and the overall limit on
the AFAA, if necessary.
6.7 Second Project Year. Notwithstanding anything to the contrary
herein contained for purposes of the calculation of the AFAA for the second
(2nd) Project Year, each of the dollar amounts indicated in Section 6.1 above
shall be reduced by fifty percent (50%), subject, however, to proration in
accordance with Section 6.3 hereof.
6.8 Employee Bonuses. Beginning with the second (2nd) Project Year and
for each Project Year thereafter, Operator shall pay to the Operator Personnel
and the GE O&M Personnel as bonuses in the aggregate not less than twenty-five
percent (25%) of the AFAA for each such Project Year; provided, however, Owner
may pay, in Owner's sole discretion, additional bonuses to the Operator
Personnel and the GE O&M Personnel during any Project Year.
VII.
WARRANTY; CORRECTION OF DEFECTS
7.1 Warranty. Operator warrants that (i) the Work hereunder shall be
performed in a first-class, competent, cost-conscious manner by appropriately
qualified personnel, (ii) the Work shall be performed in accordance with the
terms and conditions of this Agreement, including all standards set forth
herein, and (iii) all aspects of such Work shall be suitable for their required
purposes.
7.2 Consequence of Breach. In the event Operator breaches any warranty
described in Section 7.1 above, Operator shall re-perform any defective service,
replace any unfit or unqualified personnel and train new personnel, and repair
or replace any components of the Facility damaged as a consequence of such
breach. Any such re-performance, training, repair or replacement by Operator
pursuant to this Section 7.2 shall be at Operator's sole cost and expense.
7.3 Vendor Warranties. Operator shall use its best efforts to obtain
not less than one-year vendor warranties for all spare parts and replacement
parts, other than parts having a useful life of less than one year and parts
supplied by Owner pursuant to Article III. Any warranties obtained by Operator
from outside vendors or subcontractors shall be assignable and
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passed through to Owner, but, during the term of this Agreement, Operator shall
maintain, administer and enforce such warranties for the benefit of Owner,
provided, however, Operator shall not file suit to enforce any such warranty
without the prior written consent of Owner.
VIII.
TERM
Unless sooner terminated as provided herein, the term of this
Agreement shall begin on the Execution Date and shall extend for an initial term
expiring at the end of the twelfth (12th) Project Year; provided, however, Owner
shall have the right, in Owner's sole discretion, to (i) terminate this
Agreement for convenience effective as of the end of the fourth (4th) Project
Year by delivering to Operator written notice of such termination on or before
one hundred eighty (180) days prior to the end of the fourth (4th) Project Year
and payment of the Fourth Year Termination Fee (as defined hereinbelow) in
accordance with the terms hereof, (ii) terminate this Agreement for convenience
effective as of the end of the seventh (7th) Project Year by delivering to
Operator written notice of such termination on or before one hundred eighty
(180) days prior to the end of the seventh (7th) Project Year and payment of the
Seventh Year Termination Fee (as defined hereinbelow) in accordance with the
terms hereof, and (iii) terminate this Agreement for convenience, at no cost to
Owner, effective as of the end of the tenth (10th) Project Year by delivering to
Operator written notice of such termination on or before one hundred eighty
(180) days prior to the end of the tenth (10th) Project Year.
The "Fourth Year Termination Fee" shall be due and payable as follows:
(i) Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00), which
shall be due and payable by Owner to Operator within thirty (30) days after the
termination of this Agreement, plus
(ii) the reasonable costs actually incurred by Operator in
transferring, relocating and/or terminating Operator's personnel at the Facility
and terminating subcontracts pertaining to the Facility up to a maximum of One
Hundred Fifty Thousand and 00/100 Dollars ($150,000.00), which shall be due and
payable by Owner to Operator within thirty (30) days after receipt by Owner from
Operator of an invoice accompanied by all relevant documentation reasonably
necessary for Owner to verify the accuracy thereof, plus
(iii) an amount equal to ten percent (10%) of the Published Price (as
determined at the time of acquisition) of the Parts for GE Equipment actually
purchased by Owner from Operator during the term of this Agreement, which amount
shall be due and payable within thirty (30) days after receipt by Owner from
Operator of an invoice accompanied by all relevant documentation reasonably
necessary for Owner to verify the accuracy thereof, but in no event earlier than
thirty (30) days after the termination of this Agreement.
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The "Seventh Year Termination Fee" shall be due and payable as
follows:
(i) Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00), which
shall be due and payable by Owner to Operator within thirty (30) days after the
termination of this Agreement, plus
(ii) the reasonable costs actually incurred by Operator in
transferring, relocating and/or terminating Operator's personnel at the Facility
and terminating subcontracts pertaining to the Facility up to a maximum of One
Hundred Fifty Thousand and 00/100 Dollars ($150,000.00), which shall be due and
payable by Owner to Operator within thirty (30) days after receipt by Owner from
Operator of an invoice accompanied by all relevant documentation reasonably
necessary for Owner to verify the accuracy thereof, plus
(iii) an amount equal to five percent (5%) of the Published Price (as
determined at the time of acquisition) of the Parts for GE Equipment actually
purchased by Owner from Operator during the term of this Agreement, which amount
shall be due and payable within thirty (30) days after receipt by Owner from
Operator of an invoice accompanied by all relevant documentation reasonably
necessary for Owner to verify the accuracy thereof, but in no event earlier than
thirty (30) days after the termination of this Agreement.
IX.
TERMINATION
9.1 Event of Default. Should any of the following events or conditions
occur, the same shall constitute an event of default under this Agreement
(herein called an "Event of Default"):
(a) Operator breaches any of its material obligations under this
Agreement.
(b) Owner breaches any of its material obligations under this
Agreement.
(c) if any representation or warranty of Operator or Owner under
Article XIV hereof shall prove untrue in any material respect.
(d) If, in any two (2) successive Project Years, Operator incurs the
maximum liquidated damages possible under Article VI hereof for each such
successive Project Year, then such occurrence shall be an Event of Default by
Operator.
(e) If Operator's aggregate limit of liability over the term of this
Agreement as set forth in Section 17.1 hereof is reached, then such occurrence
shall be an Event of Default by Operator.
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9.2 Termination Upon Breach. If either party commits an Event of
Default, the other party (hereinafter the "Non-Defaulting Party") may give
such party in default (the "Defaulting Party") a written notice describing such
default in reasonable detail and demanding that the Defaulting Party cure such
default; provided, however, Operator shall have no right to cure the Events of
Default set forth in Sections 9.1(d) and (e) above. If the Defaulting Party does
not cure its default within twenty (20) days after its receipt of such notice,
or if the default is such that it cannot be cured within such period of time and
the Defaulting Party does not promptly commence action within such twenty (20)
day period which is calculated to cure such default and thereafter diligently
pursue such action to completion, the Non-Defaulting Party shall have the right
to terminate this Agreement by written notice to the Defaulting Party, without
prejudice to any remedies at law or in equity which are available to the Non-
Defaulting Party by reason of the Defaulting Party's default. Provided Operator
is performing all of its obligations under this Agreement in accordance with the
terms and conditions hereof, it shall not constitute an Event of Default if
Operator fails to earn a bonus for any Project Year, so long as Operator shall
pay Owner when due any associated liquidated damages required to be paid under
Article VI hereof and promptly makes all corrections to the Facility as may be
required hereunder. Notwithstanding anything stated herein, a good faith dispute
with respect to the payment of any amount claimed to be due hereunder, for so
long as such dispute remains unresolved and contested in good faith, shall not
be considered an Event of Default.
9.3 Termination for Insolvency. Subject to Article XII hereof, either
party may terminate this Agreement by written notice to the other party if the
other party (i) commences a proceeding under Federal or state bankruptcy,
insolvency or reorganization law, or (ii) has such a proceeding filed against
it and fails to have such proceeding stayed or vacated within sixty (60) days or
upon the end of any such stay, fails to have such involuntary proceeding vacated
within sixty (60) days thereafter, or (iii) admits the material allegations of
any petition in bankruptcy filed against it, or (iv) is adjudged bankrupt, or
(v) makes a general assignment for the benefit of its creditors, or (vi) has a
receiver appointed for all or a substantial portion of such party's assets which
receiver is not discharged within sixty (60) days after his appointment. Any
termination of this Agreement pursuant to this Section 9.3 shall be considered
to be by reason of anticipatory breach of contract, and such termination shall
be without prejudice to any rights the terminating party may have by reason of
such anticipatory breach.
9.4 Owner's Additional Remedies. After termination of this Agreement
by Owner by written notice pursuant to Section 9.2 or 9.3 hereof, Owner may, in
addition to its other rights hereunder, take possession of and utilize any
materials, tools, equipment, manuals, records and other property of any kind
furnished by Operator, paid for by Owner, and necessary or intended to be used
to operate the Facility. Operator shall not be entitled to receive any further
payments under this Agreement except for payments for services provided prior to
termination of this Agreement. Operator and Owner shall continue to be bound by
such provisions of this Agreement that shall survive the termination hereof. In
addition, Operator shall remain liable for all liquidated damages hereunder
which have accrued but have not yet been paid at the time of such termination.
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9.5 Transfer of Operations Upon Termination. Upon termination of this
Agreement for any reason, Operator shall fully cooperate with Owner in the
transfer of the Performance of Operator's obligations hereunder to Owner or a
third party designated by Owner. Without limiting the foregoing, Operator shall
provide Owner and such third party with such information as may be reasonably
necessary for the safe and proper operation and maintenance of the Facility. The
parties acknowledge Owner's interest that the Facility be operated and
maintained during the final Project Year of this Agreement or portion thereof,
whether or not commensurate with the term hereof, to the same standards as it is
operated and maintained throughout the term of this Agreement and that personnel
of Owner have an opportunity to gain experience in the operation and maintenance
of the Facility during such final Project Year. Accordingly, Operator agrees
that Owner may send its personnel to the Facility during the final Project Year
for the purposes of monitoring Operator's performance under the terms of this
Agreement and gaining experience in operation and maintenance of the Facility,
without charge to Owner (except for the cost of Owner's personnel), provided
that Owner's personnel do not interfere with the continuing operation and
maintenance of the Facility by Operator pursuant to the terms hereof. Owner,
however, shall remain fully liable for the actions and inactions of its
employees during such time Period. Upon termination of this Agreement, Operator,
to the extent permitted by law, shall assign to Owner any existing warranties
obtained by Operator on the Facility Or any portion thereof and shall promptly
deliver to Owner all copies of the Facility Data, drawings, books and originals
or certified copies of all records relating to the operation and maintenance of
the Facility that are required to be maintained by Operator hereunder as of the
date of such termination.
9.6 Condition of Facility Upon Termination. Upon expiration or
termination of this Agreement Operator shall leave the Facility in as good
condition as on the Existing O&M Agreement Termination Date, normal wear and
tear excepted, and with the equivalent supply of Consumables (other than spare
parts) and other operating items as were provided by Owner to Operator. All
special tools, improvements, inventory of supplies, spare parts, safety
equipment (as provided to or obtained by or provided by Operator during the
term of this Agreement) and any other items furnished by Operator hereunder will
be left at the Facility and will become or remain the property of Owner without
additional charge.
9.7 Survival of Obligations. Termination of this Agreement for any
reason shall not relieve Owner or Operator of any obligation accrued or
accruing prior to such termination. Without limiting the generality of the
foregoing, Owner and Operator shall continue to be bound by Section 6.4, Article
VII, Sections 9.4, 9.5, 9.6 and 9.7, Article XIII, Article XVII, Article XVIII,
Article XIX, Article XX, and such provisions shall survive the termination of
this Agreement.
X.
INSURANCE
10.1 Operator Insurance Coverage. Operator shall secure and maintain
as a minimum during the term of this Agreement the following insurance:
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(a) Worker's Compensation, subject to statutory limits.
(b) Employer's Liability, with limits as follows:
(i) Bodily Injury by Accident-$1,000,000 per accident;
(ii) Bodily Injury by Disease-$1,000,000 policy limit; and
(iii) Bodily Injury by Disease-$1,000,000 per each employee.
(c) Comprehensive (Business) Automobile Liability including automobile
Contractual liability endorsement, in an amount equal to a "combined single
limit" coverage for bodily injury and property damage limit of One Million and
00/100 Dollars ($1,000,000.00) per accident, in comprehensive form and covering
hired, owned and non-owned vehicles, including, without limitation, vehicles
leased by Operator from Owner. Such insurance shall name Owner and Lender as
Additional Insureds.
(d) Comprehensive (Commercial) General Liability Insurance in an
amount equal to at least One Million and 00/100 Dollars ($1,000,000.00) per
occurrence, "combined single limit" coverage. Such insurance shall contain such
coverages as Operator normally maintains for its own protection to include
Premises/Operations, Explosion, Collapse and Underground Hazards, Broad Form
Contractual, Independent Contractors, Products/Completed Operations, Broad Form
Property Damage (excluding care, custody and control), Personal Injury, Cross
Liability including a Broad Form Contractual endorsement to meet the liability
assumed in section 13.1 hereof. Such insurance shall name Owner and Lender as
Additional Insureds.
(e) Excess (or Umbrella) liability insurance providing total or excess
limits for, and following the form of, the policies referred to in Section 10.1
(b) (c) and (d) so as to bring the total of each up to Twenty-Five Million and
00/100 Dollars ($25,000,000.00) per occurrence, and in the annual aggregate
where applicable. Such insurance shall name Owner and Lender as Additional
Insureds.
(f) Aircraft and Marine insurance should any aircraft or watercraft be
used in the Work. Such insurance shall be at limits at least equal to those
specified in Section 10.1(e) above. Such insurance shall name Owner and Lender
as Additional Insureds.
10.2 Owner Insurance Coverage. Owner shall secure and maintain during
the term of this Agreement the following insurance:
(a) Worker's Compensation, subject to statutory limits.
(b) Employer's Liability, with limits as follows:
(i) Bodily Injury by Accident-$1,000,000 per accident;
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(ii) Bodily Injury by Disease-$1,000,000 policy limit; and
(iii) Bodily Injury by Disease-$1,000,000 per each employee.
(c) Commercial General Liability Insurance covering legal liability of
the insured for damage to property of third parties or bodily injury to third
parties arising out of the ownership, operation and maintenance of the Facility,
in an amount equal to one Million and 00/100 Dollars ($1,000,000.00) per
occurrence, "combined single limit" property damage/bodily injury coverage. Such
insurance policy shall be endorsed naming Lender as an Additional Insured and
Operator as an Additional Insured in connection with claims arising out of or
relating in any way to Operator's presence on the Site or for the Work to be
Performed Pursuant to this Agreement only, and shall include
Premises/Operations, Explosion, Collapse and Underground Hazards, Broad Form
Contractual, Independent Contractors, Products/Completed Operations, Broad Form
Property Damage, Personal Injury, Cross Liability (Insured vs. Insured) and a
Broad Form Named Insured endorsement; provided, however, if a claim is made
under such insurance and the claim is not based upon the negligence or willful
misconduct of Operator, then Operator acknowledges it shall have no right to any
recovery with respect to such claim and, in furtherance thereof, Operator shall
execute and deliver to Owner the appropriate waiver forms necessary for a check
to be issued by the insurer solely in the name of Owner.
(d) Excess (or Umbrella) Liability insurance providing total or excess
limits for, and following the form of, the policies referred to in Section 10.2
(b) and (c) so as to bring the total of each up to Twenty-Five Million and
00/100 Dollars ($25,000,000.00) per occurrence, and in the annual aggregate
where applicable. Such insurance policy shall be endorsed naming Lender as an
Additional Insured and Operator as an Additional Insured in connection with
claims arising out of or relating in any way to Operator's presence on the Site
or for the Work to be performed pursuant to this Agreement only; provided,
however, if a claim is made under such insurance and the claim is not based upon
the negligence or willful misconduct of Operator, then Operator acknowledges it
shall have no right to any recovery with respect to such claim and, in
furtherance thereof, Operator shall execute and deliver to Owner the appropriate
waiver forms necessary for a check to be issued by the insurer solely in the
name of Owner.
(e) Property Insurance on an "All Risk" basis covering physical damage
or loss to all real and personal property of Owner 1ocated at the Site and to
off-premises electrical, gas, and steam transmission lines and facilities, and
other equipment for winch Owner has an insurable interest and in an amount not
less than one hundred percent (100%) of the full replacement value of such
property. Such coverage shall meet all requirements for property insurance set
forth in the Related Agreements, and shall name Lender as an Additional Named
Insured and shall name Operator as an Additional Insured.
(f) Boiler and Machinery Insurance on the Facility for all insurable
objects, equipment, electrical including but not limited to pressure vessels,
turbines and equipment, electrical generators,
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motors, air tanks, boilers, machinery, pressure piping or similar apparatus, on
a comprehensive form in an amount not less than one hundred percent (100%) of
the full replacement value of such property. Such insurance policy shall cover
objects at all locations required to be insured under Section 10.2(e) above, and
shall name Lender and Operator as Additional Insureds. Owner shall have the
right at any time, and from time to time, at Owner's sole option, to combine
the Property Insurance and the Boiler and Machinery Insurance into a single
policy. Owner shall be relieved of the obligation to renew the business
interruption coverage under said Property Insurance and Boiler and Machinery
Insurance in the event such business interruption coverage cannot be purchased
at commercially reasonable rates.
10.3 Form and Content Of Insurance. All policies, and binders with
respect to insurance Provided Pursuant to this Article X shall be as follows:
(a) Form of Policies. All insurance provided for hereunder shall be
placed on forms reasonably acceptable to Owner, Operator, and Lender.
(b) Insurance Companies. All insurance required hereunder shall be
issued by and binding upon insurance companies reasonably acceptable to Owner,
Operator and Lender that are licensed or authorized to do business in the State
of New Jersey.
(c) Additional Insureds shall include the officers, directors and
employees of each entity so named as its interests may appear.
(d) Severability. All liability insurance shall contain a severability
of interest provision providing that, except with respect to the total limits of
liability, the insurance shall apply to each Insured or Additional Insured in
the same manner as if separate policies had been issued to each.
(e) Non-Recourse. All insurance shall provide that there will be no
recourse against the Additional Insureds for the payment of premiums or
commissions or (if such policies provide for the Payment thereof) additional
premiums or assessments.
(i) Waiver of Subrogation. All insurance maintained by Operator and
Owner hereunder except for the insurance required pursuant to Section 10.1(b)
and (c) and Section 10.2(b) hereof shall provide for the waiver of any right of
subrogation by the insurers thereunder against Owner, Operator and Lender and
the officers, directors and employees, agents and representatives of each of
them, and any right of the insurers to any setoff or counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any liability of
any such person insured under such policy.
(g) Notice of Cancellation. All insurance shall provide that it may
not be canceled or materially changed without giving Owner, Operator, and Lender
thirty (30) days prior written notification thereof, except in cases of non-
payment of premium for
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which ten (10) days prior written notice shall be provided (unless a longer
notice period for non-payment is agreed to by the relevant insurer).
(h) Breach of Warranty. The interest of any Insured or Additional
Insured shall not be invalidated by any action or inaction of any of the other
parties so named.
10.4 Additional Requirements.
(a) Certificates; Proof of Loss. Prior to the performance of any Work
by Operator hereunder, each party shall furnish certificates of insurance to the
other party evidencing the insurance required of such party pursuant to this
Agreement. The party maintaining each policy hereunder shall make all proofs of
loss under each such policy, and shall take all other action reasonably required
to ensure collection from insurers for any loss under any such policy, except
that Owner may require Operator to provide such proof of loss and take such
other action on behalf of Owner in the case of the insurance maintained by Owner
pursuant to Section 10,2(c), (d), (e) and (f). Operator shall provide Owner with
copies of insurance policies obtained by it promptly upon Owner's request.
(b) Insurance Report. Concurrently with the furnishing of the
certification referred to in Section 10.4(a), Operator shall furnish owner and
Lender with an opinion of each insurance broker stating that all premiums then
due have been paid and that, in the opinion of such broker, the insurance then
carried and maintained with respect to the Facility is in accordance with the
terms of this Article. Furthermore, Operator shall cause each insurer or such
broker to advise Owner and Lender in writing of any default in the payment of
any premiums or any other act or omission on the part of Operator which might
invalidate or render unenforceable, in whole or in part, any insurance provided
hereunder. Owner may at its sole option obtain such insurance if not provided by
Operator and, in such event, Operator shall reimburse Owner upon demand for the
cost thereof.
(c) Payment of Deductibles and Self-Insured Retention Amounts. Owner
shall be responsible for deductibles or self-insured retention under all of the
insurance policies required to be carried by Owner pursuant to Section 10.2
hereof, except in the event of loss or damage due to the negligence or willful
misconduct of Operator, in which case Operator shall be liable proportionately
to the extent of Operator's negligence or willful misconduct, for the
deductibles and/or self-insured retention applicable to such insurance up to but
not exceeding Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) per
occurrence. In addition, Operator shall be responsible for all deductibles and
self-insured retention under other policies maintained by Operator. Owner may,
in its sole discretion, change the deductibles or self-insured retention under
any of the insurance policies that it is required to carry pursuant to Section
10.2 hereof and shall promptly give Operator written notice of any such change;
provided, however, that Operator shall not be responsible for any deductibles or
self-insured retention in excess of Two Hundred Fifty Thousand and 00/100
Dollars ($250,000.00) per occurrence.
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(d) Subcontractor Insurance. Operator shall require all subcontractors
and Suppliers to obtain, maintain, and keep in force, prior to entry on the Site
and during the time in which they are engaged in performing services to be
furnished by Operator adequate coverage in accordance with Operator's normal
practice and shall provide Owner with current certificates of insurance
evidencing such coverage.
(e) Notification. Operator agrees to advise Owner as soon as
practicable in writing of any notice of claim. to which insurance pursuant to
this Article X applies.
(f) Owner's and Lender's Rights. Should Operator fail to provide or
maintain any of the insurance policies required of it, Owner and/or Lender shall
have the right to provide and/or maintain such coverage at Operator's expense
once Operator has had a reasonable time to cure.
(g) Capitalized Terms. Capitalized terms used in this Article X and
not otherwise defined in this Agreement shall have the meanings generally
ascribed to them in the commercial insurance industry in the United States of
America.
(h) Disclosure. Operator agrees to make full disclosure to insurers of
all material facts and circumstances as required by the terms of any insurance
policy under which Operator is named as an Additional Insured.
XI.
NOTIFICATIONS.
Any notice to either party required or permitted hereunder shall be in
writing and shall be given by (i) personal delivery, (ii) commercial courier
(iii) registered or certified U. S. Mail, return receipt requested, postage
prepaid, or (iv) telecopy if also given by personal delivery, commercial courier
or registered or certified U.S. mail, return receipt requested, postage prepaid
within three (3) days after the telecopied transmission, all such notices to be
addressed as follows:
If to Owner:
Camden Cogen L.P.
c/o Cogen Technologies, Inc.
1600 Smith Street, Suite 4300
Houston, Texas 77002
Telecopier Number: (713) 951-7747
Attention: Vice President and Chief Financial, Officer
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Camden Cogen L.P.
c/o Cogen Technologies, Inc.
1600 Smith Street, Suite 4300
Houston, Texas 77002
Telecopier Number (713) 951-7747
Attention: Senior Vice President and Chief Operating Officer
with copy to:
Camden Cogen L.P.
570 Chelton Avenue
Camden, New Jersey 08104
Telecopier Number: (609) 963-2411
Attention: Plant Manager
If to Operator:
GE Global O&M Services
One River Road, Building 36-2E
Schenectady, New York 12345
Telecopier Number: (518) 385-2280
Attention: Manager of Global O&M Services
If to Lender:
The Toronto-Dominion Bank Trust Company, as Agent
c/o The Toronto - Dominion Bank
909 Fannin, Suite 1700
Houston, Texas 77010
Telecopier Number: (713) 652-2647
Attention: Manager - Credit Administration
with copy to:
The Toronto - Dominion Bank
31 West 52nd Street
New York, New York 10019
Telecopier Number: (212) 262-1929
Attention: Director Utilities, Project Finance
Notice by personal delivery shall be effective when made and notice by
commercial courier or by mail shall be deemed effective upon receipt. A copy of
each such notice shall, to the extent reasonably practicable, also be forwarded
by telecopier.
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XII.
ASSIGNMENT; LENDER'S RIGHTS
12.1 Assignment. Neither Owner nor Operator may assign all or any part
of their interests in this Agreement without the prior written consent of the
other, which consent shall not be unreasonably withheld, delayed or conditioned;
provided, however, Owner may assign its rights under this Agreement as security
for the payment of any indebtedness payable or to become payable to Lender. Such
assignment shall be in a form substantially similar to Exhibit B attached hereto
and made a part hereof for all purposes. In connection therewith, if requested
by Lender, Operator will execute an appropriate consent to any such assignment
in a form substantially similar to Exhibit C attached hereto and made a part
hereof for all purposes. Moreover, if requested by Lender, Owner and Operator
will execute the Recognition Agreement with Lender substantially in the form
shown in Exhibit D attached hereto and made a part hereof for all purposes. This
Agreement shall be binding on and shall inure to the benefit of the parties and
their respective successors and assigns to the extent that assignment is
permitted under this Agreement
12.2 Lender's Rights. (a) Operator agrees that so long as any such
assignment to Lender or Recognition Agreement with Lender shall remain in effect
or until written notice of satisfaction is given to Operator by Under, the
following provisions will apply:
(1) except for the natural expiration of the term of this Agreement
(after giving effect to any renewal terms), there shall be no modification of
this Agreement without the prior written consent of Lender which consent shall
not be unreasonably withheld;
(2) Operator will not terminate, cancel or surrender this Agreement by
reason of Owner's default without giving Lender the same notice and right to
cure such default as Owner may have (plus an additional thirty (30) days);
provided, that if the default is a non-monetary default and (i) is of such
nature that it cannot be cured without first taking possession of the Facility
or (ii) is of such nature that it is not susceptible of being cured by Lender,
then Operator shall have no right to terminate this Agreement by reason of such
default if and so long as Lender shall proceed diligently to attempt to obtain
possession of the Facility or exercise its remedies pursuant to the financing
agreements including possession by a receiver and upon obtaining such
possession, Lender shall proceed diligently to cum such default if such default
is susceptible of being cured by Leader;
(3) Operator will not terminate this Agreement by reason of Owner's
default under Section 9.3 if Lender has cured any monetary default and has
diligently commenced and is diligently continuing to exercise its remedies under
any of the financing agreements;
(4) Operator will deliver to Lender a copy of each notice of default
and notice of termination, extension or renewal at the same time that any such
notice is delivered to Owner;
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(5) upon instructions from Lender, Operator will make any payments
due to Owner hereunder in accordance with such instructions;
(6) if Lender or a Permitted Transferee shall acquire title to or
possession of the Facility or shall appoint a new managing general partner of
Owner, then Operator shall accept performance from Lender or such Permitted
Transferee so long as Lender or such Permitted Transferee shall have paid to
Operator all costs and fees herein provided for, and then due and payable, and
shall comply or cause Owner to comply with the other provisions of this
Agreement. Upon acquiring title to or possession of the Facility, Lender shall
have the same rights as Owner with respect to the availability and review of
books and records of the Facility; and
(7) if Lender shall give notice to the Operator that a Special Event
under the Owner's Amended and Restated Agreement of Limited Partnership has
occurred and is continuing and Lender so elects, then all rights of the Owner
hereunder shall vest in Lender.
(b) Lender, as such, shall not be deemed to assume the performance of
any of the terms, covenants or conditions on the part of Owner to be performed
hereunder, but the purchaser, assignee or transferee of this Agreement under any
instrument of sale, assignment or transfer pursuant to or in connection with any
proceedings for the foreclosure of any mortgage affecting the Facility shall be
deemed to be an assignee or transferee within the meaning of this Agreement, and
shall be deemed to have agreed to perform all of the terms, covenants and
conditions on the part of Owner to be performed hereunder from and after the
date of such purchase and assignment, but only for so long as such purchaser or
assignee is the owner of such estate.
(c) Notwithstanding any other provisions of this Agreement, any sale,
transfer, or assignment of this Agreement to Leader or a Permitted Transferee
pursuant to or in connection with (1) any proceedings for the foreclosure of any
mortgage affecting the Facility or (2) the exercise by Lender of any other
remedies under any of the financing agreements shall be deemed to be a permitted
sale, transfer or assignment of this Agreement.
(d) Any Lender or any Permitted Transferee may sell, assign or
transfer this Agreement to a Permitted Transferee; provided, however, that such
Lender or Permitted Transferee shall remain liable hereunder for the
obligations, if any, incurred by it prior to the sale, assignment or transfer.
12.3 Estoppel Certificates. Operator shall, without charge, at any
time and from time to time hereafter, but not more frequently than twice in any
one-year period (or more frequently if such request is made in connection with
any sale or mortgaging of Owner's interest), within thirty (30) days after
written request of Owner, certify by written instrument duly executed and
acknowledged to any Lender or Permitted Transferee or any other person, firm or
corporation specified in such request: (a) as to whether this Agreement has been
supplemented or amended,
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and if so, the substance of such supplement or amendment; (b) as to the validity
and force and effect of this Agreement; (c) as to the existence of any Event of
Default hereunder; (d) as to the existence of any offsets, counterclaims or
defenses hereto on the part of Owner, and (e) as to any other matters as may be
reasonably so requested. Any such certificate may be relied upon by Owner and
any other person, firm or corporation to whom the same may be exhibited or
delivered, and the contents of such certificate shall be binding on Operator.
12.4 Legal Opinion. Incident to the execution of this Agreement, if
requested by Owner, Operator shall furnish to Owner and any Lender or Permitted
Transferee an opinion of counsel to Operator with respect to the enforceability
of this Agreement against Operator and covering such other matters as may be
reasonably requested by Owner.
XIII.
INDEMNIFICATION
13.1 Operator Indemnity. Operator shall indemnify, defend and hold
harmless Owner, Lender, Camden Paperboard and their respective Affiliates, and
partners, joint venturers, officers, agents, employees, successors and assigns
(collectively, the "Owner Indemnitees") from and against any and all suits,
actions, legal or administrative proceedings, claims, demands, penalties, costs
and expenses (including attorneys' fees, court costs and all costs or expenses
related to environmental clean-up, containment, remediation or removal of
hazardous waste or pollution to property of third parties) of any nature for
personal injury or death or physical damage to property of any third party
(including employees of Operator and its subcontractors) arising out of or
resulting from the performance or non-performance of the Work or any other
activities on or about the Site or other locations where the Work is performed
to the extent that the same is caused by any negligent act or negligent omission
of, or willful misconduct or intentional act by, Operator or its subcontractors
or suppliers, or anyone employed by any of them or anyone for whose acts any of
them may be liable, unless solely caused by the negligence of any of the Owner
Indemnitees. In the event that such damage or injury is caused by the joint or
concurrent negligence of Owner, its employees, subcontractors (other than
subcontractors of Operator) or agents, the loss shall be borne by Operator and
Owner proportionately to their degree of fault. In the event Operator shall be
liable for any loss, costs and expenses pursuant to this Section 13.1, the
proceeds of the insurance policies referred to in Section 10.2(c) and (d) shall
first apply, other than as stipulated therein, to the loss, costs and expenses.
If such proceeds are insufficient to cover all such loss, costs and expenses,
Operator shall be liable for and shall pay for all sums in excess of such
insurance proceeds; provided, however, in the event that such loss, costs and
expenses are caused by the joint or concurrent negligence of Owner, its
employees, subcontractors (other than subcontractors of Operator) or agents, the
loss, costs and expenses shall be borne by Operator and Owner proportionately to
their degree of fault. Notwithstanding anything herein to the contrary, in the
event of loss or damage due to the negligence or willful misconduct of Operator,
Operator shall be liable, proportionately to the extent of Operator's negligence
or willful misconduct, for the deductibles, self-insured retention and waiting
period deductibles applicable to the insurance policies required to be carried
by Owner pursuant to Section 10.2 hereof.
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13.2 Owner Indemnity. Owner shall indemnify, defend and hold harmless
Operator and its Affiliates and partners, joint venturers, officers, agents,
employees, successors, and assigns (collectively, the "Operator Indemnitees")
from and against any and all suits, actions, legal or administrative
proceedings, claims, demands, penalties, costs, and expenses (including
attorneys' fees, court costs and all costs or expenses related to environmental
clean-up, containment, remediation or removal of hazardous waste or pollution to
property of third parties) of any nature for personal injury or death or
physical damage to property of any third party (including employees of Owner and
its subcontractors) arising out of or resulting from the performance or non-
performance of Owner of its obligations hereunder or any of Owner's activities
on or about the Site or other location where Owner is to perform its obligations
hereunder to the extent that the same is caused by any negligent act or
negligent omission of, or willful misconduct or intentional act by, Owner, its
subcontractors (other than subcontractors of Operator) or suppliers (other than
suppliers of Operator), or anyone employed by any of them, or anyone for whose
acts any of them may be liable, unless solely caused by the negligence of any of
the Operator Indemnitees. In the event that such damage or injury is caused by
the joint or concurrent negligence of Operator or its employees, contractors,
subcontractors or agents, the loss shall be borne by Operator and Owner
proportionately to their degree of fault.
13.3 No Limitation. In any and all claim against any of the Owner
Indemnitees by any employee of Operator, any of Operator's subcontractors or
suppliers, or anyone directly or indirectly employed by any of them or anyone
for whose acts any of them may be liable, the indemnification obligation under
Section 13.1 shall not be limited in any way by any limitation on the amount or
type of damages, compensation or benefits payable by or for Operator or any of
its subcontractors or suppliers under workers' or workmen's compensation acts,
disability benefit acts or other employee benefits acts, nor by the provision by
Operator of any insurance required to be provided under this Agreement.
XIV.
REPRESENTATIONS AND WARRANTIES
14.1 Representations and Warranties of Owner. Owner hereby represents
and warrants to Operator as follows:
(a) Owner is a limited partnership duly organized and existing in good
standing under the laws of the State of Delaware and is qualified to do business
in the State of New Jersey.
(b) Owner possesses all requisite power and authority to enter into
and perform this Agreement and to carry out the transactions contemplated
herein.
(c) Owner's execution, delivery, and performance of this Agreement
have been duly authorized, and this Agreement has been duly executed and
delivered and constitutes Owner's legal, valid, and binding obligation,
enforceable against Owner in accordance
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with its terms, except as may be limited by bankruptcy, insolvency and other
legal principles pertaining to creditor's rights.
(d) No suit, action or arbitration, or legal, administrative or other
proceeding is pending or, to Owner's knowledge, threatened against Owner that
would affect the validity or enforceability of this Agreement or the ability of
Owner to fulfill its obligations and commitments hereunder.
14.2 Representations and Warranties of Owner. Operator hereby
represents and warrants to Owner as follows:
(a) Operator is a corporation duly organized and existing in good
standing under the laws of the State of New York and is qualified to do business
in the State of New Jersey.
(b) Operator possesses all requisite power and authority to enter into
and perform this Agreement and to carry out the transactions contemplated
herein.
(c) Operator's execution, delivery, and performance of this Agreement
have been duly authorized, and this Agreement has been duly executed and
delivered and constitutes Operator's legal, valid, and binding obligation,
enforceable against Operator in accordance with its terms, except as may be
limited by bankruptcy, insolvency and other legal principles pertaining to
creditors' rights.
(d) No suit, action or arbitration, or legal, administrative or other
proceeding is pending or, to Operator's knowledge, threatened against Operator
that would affect the validity or enforceability of this Agreement or the
ability of Operator to fulfill its obligations and commitments hereunder.
(e) No material consents or approvals are required in connection with
the execution, delivery and performance by Operator of this Agreement.
(f) The execution, delivery and performance by Operator of this
Agreement will not (i) violate any law, rule or regulation applicable to
Operator, (ii) result in any breach of, or constitute any default under, any
contractual obligation of Operator, or (iii) result in, or require, the creation
or imposition of any lien or other encumbrance on any of the properties or
revenues of Owner.
XV.
BOOKS, RECORDS AND REPORTS
15.1 Books and Records. Operator shall maintain books and records at
the Site reflecting solely transactions arising from the operation and
maintenance of the Facility pursuant to the terms of this Agreement, including,
without limitation, accounting, bookkeeping and
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administrative reports relating to Facility performance data, the accrual and
payment of items constituting operating expenses and Reimbursable Costs, and
the payment of all O&M Fees and other monies to Operator. Such books and records
shall (a) reflect only transactions in connection with the Facility, (b) be kept
physically apart from any other books and records maintained by Operator for
whatever purpose, and (c) be available to Owner upon Owner's request for
examination or copying during the normal business hours of Operator. Operator
shall cooperate with Owner's accountant in the event Owner requests such
accountant to conduct a financial audit of the services provided by Operator
hereunder. If such audit reveals errors in the calculation of any amounts paid
by Owner, Operator shall promptly reimburse Owner for any amounts improperly
paid by Owner or Owner shall reimburse Operator for any amounts not paid
promptly by Owner, as the case may be. Furthermore, if such audit reveals errors
of more than two percent (2%) in the calculation of Reimbursable Costs during
any given month, then Operator shall pay to Owner the cost of the audit. At the
termination of this Agreement, Operator shall furnish to Owner one copy of each
report previously delivered to Owner pursuant to Section 15.2 hereof, and one
copy of such other books and records which (i) relate to the Facility, and (ii)
Operator maintains at the time of such termination in the normal course of its
record keeping under this Article XV.
15.2 Reports. In addition to any other report required to be made by
Operator pursuant to the terms of this Agreement, Operator shall furnish to
Owner all such reports concerning the operation and maintenance of the Facility,
including any reports which may be required under the Related Agreements and as
may be required by the Lender. Operator shall provide such reports in the manner
and at the times as may be required under the Related Agreements or by the
Lender.
XVI.
FORCE MAJEURE
16.1 Force Majeure. Neither party shall be responsible or liable for
or deemed in breach hereof because of any delay in the performance of their
respective obligations hereunder due to circumstances beyond the reasonable
control of the party experiencing such delay, including but not limited to acts
of God; unusually severe weather conditions; strikes or other labor difficulties
(except that Operator's performance shall not be excused by strikes by persons
employed directly by Operator at the Site or by strikes limited to the Site);
war; riots; requirements, actions or failures to act on the part of governmental
authorities preventing performance, inability despite due diligence to obtain
required licenses, permits or governmental approvals; accidents; fire; damage to
or breakdown of necessary facilities; transportation delays or accidents;
failure or refusal of PSE&G to accept deliveries of Net Electrical Power Output
under the Power Purchase Agreement; failure or refusal of Camden Paperboard or
other Steam Purchasers to accept deliveries of steam under the Steam Purchase
Contracts; or unavailability of Fuel (such causes hereinafter called "Force
Majeure"); provided that the non-performing party is materially and adversely
affected by the event of Force Majeure and:
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(a) The non-performing party gives the other party, as soon as
reasonably practicable but in any event within forty-eight (48) hours of such
Force Majeure occurrence, written notice describing the particulars of the
occurrence;
(b) The suspension of performance is of no greater scope and of no
longer duration than is required by the Force Majeure;
(c) The non-performing party uses its best efforts to mitigate the
effects of the Force Majeure and remedy its inability to perform;
(d) When the non-performing party is able to resume performance of its
obligations under this Agreement, that party shall give the other party written
notice to that effect; and
(e) The Foreclosure was not caused by or connected with any negligent
or intentional acts, errors, or omissions, or failure by the non-performing
party to comply with any law, rule, regulation, order, or ordinance or for any
breach or default of this Agreement.
The term Force Majeure does not include changes in market conditions
or governmental action that affect the cost of Owner's supply of Fuel or any
alternative supplies of Fuel or the demand for Owner's products.
16.2 Effect of Force Majeure. If after an event of Force Majeure that
has caused Operator to suspend or delay performance of the Work hereunder,
Operator has failed to take such action as Operator could lawfully and
reasonably initiate to remove or relieve either such event of Force MaJeure or
its direct or indirect effects, Owner may, in its sole discretion, at Operator's
expense, initiate such reasonable measures as will be designed to remove or
relieve such event of Force Majeure or its direct or indirect effects and
thereafter require Operator to resume full or partial performance of the Work
hereunder.
16.3 Extended Force Majeure. In the event an event of Force Majeure
hereunder or under any of the Related Agreements continues for thirty (30) days
or more, then Owner shall have the right, upon delivery of thirty (30) days
advance written notice to Operator, to cause Operator to de-mobilize, and
effective thirty (30) days after Operator's receipt of such notice, Owner shall
be permanently relieved of the obligation to make payment of the O&M Fee to
Operator for those months during such extended event of Force Majeure that
Operator is demobilized. Owner shall pay all costs and expenses incurred in
connection with de-mobilization and re-mobilization to the extent such costs and
expenses are approved in writing by Owner. In addition, if such de-mobilization
continues for a period of one hundred eighty (180) or more consecutive days,
then Owner may terminate this Agreement by delivering written notice of
termination to Operator, such termination to be effective no earlier than thirty
(30) days after Operator's receipt of such notice
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16.4 Payments to Operator During an Event of Force Majeure. During the
continuance of an event of Force MaJeure, Owner's obligation to make Payments to
Operator for the O&M Fee and the AFAA shall be limited to the net income
(including insurance proceeds) derived from the Facility; provided, however, (i)
after the event of Force Majeure terminates, Owner shall bring current the
payment of all O&M Fees and AFAA (which are unpaid and accrued during the event
of Force Majeure) to Operator at such time as there is sufficient net income
from the Facility to make such payments and (ii) any such delayed payments of
the O&M Fee and the AFAA shall accrue interest at the rate of interest announced
by The Chase Manhattan Bank, N.A., from time to time, at its principal office
located at 1 Chase Manhattan Plaza, New York, New York 10081 (or any successor
financial institution), as its prime commercial lending rate; provided, however,
Operator shall not be entitled to any O&M Fees for those periods in which
Operator was de-mobilized pursuant to Section 16.3 hereof. Owner's obligations
under this Section 16.4 shall survive the termination or expiration of this
Agreement.
XVII.
LIMITATON OF LIABILITY
17.1 Operator. In no event, whether in tort, negligence, strict
liability, breach of contract, warranty or otherwise, shall Operator's total
liability hereunder to Owner exceed (a) in any Project Year, Two Million and
00/100 Dollars ($2,000,000.00) and (b) over the term of this Agreement, a total
aggregate amount of Six Million and 00/100 Dollars ($6,000,000.00); provided,
however, that the foregoing limitation on liability shall not apply to any
liability of Operator to Owner (i) resulting from willful misconduct or
intentional acts by Operator or (ii) otherwise covered by the insurance policies
required to be maintained by Operator pursuant to Section 10.1 hereof up to the
minimum amounts therein stated. Notwithstanding anything contained herein to the
contrary, in no event, whether in tort, negligence, strict liability, breach of
contract, warranty, indemnity or otherwise, shall Operator be liable to Owner
for special, incidental, exemplary or consequential damages, including but not
limited to, loss of profits or revenues.
17.2 Owner. In no event, whether in tort, negligence, strict
liability, breach of contract, warranty or otherwise, shall Owner's total
liability hereunder to Operator exceed (a) in any Project Year, Two Million and
00/100 Dollars ($2,000,000.00) and (b) over the term of this Agreement, a total
aggregate amount of Six Million and 00/100 Dollars ($6,000,000.00); provided,
however, that the foregoing limitation on liability shall not apply to any
liability of Owner to Operator (i) resulting from willful misconduct or
intentional acts by Owner, or (ii) otherwise covered by the insurance policies
required to be maintained by Owner pursuant to Section 10.2 hereof up to the
minimum amounts therein stated. Notwithstanding anything contained herein to the
contrary, in no event, whether in tort, negligence, strict liability, breach of
contract, warranty, indemnity or otherwise, shall Owner be liable to Operator
for special, incidental, exemplary or consequential damages, including but not
limited to, loss of profits or revenues, except Owner shall indemnify Operator
against claims from Owner's customers for special, incidental, exemplary or
consequential damages up to, but not in excess of, a total
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aggregate amount of Three Million and 00/100 Dollars ($3,000,000.00) over the
term of this Agreement.
XVIII.
RESOLUTION OF DISPUTES
18.1 Resolution by Parties.
(a) In the event that a dispute arises hereunder between the parties,
the parties shall attempt in good faith to settle such dispute by mutual
discussions within thirty (30) days after the date that a party gives written
notice of the dispute to the other party; provided, however, that if the dispute
involves the amount of an invoice and after ten (10) days of mutual discussion
either party believes in good faith that further discussion will not resolve the
dispute to its satisfaction, such party may immediately refer the matter to the
expert for consideration pursuant to Section 18.2 hereof.
(b) In the event that the dispute is not resolved in accordance with
Section 18.l(a) hereof, either party may refer the dispute to the chief
executive officers or chief operating officers of the respective parties for
further consideration. In the event that such individuals are unable to reach
agreement within fifteen (15) days, or such longer period as they may agree,
then either party may refer the matter to an expert in accordance with Section
18.2 hereof.
18.2 Mediation by Expert.
(a) In the event that the parties are unable to resolve a dispute in
accordance with Section 18.1 hereof, then either party, in accordance with this
Section 18.2, may refer the dispute to an expert for consideration of the
dispute and to obtain a recommendation from the expert as to the resolution of
the dispute; provided, however, that with respect to disputes that involve the
amount of an invoice, either party may before any such dispute arises require
that an expert be appointed in accordance with the provisions of Section 18.2(b)
hereof and shall nominate a person it proposes to be the expert. Such an expert
shall have responsibility for considering all disputes that involve the amount
of invoices until replaced in accordance with the provisions of Section 18.2(b)
hereof.
(b) The party initiating submission of the dispute to the expert shall
provide the other party with a notice stating that it is submitting the dispute
to an expert and nominating the person it proposes to be the expert. The other
party shall, within fifteen (15) days of receiving such notice, notify the
initiating party whether such person is acceptable. If the party receiving such
notice fails to respond or notifies the initiating party that the person is not
acceptable, the parties shall meet and discuss in good faith for a period of ten
(10) days to agree upon a person to be the expert. If the parties are unable to
agree, the responding party shall by the end of such ten (10) day period
nominate a person to be an expert, whereupon the two nominated experts shall
meet and agree upon a third person who shall be the expert. Should an expert
die, resign, refuse
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to act or become incapable of performing his or her functions, the vacancy shall
be filled by the method by which the expert was originally appointed.
(c) (i) Consideration of the dispute by an expert shall be initiated
by the party who is seeking consideration of the dispute by the expert
submitting to both the expert and the other party written materials setting
forth:
(A) a description of the dispute;
(B) a statement of the party's position; and
(C) copies of records supporting the party's position.
(ii) Within ten (10) days of the date that a party has submitted the
materials described in Section 18.2(c)(i) hereof, the other party may submit to
the expert:
(A) a description of the dispute;
(B) a statement of the party's position; and
(C) copies of any records supporting the party's position.
The expert shall consider any such information submitted by the
responding party within the period provided in Section 18.2(c) (ii) hereof and,
in the expert's discretion, may consider any additional information submitted by
either party at a later date.
(d) The parties shall not be entitled to apply for discovery of
documents, but shall be entitled to have access to the other party's relevant
records and to receive copies of the records submitted by the other party.
(e) Each party shall designate one person knowledgeable about the
issues in dispute who shall be available to the expert to answer questions and
provide any additional information requested by the expert. Except for such
person, a party shall not be required to, but may, provide oral statements or
presentations to the expert or make any particular individuals available to the
expert.
(f) Except as provided in Section 18.2(h) hereof with respect to the
payment of costs, the proceedings shall be without prejudice to any party and
any evidence given or statements made in the course of this process may not be
used against a party in any other proceedings. The process shall not be regarded
as an arbitration and the laws relating to commercial arbitration shall not
apply. Unless the parties agree m writing signed by both parties at the time the
expert is selected that the decision of the expert will be binding, the
determination of the expert shall not be binding.
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(g) When consideration of the dispute by an expert is initiated, the
expert shall be requested to provide a recommendation within fifteen (15) days
after the ten (10) day response period provided in Section 18.2(c)(ii) above has
run. If the expert's recommendation is given within such fifteen (15) day
period, or if the expert's recommendation is given at a later time and neither
party has at such time initiated any other proceeding concerning the dispute,
the parties shall review and discuss the recommendation with each other in good
faith for a period of ten (10) days following delivery of the recommendation
before proceeding with any other actions.
(h) If a party does not accept the recommendation of the expert with
respect to the dispute, it may initiate arbitration proceedings in accordance
with Section 18.3 hereof, provided, however, that prior to initiating the
arbitration proceedings it shall have paid all costs of the expert (including
the reimbursement of any costs paid to the expert by the other party) and all
out-of-pocket costs of the other party. Similarly if the expert has not
submitted its recommendation within the time period provided in Section 18.2(g)
hereof, a party may initiate arbitration proceedings in accordance with Section
18.3 hereof, provided that prior to initiating the arbitration proceedings it
shall have paid all costs of the expert (including the reimbursement of any
costs paid to the expert by the other party).
(i) Except as provided in Section 18.2(h) hereof, the costs of
engaging an expert shall be borne equally by the parties and each party shall
bear its own costs in preparing materials for, and making presentations to, the
expert.
(j) Without prejudice to the parties' rights to initiate arbitration
proceedings following the recommendation of the expert in accordance with
Section 18.2(h), the parties shall act in accordance with the recommendation
of the expert until resolution of the dispute by arbitration.
18.3 Arbitration. In the event a dispute arises between Owner and
Operator which is not resolved pursuant to Section 18.1 or 18.2 hereof, as
applicable, each party, as its sole remedy, other than mediation pursuant to the
terms of Section 18.2 hereof, for resolution of such dispute, shall, have the
right to pursue arbitration pursuant to the terms hereof. All claims, disputes,
and other matters in question arising out of or relating to this Agreement or
the breach thereof and winch are resolved by arbitration shall be decided by
arbitrators selected as hereinafter provided and shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then obtaining, unless the parties mutually agree otherwise. The
resolution of such disputes shall not delay Operator's performance of its
undisputed obligations under the terms of this Agreement nor Owner's payment to
Operator for such Work. The arbitration shall be held in New York, New York, and
any arbitration demand must be filed with the American Arbitration Association
office located closest to New York, New York. If the claim or defense of either
party was without merit, the arbitrators may require that the party at fault pay
or reimburse the other party for (i) fees and expenses, including, attorneys and
expert fees and expenses, and (ii) reasonable out of pocket expenses incurred by
the other party in connection with the arbitration proceedings.
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18.4 Selection of Arbitrators. Each dispute shall be submitted to
three (3), arbitrators, one (1) arbitrator being selected by Owner, one (1)
arbitrator being selected by Operator, and the third arbitrator being selected
by the two (2) so selected. The party initiating the arbitration shall include
in its notification under Section 18.5 below the designation of its selected
arbitrator and the party receiving such notification shall designate its
arbitrator within fifteen (15) days thereafter and notify the initiating party
and its arbitrator of the selection. If the arbitrators selected by Owner and
Operator cannot agree on a third arbitrator within fifteen (15) days after the
second arbitrator is selected, the third arbitrator shall be selected by the
American Arbitration Association. In the event the party receiving notification
of a demand for arbitration shall not have selected its arbitrator and given
notice thereof to the other party and its arbitrator within fifteen (15) days
after receiving such notification, such arbitrator shall be selected by the
American Arbitration Association. Should a vacancy arise because any arbitrator
dies, resigns, refuses to act or in the opinion of his fellow arbitrators
becomes incapable of performing his or her functions, the vacancy shall be
filled by the method by which that arbitrator was originally appointed.
18.5 Notice. Notice of demand for arbitration shall be filed in
writing with the other party to this Agreement and with the American Arbitration
Association. The demand shall be made within a reasonable time after the claim,
dispute or other matter in question has arisen. In no event shall the demand for
arbitration be made after the date when the applicable statute of limitations
would bar institution of a legal or equitable proceeding based on such claim,
dispute, or other matter in question; provided, however, any claims asserted by
Owner with respect to a breach of the warranty set forth in Section 7.1 hereof
shall be made within one (1) year after the termination of this Agreement.
18.6 Award. This agreement to arbitrate shall be specifically
enforceable under the prevailing arbitration law. The award rendered by the
arbitrators shall be final and judgment may be entered upon it in accordance
with applicable law in any court having jurisdiction thereof.
18.7 Survival. This Article XVIII shall survive termination of this
Agreement.
XIX.
CONFIDENTIALITY AND INTELLECTUAL PROPERTY
19.1 Confidential Information. Operator agrees to keep confidential
and not to disclose to any person for use for any purpose other than the
performance of the Work any written or other tangible information which is
marked or designated by Owner as confidential or proprietary (including
documents, computer records, specifications, formulae, evaluations, methods,
processes, technical descriptions, reports and other data, records and
information) provided to or created or acquired by Operator solely in the course
of the performance of the Work (collectively, "Owner Confidential Information").
Owner agrees to keep confidential and not to disclose to any person for use for
any purpose other than in connection with Owner's ownership of the Facility any
written or other tangible information which is marked or designated by Operator
as confidential or proprietary (including documents, computer records,
specifications,
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formulae, evaluations, methods, processes, technical descriptions, reports and
other data records and information) provided to it by Operator, but not provided
to Or created or acquired by operator solely in the course of the performance of
the Work (Collectively, "Operator Confidential Information", and together with
the Owner Confidential Information, the "Confidential Information").
Notwithstanding the foregoing, operator and owner shall be entitled to disclose
Owner Confidential Information or Operator Confidential Information, as the case
may be:
(i) to its respective directors, officers, employees, subcontractors,
agents or professional advisors to the extent necessary for performance of its
obligations under this Agreement or to its auditors for the Purposes Of any
audit of its accounts, provided that it first obtains from any such Person or
entity to whom the disclosure is to be made an agreement of confidentiality in
favor of the other party with respect to the Confidential Information in
question substantially on the terms of this Article XIX; provided, however, in
the case of employees, the party desiring to disclose Confidential information
need not obtain a confidentiality agreement from such employees, but shall make
such employees aware of, and require that such employees comply with, the
confidentiality obligations contained herein;
(ii) when required to do so by law or by or pursuant to the rules of
any order having the force of law of any court, association or agency of
competent jurisdiction or any governmental agency, provided that the party
seeking to disclose Confidential Information first informs the other party of
its intent to disclose such Confidential information so that such other party
can seek a protective order or other equitable relief to prevent disclosure of
such Confidential Information;
(iii) to the extent that the Confidential Information has, except as a
result of breach of confidentiality by a party, become publicly available or
generally known to the public at the time of such disclosure;
(iv) to the extent that a party has acquired the Confidential
Information from a third party who is not in breach of any obligation as to
confidentiality;
(v) to the extent that the Confidential Information has been
independently developed by employees who have not had access to the Confidential
Information of the other party; or
(vi) to any person with the prior written consent of the other party.
19.2 Return of Confidential Information. Upon termination of this
Agreement, Operator shall return to Owner the Owner Confidential Information
(including all copies thereof) within its possession or control and Owner shall
return to Operator the Operator Confidential Information (including all copies
thereof) within its possession or control.
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19.3 Continuation of Confidentiality Obligations. The obligations
under this Article XIX shall continue for a period of three (3) years following
the termination of this Agreement.
19.4 Ownership of Confidentiality Information. All Owner Confidential
Information shall be and shall remain the property of Owner and all Operator
Confidential Information sha1l be and shall remain the property of Operator.
19.5 Intellectual Property.
(a) All of Owner's intellectual property rights shall remain the
property of Owner, but Owner hereby grants to Operator an irrevocable, non-
exclusive, royalty-free, non-transferable license to use such intellectual
property to the extent that Operator requires use of such intellectual property
in connection with the performance of the Work during the term of this
Agreement.
(b) Operator hereby grants to Owner an irrevocable, non-exclusive,
royalty-free license to use any intellectual property rights owned by Operator
and required in connection with the Facility. Such license shall be non-
transferrable and limited for the use and benefit of the Facility, except that
Owner may assign the benefit of such license to Lender.
(c) Before entering into an agreement with a third party relating to
the supply of materials specifically created by such third party for the
Facility, Operator shall request that such third party grant licenses to
Operator and Owner (with rights to Owner to assign or sublicense to any person
appointed operator of the Facility) to use all intellectual property rights
which arise in connection with such materials. In addition, Operator shall use
reasonable efforts to procure that intellectual property rights owned or
developed by third parties and used by Operator in connection with the Facility
be licensed either (i) to both Operator and Owner or (ii) to Operator solely,
but with rights to sub-license such intellectual property rights to Owner.
(d) Owner shall have the right either to (i) assign all sub-licenses
of intellectual property rights granted to it or (ii) grant sub-licenses to any
new operator of the Facility in respect of intellectual property in respect of
which a sub-license has been granted to Owner; provided, however, any such sub-
licenses shall limit the use of intellectual property for the benefit of the
Facility.
XX.
MISCELLANEOUS
20.1 Governing Law. This is Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey, without giving
effect to the conflict of laws principles thereof.
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20.2 Severability. Every provision of this Agreement is intended to be
severable such that if any term or provision hereof is illegal or invalid for
any reason, such provision shall be severed from this Agreement and shall not
affect the validity of the remainder of this Agreement.
20.3 Entire Agreement. This Agreement constitutes the entire agreement
between Owner and Operator relating to the subject matter hereof and supersedes
and replaces all prior and contemporaneous agreements and understandings not
incorporated herein by reference thereto, whether written or oral, and sets
forth all the representations, covenants and warranties upon which Owner and
Operator rely in entering into this Agreement.
20.4 Amendments. No amendment or modification hereof shall be valid or
binding upon the parties hereto unless evidenced in writing and signed by a duly
authorized representative of Owner and Operator and consented to by Lender.
20.5 Waiver. No failure by Owner to insist upon the strict performance
of any term, covenant or condition of this Agreement, or to exercise any right
or remedy upon breach of any provision, and no acceptance of payment or
performance during the continuation of any such breach, shall constitute a
waiver of any term, covenant or condition herein or a waiver of any subsequent
breach or default in the performance of any term, covenant or condition herein.
20.6 Original and Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original for all
purposes, but all of which shall constitute one and the same instrument.
20.7 Independent Contractor. Operator shall perform its duties and
obligations hereunder as an independent contractor, and nothing contained herein
shall be deemed to create a relationship of employer/employee, master/servant,
agency (except as otherwise expressly set forth herein), partnership or joint
venture.
20.8 Limited Recourse. Any claim against Owner that may arise under
this Agreement shall be made only against, and shall be limited to the assets
of, Owner, and no judgment, order or execution entered in any suit, action or
proceeding thereon shall be obtained or enforced against any partner or joint
venturer of Owner or the assets of such partner or joint venturer or any
incorporator, shareholder or other equity holder, employee, officer or director
thereof, whether acting individually or in a representative capacity hereunder
or in connection with the ownership, operation or maintenance of the Facility
(or, in the case of such partners or joint venturers that are partnerships, of
any partner thereof), or against any direct or indirect parent corporation or
affiliate or any incorporator, shareholder or other equity holder, employee,
officer or director of any thereof, whether acting individually or in a
representative capacity hereunder or in connection with the ownership, operation
or maintenance of the Facility, for the purpose of obtaining satisfaction of any
payment of any amount owing under this Agreement.
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20.9 Captions. The captions contained in this Agreement are for
convenience and reference only and in no way define, describe, extend or limit
the scope or intent of this Agreement or the intent of any provision contained
herein.
20.10 Exhibits. All Exhibits referenced in this Agreement shall be
incorporated into this Agreement by such reference and shall be deemed to be an
integral part of this Agreement.
20.11 Effectiveness of Agreement. This Agreement shall only become
effective upon the termination of the Existing O&M Agreement by Owner pursuant
to the terms of the Termination Agreement. If Owner does not elect to terminate
the Existing O&M Agreement pursuant to the Termination Agreement, then this
Agreement shall be null and void and of no force or effect.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed as of the date and year first above written.
CAMDEN COGEN L.P. d/b/a. Camden Cogen,
Limited Partnership
By: Cogen Technologies Camden GP Limited
Partnership, a Delaware limited partnership,
its general partner
By: Cogen Technologies Camden, Inc., its
general partner
By: /s/ J.M. Bollinger
------------------------------------------------
Name: J.M. Bollinger
---------------------------------------------
Title: SR. VP/COO
--------------------------------------------
"OWNER"
By: /s/ A.C. White
------------------------------------------------
Name: A.C. White
---------------------------------------------
Title: GEN. MGR. Global O&M Services
--------------------------------------------
"OPERATOR"
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POWER PURCHASE
AND
OPERATIONS COORDINATION AGREEMENT
BETWEEN
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
AND
COGEN TECHNOLOGIES NJ VENTURE
DATED June 5, 1989
____________
<PAGE>
TABLE OF CONTENTS
PAGE
----
RECITALS....................................... 1
ARTICLE I DEFINITIONS.................................... 4
ARTICLE II GENERAL CONDITIONS OF DELIVERY AND
ACCEPTANCE OF NET ELECTRICAL POWER OUTPUT...... 9
Section A - Warranty of Qualifying Facility
Status............................. 9
Section B - Repeal of PURPA.................... 10
Section C - Verification and Nomination of
Capacity........................... 11
Section D - Exceptions to Obligation to
Accept Electrical Power Output..... 13
Section E - Obligation to Provide Reactive
Power.............................. 16
Section F - Condition Precedent................ 17
Section G - Relationship to TRANSMISSION
AGREEMENT.......................... 18
ARTICLE III TERM........................................... 18
ARTICLE IV PURCHASE PRICE AND PAYMENT CONDITIONS.......... 19
Section A - Monthly Energy Charge.............. 19
Section B - Monthly Capacity Charge............ 21
Section C - Monthly Service Charge............. 25
Section D - Recovery of Payments............... 25
Section E - Replacement Energy and
Capacity Costs..................... 27
Section F - Security Provision................. 32
ARTICLE V BILLING AND PAYMENT............................ 42
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TABLE OF CONTENTS
PAGE
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ARTICLE VI OPERATIONS COORDINATION.......................... 43
ARTICLE VII NET ELECTRICAL POWER OUTPUT SPECIFICATIONS....... 47
ARTICLE VIII METERING/RECORDS................................. 47
ARTICLE IX USE OF THE PUBLIC SERVICE SYSTEM................. 48
ARTICLE X DEDICATION OF FACILITIES......................... 49
ARTICLE XI LIABILITY........................................ 49
ARTICLE XII FORCE MAJAURE.................................... 50
ARTICLE XIII INDEMNIFICATION.................................. 52
ARTICLE XIV INSURANCE........................................ 54
ARTICLE XV WARRANTIES....................................... 58
ARTICLE XVI EVENTS OF DEFAULT AND BREACH OF CONTRACT......... 59
Section A - Default by VENTURE................... 59
Section B - Default by PSE&G..................... 61
Section C - Remedies............................. 63
ARTICLE XVII ARBITRATION...................................... 65
ARTICLE XVIII SPECIFIC PERFORMANCE............................. 69
ARTICLE XIX ENTIRE AGREEMENT................................. 70
ARTICLE XX ASSIGNMENT/TRANSFER.............................. 70
ARTICLE XXI CURE BY FINANCIER................................ 72
ARTICLE XXII FINANCIER SECURITY AGREEMENTS.................... 75
ARTICLE XXIII DETERMINATION OF PSE&G COSTS..................... 77
ARTICLE XXIV STANDARD FOR PERFORMANCE......................... 77
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<PAGE>
TABLE OF CONTENTS
PAGE
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ARTICLE XXV STANDBY ELECTRIC SERVICE......................... 78
ARTICLE XXVI SUCCESSORS AND ASSIGNS........................... 78
ARTICLE XXVII CHOICE OF LAW.................................... 79
ARTICLE XXVIII CAPTIONS......................................... 79
ARTICLE XXIX COUNTERPARTS..................................... 79
ARTICLE XXX MISCELLANEOUS.................................... 80
ARTICLE XXXI RESERVATIONS..................................... 81
ARTICLE XXXII SURVIVAL OF OBLIGATIONS.......................... 81
ARTICLE XXXIII NOTICES.......................................... 81
EXHIBIT 1 INTERCONNECTION PLAN
EXHIBIT 2 PAYMENT TRACKING ACCOUNT
EXHIBIT 3 CONSENT TO ASSIGNMENT
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<PAGE>
COGEN TECHNOLOGIES NJ VENTURE
POWER PURCHASE
AND
OPERATIONS COORDINATION AGREEMENT
This AGREEMENT made and entered as of the 5th day of June, 1989 by and
between PUBLIC SERVICE ELECTRIC AND GAS COMPANY, a New Jersey corporation
(PSE&G) and COGEN TECHNOLOGIES NJ VENTURE (VENTURE), a New Jersey partnership.
RECITALS
WHEREAS, VENTURE owns and operates a grid connected COGENERATION
FACILITY which is located within the electric service territory of PSE&G at the
property of Bayonne Industries, Inc. and IMTT-Bayonne (BAYONNE) in the City of
Bayonne, County of Hudson, State of New Jersey;
WHEREAS, VENTURE has a contract to sell seventy-five and eight tenths
percent (75.8%) of the NET ELECTRICAL POWER OUTPUT to Jersey Central Power &
Light Company (JCP&L) and intends to sell to PSE&G the remaining twenty-four and
two tenths percent (24.2%) of the NET ELECTRICAL POWER OUTPUT produced by the
COGENERATION FACILITY, and PSE&G, in recognition of its obligation under the
Public Utility Regulatory Policies Act of 1978 (16 U.S.C. Sections 796 et seq.)
(PURPA) as implemented by the Federal Energy Regulatory Commission (FERC or
Commission) and the State of New Jersey Board of Public Utilities (NJBPU), will
purchase
<PAGE>
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pursuant to the terms and conditions set forth herein twenty-four and two tenths
(24.2%) of such NET ELECTRICAL POWER OUTPUT from the COGENERATION FACILITY;
WHEREAS, VENTURE has obtained, pursuant to the rules and regulations
of the FERC set forth at 18 C.F.R. 292.207(b), a certification that the
COGENERATION FACILITY is a qualifying facility in accordance with 18 C.F.R.
Section 292.203, as declared in FERC Docket No. QF86-972-000;
WHEREAS, VENTURE has constructed and shall maintain the COGENERATION
FACILITY in compliance with the regulations of the FERC applicable to qualifying
facility status during the term of this AGREEMENT;
WHEREAS, VENTURE has entered into agreements with BAYONNE and Exxon
Company USA (Exxon) pursuant to which BAYONNE and Exxon will purchase and
VENTURE will sell thermal energy;
WHEREAS, PSE&G is a public utility as defined in N.J.S.A 48:2-13 and,
as such, is required by applicable statutes and regulations to furnish safe,
adequate and proper service to its retail and sale-for-resale customers and
further, to have and maintain its property, plant and equipment in such
condition as to enable it to do so;
<PAGE>
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WHEREAS, VENTURE has entered into a Revised Transmission Service and
Interconnection Agreement, dated April 27, 1987 (TRANSMISSION AGREEMENT) with
PSE&G, which is incorporated by reference herein and made a part hereof, to
design, construct, install, operate and maintain the INTERCONNECTION so as to
interconnect the PROJECT with the electric transmission facilities of PSE&G
emanating from PSE&G's Bayonne Switching Station;
WHEREAS, PSE&G's obligation under this AGREEMENT and under the
TRANSMISSION AGREEMENT to receive instantaneous active electrical power output
from the COGENERATION FACILITY at the RECEIPT POINT shall not exceed 190,000 kw;
WHEREAS, PSE&G is a member of the Pennsylvania-New Jersey-Maryland
Interconnection (PJM); and
WHEREAS, PJM is a fully coordinated power pool which, pursuant to an
agreement executed by and among its members, affords to the member utilities for
the benefit of their customers reliable electric service at the lowest possible
cost;
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NOW, THEREFORE, in consideration of the recitals and mutual covenants
contained herein, the PARTIES hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms when used herein with capitalization shall have
the following meanings, unless a different meaning shall be expressly stated:
AGREEMENT means this Power Purchase and Operations Coordination
Agreement between VENTURE and PSE&G.
COGENERATION FACILITY means the three gas turbines and waste heat
boilers, one steam turbine, synchronous generators, and all appurtenant
structures and equipment constructed, installed, owned/leased, operated and
maintained by VENTURE at the property of BAYONNE, for the purpose of generating
steam and electricity and other forms of useful thermal energy output and having
an installed name-plate rating of 164.9 megawatts.
DATE OF COMMERCIAL OPERATION means the date on which the NJBPU
approves this AGREEMENT, unless the PARTIES do not give written acceptance
within thirty (30) days as provided in ARTICLE II, Section F.
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FINANCIER means any individual(s) or entity(ies) and any
representative(s) or trustee(s) for any such individual(s) or entity(ies):(i)
lending money to VENTURE for: (a) the construction or term financing of the
PROJECT; (b) the establishment and/or maintenance of working capital
requirements; and/or (c) the refinance or take-out of any such loan(s); and/or
(ii) participating as an equity investor in the PROJECT; and/or (iii) any lessor
under a lease finance arrangement. Such term includes the Prudential Insurance
Company of America (Prudential).
INTERCONNECTION means the 138,000-volt circuit reinforcements,
extensions and associated terminal facility reinforcements to the PUBLIC SERVICE
SYSTEM which have been designed, constructed, and installed by PSE&G to
interconnect the PROJECT with and to the PUBLIC SERVICE SYSTEM, as more fully
described in the TRANSMISSION AGREEMENT as set forth in Exhibit 1.
LOAN AGREEMENT means any agreement between VENTURE and one or more
FINANCIERS pursuant to which VENTURE arranges for and obtains debt financing to
construct and/or operate the PROJECT. Such term includes the Term Loan Agreement
between VENTURE and Prudential dated as of November 1, 1987, as amended pursuant
to the First Amendment to the Term Loan Agreement dated as of December 15, 1988.
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MONTH means the calendar month commencing at 12:00.01 a.m. Eastern
Time on the first day of the calendar month and concluding at midnight Eastern
Time on the final day of the same calendar month.
NET ELECTRICAL CAPACITY means the average monthly amount of electrical
capacity in kilowatts produced at the COGENERATION FACILITY during ON-PEAK
PERIODS less the amount of electric capacity consumed by the COGENERATION
FACILITY'S in-plant load during ON-PEAK PERIODS, and delivered to PSE&G at the
RECEIPT POINT, determined by dividing the NET ELECTRICAL ENERGY during such ON-
PEAK PERIOD by the total hours in such ON-PEAK PERIOD.
NET ELECTRICAL ENERGY means the amount of electrical energy in
kilowatthours produced at the COGENERATION FACILITY, less the amount of electric
energy consumed by the COGENERATION FACILITY'S in-plant load, and delivered to
PSE&G at the RECEIPT POINT.
NET ELECTRICAL POWER OUTPUT means the NET ELECTRICAL ENERGY and NET
ELECTRICAL CAPACITY.
OFF-PEAK PERIOD means all other hours of a week exclusive of the ON-
PEAK PERIOD.
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ON-PEAK PERIOD means, as specified in PSE&G's Purchased Electric Power
Tariff, the period from 7:00 a.m. to 9:00 p.m. (Eastern Time) Monday through
Friday, excluding holidays, as from time to time defined by PJM, or as otherwise
designated in PSE&G's Purchased Electric Power Tariff then in effect.
PARTY or PARTIES means PSE&G or VENTURE, or both, and their respective
successors or assigns.
PROJECT means the COGENERATION FACILITY, SUBSTATION FACILITY and
associated facilities and equipment constructed, owned/leased, operated and
maintained by VENTURE at the property of BAYONNE for the purpose of producing,
among other things, electric power.
PUBLIC SERVICE SYSTEM means the electric power generation,
transmission, subtransmission and distribution facilities owned, operated and
maintained by PSE&G, which includes, the INTERCONNECTION.
RECEIPT POINT, also referred to as POINT OF INTERCONNECTION, means the
point of physical connection of the PROJECT to the PSE&G 138kV transmission
system located at the point at which the PSE&G 138kV transmission system meets
with and connects to the SUBSTATION FACILITY. The
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RECEIPT POINT is identified in Exhibit 1 of the TRANSMISSION AGREEMENT, which
exhibit is made a part hereof and incorporated by reference herein.
SUBSTATION FACILITY means the 138kV substation designed, constructed,
installed, owned, operated and maintained by VENTURE at the PROJECT which is
required to connect the COGENERATION FACILITY with the PUBLIC SERVICE SYSTEM, as
more fully described in the TRANSMISSION AGREEMENT.
SUMMER SEASON means the consecutive period of time from June 1 to
September 30 of any year.
SYSTEM EMERGENCY means the existence of a physical or operational
condition and/or the occurrence of an event on the PUBLIC SERVICE SYSTEM or PJM
System which in PSE&G's sole judgment is: (i) imminently likely to endanger life
or property; or (ii) impairs and/or imminently will impair: (a) PSE&G's ability
to discharge its statutory obligation(s) to provide safe, adequate and proper
service to its retail and sale-for-resale customers; and/or (b) the safety
and/or reliability of the PUBLIC SERVICE SYSTEM or PJM System.
WINTER SEASON means the consecutive period of time from December 1 to
the last day in February.
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ARTICLE II
GENERAL CONDITIONS OF DELIVERY AND
ACCEPTANCE OF NET ELECTRICAL POWER OUTPUT
Except as otherwise provided herein, VENTURE agrees to deliver and
sell and PSE&G agrees to accept and purchase during the term of this AGREEMENT
twenty-four and two tenths percent (24.2%) of the NET ELECTRICAL POWER OUTPUT
from the COGENERATION FACILITY.
SECTION A
WARRANTY OF QUALIFYING FACILITY STATUS
VENTURE warrants that, at the date of first power deliveries from
VENTURE's COGENERATION FACILITY and subject to Section B of this ARTICLE II,
during the term of this AGREEMENT, the COGENERATION FACILITY shall meet the
requirements for a qualifying facility as established by the FERC's Rules and
Regulations set forth in Title 18 C.F.R. Section 292 et seq. Subject to
Section B of this ARTICLE II, VENTURE's obligation to deliver and sell and
PSE&G's obligation to accept and purchase twenty-four and two tenths percent
(24.2%) of the NET ELECTRICAL POWER OUTPUT shall be conditioned on VENTURE's
maintaining the requisite qualifying facility status as set forth in PURPA and
the Rules and Regulations of the FERC implementing same during the term of this
AGREEMENT as applicable to the COGENERATION FACILITY with respect to qualifying
facility status.
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SECTION B
REPEAL OF PURPA
In the event that (i) Sections 201 and 210 of PURPA are for any reason
no longer in effect, or (ii) the COGENERATION FACILITY ceases to qualify as a
qualifying facility under PURPA for any reason not within the control of
VENTURE, including but not limited to a reduction or cessation in thermal energy
use by BAYONNE or Exxon, the rights and obligations of VENTURE and PSE&G under
this AGREEMENT will continue so long as the NJBPU does not take any action which
would prevent PSE&G from full and timely recovery from its customers of all
costs and charges paid to VENTURE for capacity and energy delivered and sold to
PSE&G, and so long as the continued operation of the COGENERATION FACILITY and
the continued acceptance and purchase of twenty-four and two tenths percent
(24.2%) of the NET ELECTRICAL POWER OUTPUT by PSE&G at the rates set forth
herein does not violate any federal, state or local law, ordinance or regulation
or subject VENTURE or its owners to regulation under the Public Utility Holding
Company Act of 1935 (PUHCA) where such regulation is unreasonably burdensome. If
the continued operation of the COGENERATION FACILITY as a result of the
occurrence of the events specified in (i) or (ii) above would violate any such
law, ordinance or regulation or would subject VENTURE or its owners to
regulation under PUHCA where such regulation is unreasonably burdensome, the
PARTIES shall negotiate in good
<PAGE>
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faith to attempt to reach an agreement on a power sale contract, lease or other
arrangement which will provide for the continued purchase of twenty-four and two
tenths percent (24.2%) of the NET ELECTRICAL POWER OUTPUT by PSE&G under terms
which provide the same economic benefit to the PARTIES as is provided under this
AGREEMENT. If the NJBPU no longer permits such full and timely recovery or the
existing recovery mechanism for such costs is changed, modified, and/or
eliminated so as to impair such full and timely recovery; and if an event
specified in (i) or (ii) above has occurred, the PARTIES shall negotiate in good
faith to attempt to reach an agreement on a power sale contract, lease or other
arrangement which will provide for the continued acceptance and purchase of
twenty-four and two tenths percent (24.2%) of the NET ELECTRICAL POWER OUTPUT by
PSE&G at a rate which provides substantially similar economic benefits to the
PARTIES as is provided under this AGREEMENT and which the NJBPU will permit
PSE&G to recover from its ratepayers. If, after such negotiations, the PARTIES
are unable to reach such an agreement, either PARTY may exercise any other
remedy provided under the AGREEMENT.
SECTION C
VERIFICATION AND NOMINATION OF CAPACITY
In order to establish VENTURE's obligation to deliver twenty-four and
two tenths percent (24.2%) of the NET ELECTRICAL CAPACITY to PSE&G and PSE&G's
obligation to pay for such NET ELECTRICAL CAPACITY in accordance with
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ARTICLE IV of this AGREEMENT, VENTURE has nominated the following nominal net
seasonal capacity levels (Net Seasonal Capacity) specific to the reference
ambient temperature indicated:
SUMMER SEASON 150 MW @ 94 degrees F
WINTER SEASON 179 MW @ 25 degrees F
The PARTIES agree that NET ELECTRICAL CAPACITY delivered is a function
of ambient temperature and that nominated or renominated values of Net Seasonal
Capacity are to be adjusted to actual prevailing average ambient temperature
conditions for purposes of determining whether any excess capacity has been
delivered pursuant to ARTICLE IV, Section B, or for determining any replacement
energy or capacity costs pursuant to ARTICLE IV, Section E.
VENTURE shall be entitled to an initial renomination of the SUMMER
SEASON and WINTER SEASON nominal Net Seasonal Capacity based upon performance,
test or demonstrated results from actual operations prior to one (1) year after
the DATE OF COMMERCIAL OPERATION. These renominated values shall be in effect
for all purposes of this AGREEMENT until a future renomination is made in
accordance with this Section C.
VENTURE shall be entitled to renominate the value(s) of the SUMMER
SEASON and/or WINTER SEASON Net Seasonal Capacity levels every year, starting
from the date of the initial renomination or the DATE OF COMMERCIAL OPERATION if
no initial renomination is made, for the
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balance of the term of this AGREEMENT. In no event, however, shall any
renominated capacity value lie outside a range of plus or minus ten percent
(10%) of the SUMMER SEASON and/or WINTER SEASON Net Seasonal Capacity values
determined for the initial renomination or the values set forth in this section
if no initial renomination is made.
Each subsequent renomination after the initial renomination shall be
based on the COGENERATION FACILITY's projected performance based on actual or
test results during expected ambient conditions in the SUMMER SEASON and/or
WINTER SEASON. VENTURE agrees to provide PSE&G with all data reasonably
necessary for PSE&G to confirm the renominated value(s).
SECTION D
EXCEPTIONS TO OBLIGATION TO ACCEPT
ELECTRICAL POWER OUTPUT
Notwithstanding the above, and in addition to the provisions of
ARTICLE XII of this AGREEMENT, PSE&G shall be excused from accepting all or a
portion of twenty-four and two tenths percent (24.2%) of the NET ELECTRICAL
POWER OUTPUT:
(1) if VENTURE fails to comply with the Interconnection, Protection and
Safety Requirements and Standards for Customer-Owned Generating
Facilities as set forth in Exhibit 2.
(2) If PSE&G is unable to back down its own generation sufficiently to
accept tventy-four and two tenths
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percent (24.2 %) of the NET ELECTRICAL POWER OUTPUT from the
COGENERATION FACILITY without jeopardizing the integrity of the PUBLIC
SERVICE SYSTEM or the PJM System.
(3) If Transmission facilities are loaded to their published ratings and
continued or increased power output from the COGENERATION FACILITY
would adversely affect the reliability of the PUBLIC SERVICE SYSTEM or
the PJM System.
(4) Under Light Load Conditions, during which PSE&G shall use its best
efforts to treat VENTURE equally with all other non-utility generation
on the PUBLIC SERVICE SYSTEM in accordance with established procedures.
PSE&G shall give notice to VENTURE in time for VENTURE to cease the
delivery of twenty-four and two tenths percent (24.2%) of the NET
ELECTRICAL POWER OUTPUT which notice shall be served no less than two
(2) hours prior to the scheduled delivery. For purposes of this ARTICLE
II, Section D, the term "Light Load Conditions" means a minimum
generation emergency condition declared by PJM or the PSE&G Electric
System Operations Center or similar circumstances which may imminently
lead to such conditions without actions being taken by PSE&G to avoid
this circumstance. Such circumstances may include but shall not be
limited to conditions which may
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require a reduction in output of a PSE&G nuclear unit and/or removal
of a generation unit from service which could not be returned to
service in the next peak period.
(5) During any SYSTEM EMERGENCY if such purchases would contribute to such
SYSTEM EMERGENCY.
(6) If PSE&G intentionally interrupts acceptance of twenty-four and two
tenths percent (24.2%) of the NET ELECTRICAL POWER OUTPUT to conduct
planned maintenance of the interconnection or adjacent transmission,
and/or subtransmission facilities.
All cases of PSE&G's refusal to purchase from VENTURE shall be subject
subsequently to verification by the NJBPU, if requested by VENTURE. Where
practicable, PSE&G shall give VENTURE advance notice of any interruption,
curtailment or reduction effected pursuant to this Section D, the circumstances
requiring or necessitating the interruption, curtailment or reduction of PSE&G's
acceptance of twenty-four and two tenths (24.2%) of the NET ELECTRICAL POWER
OUTPUT and, if able, the reasons therefor, and the extent and duration thereof.
In the event PSE&G is unable, for any reason, to give VENTURE advance notice of
such interruption, curtailment or reduction of such acceptance, PSE&G shall, as
soon thereafter as practicable, contact VENTURE to confirm such interruption,
curtailment or reduction, explaining the circumstances requiring or
necessitating the interruption, curtailment or reduction,
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and, if able, furnish the reasons therefor and the extent and duration thereof.
At VENTURE's request, PSE&G shall provide written notice to VENTURE explaining
the circumstances requiring or necessitating any interruption, curtailment or
reduction of service effective pursuant to this ARTICLE II. PSE&G will resume
the acceptance of twenty-four and two tenths percent (24.2%) of the NET
ELECTRICAL POWER OUTPUT as soon as practicable after the reason for the
interruption, curtailment or reduction no longer exists.
In the event acceptance of twenty-four and two tenths percent (24.2%)
of the NET ELECTRICAL POWER OUTPUT is interrupted, curtailed or reduced by PSE&G
for any reason specified in this Section D, PSE&G agrees to use its best
efforts (consistent with PSE&G's existing obligations to restore service to its
retail and wholesale customers) to correct any condition and to restore
acceptance of such power. VENTURE expressly agrees that PSE&G is not liable for
damages of any kind to VENTURE or any third party, all as more fully set forth
in ARTICLE XI and ARTICLE XIII of this AGREEMENT, due to PSE&G's failure to
accept twenty-four and two tenths percent (24.2%) of the NET ELECTRICAL POWER
OUTPUT for any of the reasons expressed above.
SECTION 3
OBLIGATION TO PROVIDE REACTIVE POWER
PSE&G may request, and, when requested, VENTURE shall use best efforts
to provide reactive power, leading or lagging, from the COGENERATION FACILITY up
to the operating
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limits of the COGENERATION FACILITY to the extent that it does not require a
reduction in NET ELECTRICAL POWER OUTPUT and further, in the event of a SYSTEM
EMERGENCY, PSE&G may request VENTURE to provide reactive power, leading or
lagging, from the COGENERATION FACILITY and, if PSE&G makes such a request,
VENTURE shall use its best efforts to provide same up to the operating limits of
the COGENERATION FACILITY, whether or not same requires a reduction in NET
ELECTRICAL POWER OUTPUT.
SECTION F
CONDITION PRECEDENT
The following shall be a condition precedent to the effectiveness of
this AGREEMENT: A finding by the NJBPU in an Order that this AGREEMENT, as
presently constituted, is reasonable and prudent throughout the term of this
AGREEMENT and that PSE&G will be able to flow through to and/or fully and timely
recover from its ratepayers through the Levelized Energy Adjustment Clause or
its successor all purchased power costs incurred by PSE&G pursuant to this
AGREEMENT, which approval by the NJBPU shall be under terms and conditions
reasonably acceptable to both PSE&G and VENTURE.
After the foregoing condition has been satisfied, the PARTIES shall,
within thirty (30) days, affirm in writing, executed by both PARTIES, that this
condition precedent has been satisfied. In the event said condition precedent is
not satisfied, this AGREEMENT shall be void.
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SECTION G
RELATIONSHIP TO TRANSMISSION AGREEMENT
This AGREEMENT contains similar obligations with respect to certain
operations and coordination requirements as well as the obligations relating to
such requirements of the PARTIES under this AGREEMENT as are found in the
TRANSMISSION AGREEMENT. To the extent provisions of this AGREEMENT and the
TRANSMISSION AGREEMENT are similar and activities anticipated to be undertaken
to comply with this AGREEMENT are in substance the same as activities to be
undertaken to comply with the TRANSMISSION AGREEMENT, compliance by either PARTY
with the provisions of this AGREEMENT shall fulfill the obligations of such
PARTY under the TRANSMISSION AGREEMENT.
ARTICLE III
TERM
Subject to the condition precedent set forth in ARTICLE II above, this
AGREEMENT shall enter into effect as of the DATE OF COMMERCIAL OPERATION and
shall continue in effect for an initial term ending November 1, 2008. Upon the
expiration of the initial term, this AGREEMENT shall be renewed for two (2)
successive five (5) year renewal terms unless either PARTY provides written
notice of intent not to renew to the other no less than three (3) years prior to
the expiration of the then pending term.
At the expiration of this AGREEMENT, this
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AGREEMENT and each PARTY's obligation(s) hereunder shall automatically terminate
as of the effective date thereof; provided, however, expiration of this
AGREEMENT shall not relieve either PARTY from any obligation arising under this
AGREEMENT to pay any monies due to the other PARTY which monetary obligation was
incurred prior to the date of expiration of this AGREEMENT.
ARTICLE IV
PURCHASE PRICE AND PAYMENT CONDITIONS
Beginning on the DATE OF COMMERCIAL OPERATION and until the expiration
of the AGREEMENT, PSE&G agrees to pay VENTURE in accordance with Sections A and
B of this ARTICLE IV, a Monthly Energy Charge and a Monthly Capacity Charge as
defined below.
SECTION A
MONTHLY ENERGY CHARGE
The Monthly Energy Charge for any month shall be twenty-four and two
tenths percent (24.2%) of the NET ELECTRICAL ENERGY delivered by VENTURE to
PSE&G during any MONTH times VENTURE's Adjusted Base Rate. The Adjusted Base
Rate is composed of the sum of a Fixed Component, a Fuel Component and a GNP
Deflator Component, as follows:
(1) The Fixed Component is equal to two (2) cents/kWh, and is unchanged for
the duration of this AGREEMENT.
(2) The Fuel Component starts at one and eighty-eight
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hundredths (1.88) cents/kWh as of the DATE OF COMMERCIAL OPERATION and
shall remain in effect until the first day of the first MONTH which
begins after such date. On the first day of such MONTH and each
subsequent MONTH, the Fuel Component in effect for the previous MONTH
is multiplied by an Escalation Factor which shall be determined as
follows:
The Escalation Factor shall be a fraction, the numerator of which is
PSE&G's CIG rate or its successor rate for the MONTH during which any
NET ELECTRICAL ENERGY is being delivered and the denominator of which
is the CIG rate for the prior MONTH.
(3) The GNP Deflator Component on December 1, 1988 shall be seventy-two
hundredths (.72) cent/kWh, which shall remain in effect through
December 31, 1989. On January 1, 1990 and on January 1 of each year
thereafter, the GNP Deflator Component in effect for the previous year
is multiplied by an escalation factor as determined below for the
purposes of determining the GNP Deflator Component to be in effect
during such year. The escalation factor shall be determined using the
annual Implicit Price Deflator for Gross National Product (GNP) in the
Survey of Current Business published by the United States Department of
Commerce/Bureau
<PAGE>
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of Economic Analysis as follows:
(a) Multiply the current GNP Deflator Component by the fraction of
which the numerator is the GNP Deflator (Preliminary) for the calendar
year prior to the current year and the denominator which is the GNP
Deflator (Final) for the second calendar year prior to the current
year.
(b) When the GNP Deflator (Final) is published, re-calculate the
current GNP Deflator Component by using the fraction of which the
numerator is the GNP Deflator (Final) for the calendar year prior to
the current year and the denominator which is the GNP Deflator (Final)
for the second calendar year prior to the current year.
(c) The total energy payment for months in which the GNP Deflator
(Preliminary) was used shall be be recalculated and the appropriate
adjustment shall be made during the next billing period.
SECTION B
MONTHLY CAPACITY CHARGE
The Monthly Capacity Charge shall be twenty-four and two tenths
percent (24.2%) of the NET ELECTRICAL CAPACITY during such month times a
capacity rate equal to eight dollars and seventy-six cents ($8.76) per kW-month
effective on December 1, 1988 and escalated at four and nine tenths percent
(4.9%) on January 1, 1990 and January 1 of each year thereafter for the duration
of this AGREEMENT.
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1. Payment of the Monthly Capacity Charge shall be made in accordance with the
following:
(a) For the SUMMER SEASON PSE&G shall pay VENTURE in accordance with the
above Monthly Capacity Charge, but VENTURE shall not be entitled to
retain any amounts paid by PSE&G at a level of capacity in excess of
twenty-four and two tenths percent (24.2%) of the Net Seasonal Capacity
in Section C of ARTICLE II.
(b) For the WINTER SEASON PSE&G shall pay VENTURE in accordance with the
above Monthly Capacity Charge, but VENTURE shall not be entitled to
retain any amounts paid by PSE&G at a level of capacity in excess of
twenty-four and two tenths percent (24.2%) of the Net Seasonal Capacity
in Section C of ARTICLE II.
2. At the end of each SUMMER SEASON, PSE&G shall determine whether capacity in
excess of twenty-four and two tenths percent (24.2%) of the then Net Seasonal
Capacity nominated or renominated by VENTURE in Section C of ARTICLE II has
been delivered and sold to PSE&G. The total capacity delivered in such season
shall be determined by dividing the total number of kwh's actually delivered
by VENTURE during the ON-PEAK PERIOD of the SUMMER SEASON by the total of all
ON-PEAK hours during such SUMMER SEASON and multiplying the result by twenty-
four and two tenths
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percent (24.2%). The excess capacity shall be the amount by which the total
capacity as determined above exceeds twenty-four and two tenths percent
(24.2%) of the SUMMER SEASON capacity nominated or renominated by VENTURE in
Section C of ARTICLE II, as adjusted for the actual average prevailing
ambient temperature.
If PSE&G has paid for and has not requested such excess capacity, PSE&G
shall be entitled to and VENTURE shall refund any excess capacity charges
paid pursuant to this paragraph, such refund to be equal to four times the
product of: (a) the excess capacity determined in this Section B 2 of ARTICLE
IV, and (b) the Monthly Capacity Charge determined pursuant to this ARTICLE
IV Section B. Any such refund shall be credited against and an adjustment
made on the Statement of Payment to VENTURE with regard to the month of
September.
3. At the end of each WINTER SEASON, PSE&G shall determine whether capacity in
excess of twenty-four and two tenths percent (24.2%) of the then Net Seasonal
Capacity nominated or renominated by VENTURE in Section C of ARTICLE II has
been delivered and sold to PSE&G. The total capacity delivered in such season
shall be determined by dividing the total number of kWh's actually delivered
by VENTURE during the ON-PEAK PERIOD of the WINTER SEASON by the total of all
ON-PEAK PERIOD hours during such WINTER SEASON and
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multiplying the result by twenty-four and two tenths percent (24.2%). The
excess capacity shall be the amount by which the total capacity as determined
above exceeds twenty-four and two tenths percent (24.2%) of the capacity
nominated or renominated by VENTURE pursuant to Section C of ARTICLE II, as
adjusted for the actual average prevailing ambient temperature.
If PSE&G has paid for and has not requested such excess capacity, PSE&G
shall be entitled to and VENTURE shall refund any excess Capacity Charges for
said three (3) MONTH period, such refund to be equal to the sum of the
product of: (a) each MONTH of the three (3) MONTH excess capacity and (b) the
Monthly Capacity Charge pursuant to this ARTICLE IV Section B. Any such
refund shall be credited against and an adjustment made on the Statement of
Payment to VENTURE with regard to the month of February.
4. For purposes of this ARTICLE IV, Section B and Section E, it is agreed and
understood that the capacity nominated or renominated shall be value adjusted
to the average ambient temperature which actually prevailed during the ON-
PEAK PERIOD's of the applicable season. The procedure for adjustments which
shall be made by VENTURE using established correlations and/or vendor-based
performance curves or data depicting
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capacity output of the COGENERATION FACILITY as a function of ambient
temperature shall be submitted to PSE&G for approval. VENTURE shall provide
PSE&G with all the information and calculations used to make such
adjustments if so requested by PSE&G.
Prevailing average ambient temperature for purposes of adjusting the
applicable nominated or renominated capacity shall be determined from
available meteorological data as measured at Newark International Airport,
Newark, New Jersey.
SECTION C
MONTHLY SERVICE CHARGE
PSE&G shall charge VENTURE a monthly service charge for metering and
administrative expenses, as set forth under the service charge portion of the
applicable Purchased Electric Power tariff then on file with the NJBPU.
SECTION D
RECOVERY OF PAYMENTS
Each PARTY, having entered into this AGREEMENT in good faith, hereby
waives all rights on its part now or hereafter to undertake any proceeding for
the sole purpose of having the purchase rate, as calculated in this ARTICLE IV
of this AGREEMENT, set aside as being unjust and unreasonable or of impairing or
disallowing the full and timely recovery of any payment made by PSE&G under this
AGREEMENT. Each PARTY recognizes, however, that subsequent
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to execution and approval of this AGREEMENT, if any legislative or judicial
body or governmental agency having jurisdiction impairs or disallows the full
and timely recovery of any payments made by PSE&G under this AGREEMENT for
ratemaking purposes, then the PARTIES shall, within thirty (30) days thereafter,
execute an amendment to this AGREEMENT implementing the appropriate purchase
rate, which is that rate which the NJBPU or any successor will permit PSE&G to
recover on a full and timely basis from its ratepayers. Such a revised purchase
rate shall be effective as of the effective date of the legislative, judicial or
governmental agency pronouncement requiring such a revised purchase rate. Such
amendment and such revised rate shall be null and void ab initio in the event
that any such legislative, judicial or governmental agency pronouncement is not
upheld on appeal, and PSE&G shall, within thirty (30) days thereafter, pay to
VENTURE the amount by which the payments which would have been made under the
AGREEMENT in the absence of such amendment exceed the amount paid under such
amendment.
It is expressly agreed and understood that a prospective change in the
amount or the calculation of PSE&G's avoided cost within the meaning of PURPA
shall not give rise to a revision of the purchase price under this AGREEMENT
unless any legislative or judicial body or governmental agency having
jurisdiction disallows payments
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made by PSE&G hereunder for ratemaking purposes in accordance with the provision
of this Section D.
It is also expressly agreed and understood that this Section D does
not in any way authorize or permit any legislative or judicial body or
government agency having jurisdiction to impair or disallow the full, and timely
recovery of any payments made by PSE&G under this AGREEMENT.
PSE&G agrees to give notice to VENTURE of any challenge to the
validity of the AGREEMENT or to the full and timely recovery of any payments
under this AGREEMENT from its ratepayers in any regulatory or judicial
proceeding, so as to permit VENTURE to intervene in such proceeding provided
that the failure of PSE&G to give notice shall not be deemed a breach of this
AGREEMENT so long as such failure was due to good faith error or omission; PSE&G
further agrees to refrain from objecting or in any way opposing any application
by VENTURE to intervene before any regulatory body or judicial forum, or
otherwise fully participate before such body or forum, in which the validity or
consequences of the AGREEMENT is subject to challenge. VENTURE and PSE&G further
agree to use their best efforts to defend the AGREEMENT before such regulatory
body or judicial forum.
SECTION E
REPLACEMENT ENERGY AND CAPACITY COSTS
Effective on January 1 of each year following the
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first full year after the DATE OF COMMERCIAL OPERATION, if VENTURE fails to
generate and sell twenty-four and two tenths percent (24.2%) of the NET
ELECTRICAL POWER OUTPUT to PSE&G, and if this AGREEMENT has not been terminated
pursuant to ARTICLE XVI, VENTURE shall pay PSE&G Replacement Energy Costs and/or
Replacement Capacity Costs as provided below:
1. Replacement Energy Costs
For the purposes of this Section E, VENTURE shall be deemed to have
generated and sold a total amount of NET ELECTRICAL ENERGY to PSE&G at a
level for all ON-PEAK PERIOD hours during the SUMMER SEASON and WINTER
SEASON which shall be eighty-five percent (85%) of twenty-four and two
tenths percent (24.2%) of the Net Seasonal Capacity nominated or renominated
pursuant to Section C of ARTICLE II for such season, adjusted for the
average ambient temperature, multiplied by all ON PEAK hours during such
season (Average Generation). If twenty-four and two tenths percent (24.2%)
of the actual amount of NET ELECTRICAL ENERGY delivered by VENTURE to PSE&G
during all ON-PEAK PERIOD hours, for either the SUMMER SEASON or WINTER
SEASON including any credits calculated pursuant to Subparagraph 3 of this
Section E (Actual Generation) is less than the Average Generation, then
VENTURE shall pay PSE&G Replacement Energy Costs equal to the number of
kilowatthours by
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which the Average Generation exceeds the Actual Generation, multiplied by
PSE&G's Cost of Replacement Energy. The Cost of Replacement Energy during
the SUMMER SEASON or WINTER SEASON shall be the amount by which the
projected average PJM Billing Rate, as shown on Exhibit 2, for all hours of
such season during such year exceeds the Adjusted Base Rate in effect during
such season.
2. Replacement Capacity Costs
For the purposes of this Section E, VENTURE shall be deemed to have provided
Net Seasonal Capacity to PSE&G at an average level for all ON-PEAK PERIOD
hours during the SUMMER SEASON and WINTER SEASON which shall be eighty-five
(85%) of twenty-four and two tenths percent (24.2%) of the Net Seasonal
Capacity then nominated or renominated pursuant to Section C of ARTICLE II
for each season adjusted to the average ambient temperature (Average
Capacity). The Average Capacity for the second and third full years which
begin after the DATE OF COMMERCIAL OPERATION shall be based upon the actual
capacity achieved for all the ON-PEAX PERIOD hours during the SUMMER SEASON
and WINTER SEASON in the immediately preceding year. For all remaining years
of this AGREEMENT Average Capacity will be based upon an average of the
actual capacity during the SUMMER SEASONS and WINTER SEASONS
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respectively of the three immediately preceding years. If the actual amount
of Net Seasonal Capacity provided by VENTURE to PSE&G during all ON-PEAK
PERIOD hours during such season, including any credits calculated pursuant
to Subparagraph 3 of this Section E (Actual Capacity) is less than the
Average Capacity, then the capacity charge paid to VENTURE for such season
shall be multiplied times the ratio of the Actual Capacity divided by the
Average Capacity. The difference between the reduced capacity charge
determined above and the actual capacity charge paid to VENTURE shall be
refunded to PSE&G.
3. Performance Waiver Provision
In the event VENTURE shall incur (i) an event of Force Majeure in accordance
with ARTICLE XII, or (ii) a curtailment in accordance with ARTICLE II,
Section D(2), (3), (4), (5) or (6), then a credit towards VENTURE's Actual
Generation (Generation Credit) during either the SUMMER SEASON or WINTER
SEASON shall be calculated as follows:
GC = AG x (Nu divided by Nt) x (He divided by Ht)
Where GC = Generation Credit Per Affected Generator
AG = Average Generation
Nu = Nameplate Rating of Affected Generator
Nt = Total Nameplate Rating of all Generators
He = Lost ON-PEAK PERIOD Hours
Ht = Total ON-PEAK PERIOD Hours
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In addition, should VENTURE incur an event described in (i) or (ii),
as set forth above, then a credit towards VENTURE's Actual Capacity (Capacity
Credit) shall be calculated as follows:
CC = AC x (Nu divided by Nt) x (He divided by Ht)
Where CC = Capacity Credit per Affected Generator
AC = Average Capacity
4. Payment of Replacement Energy and Capacity Costs
Within sixty (60) days subsequent to the close of each season, PSE&G
shall submit to VENTURE a Replacement Energy Cost and Replacement
Capacity Cost Statement (Statement), setting forth the amount of any
payment to be made by VENTURE to PSE&G pursuant to this ARTICLE IV,
Section E. VENTURE shall make payment to PSE&G within thirty (30) days
of the date of the Statement.
This ARTICLE IV, Section E sets forth the methodology for calculating
Replacement Energy Costs and Replacement Capacity Costs to be paid to PSE&G in
the event VENTURE fails to fulfill certain performance obligations and if this
AGREEMENT has not been terminated pursuant to ARTICLE XVI. The inclusion of such
provision is not intended to create any express or implied right in VENTURE to
terminate this AGREEMENT. Termination of this AGREEMENT by VENTURE, except as
provided for in ARTICLE XVI or in the exercise of its rights under ARTICLE XVII
following a determination that PSE&G has breached this AGREEMENT, shall
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constitute a breach of this AGREEMENT.
SECTION F
SECURITY PROVISION
1. A Payment Tracking Account, an illustration of which is made a part
of this AGREEMENT as Exhibit 2, shall be established on the DATE OF COMMERCIAL
OPERATION to define the cumulative difference between the projected payments to
be made by PSE&G to VENTURE under this AGREEMENT (Projected Contract Payment)
and the projected payments which would have been made if such payments were
based on the PJM Billing Rate for energy and the PJM Capacity Deficiency Rate
for capacity (hereinafter referred to as the PJM Price), as shown in Exhibit 2.
The Payment Tracking Account shall not be funded, and any balance in the Payment
Tracking Account shall accrue interest at a rate equal to the Prime Rate of The
Chase Manhattan Bank, N.A., New York, New York, on January lst of each year but
in no event shall the interest rate applied to this account exceed thirteen
percent (13%).
2. For each twelve (12) MONTH period (Period) after the DATE OF
COMMERCIAL OPERATION, the Payment Tracking Account shall be calculated by PSE&G
pursuant to Exhibit 2 as follows:
(a) The difference (Difference Value) between the Projected Contract
Payment (Rate A) and the PJM Price (Rate B) shown in column headed
Rate A - Rate B, is fixed, for the term of the AGREEMENT, as shown for
each year.
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(b) The Energy column is shown for illustrative purposes only, and twenty-
four and two tenths percent (24.2%) of the actual NET ELECTRICAL
ENERGY delivered and sold to PSE&G for each Period will be used to
calculate the annual amount to be included in the Payment Tracking
Account.
(c) The interest rate shown in the Cumulative column is shown for
illustrative purposes only. The interest rate to be applied annually
to the balance in the Cumulative column is specified in Paragraph 1 of
this Section F.
(d) The Cumulative amount in the Payment Tracking Account at the end of
the first Period will be determined by multiplying the Difference
Value (cents/kWh) for year one (1) by twenty-four and two tenths
percent (24.2%) of the NET ELECTRICAL ENERGY actually delivered and
sold to PSE&G during the Period.
(e) The Cumulative amount for each subsequent Period will be the algebraic
sum of the (i) Cumulative amount in the Payment Tracking Account at
the start of each Period; (ii) interest rate multiplied by the
cumulative amount in the Payment Tracking Account from (i) above;
(iii) Difference Value for that Period from (a), multiplied by twenty-
four and two tenths percent (24.2%) of the NET ELECTRICAL ENERGY
actually delivered and sold
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to PSE&G during such Period minus (iv) all Replacement Energy Payments
during such Period under this ARTICLE IV, Section E.
3. The Payment Tracking Account shall be closed at the end of the
Period in which the account equals zero or has a credit balance. If the Payment
Tracking Account has not been closed by the end of the initial term of this
AGREEMENT, VENTURE shall at VENTURE's option either: (1) pay any credit balance
due to PSE&G and the Payment Tracking Account shall thereupon be closed; or (2)
continue sales to PSE&G from the PROJECT under terms that will reduce the
balance due to PSE&G to zero over a maximum period of five (5) years which terms
may include, at VENTURE's request provided notice is given at least three (3)
years prior to the end of the initial term of this AGREEMENT and with PSE&G's
and NJBPU's approval, the sale of the entire output of the COGENERATION FACILITY
to PSE&G as long as such sales to PSE&G shall be for not less than one (1) year
in duration; provided, however, that if this AGREEMENT is terminated prior to
the end of the initial term specified in ARTICLE III following a breach of this
AGREEMENT by VENTURE, VENTURE shall pay any balance in the Payment Tracking
Account to PSE&G over the remaining years of the initial term of this AGREEMENT
or over a five (5) year period, whichever is shorter, including interest that
will accumulate as long as a balance exists in the Payment Tracking Account. The
Payment Tracking Account shall be
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deemed closed at such time as VENTURE has repaid all such monies to PSE&G.
Notwithstanding the foregoing, if this AGREEMENT is terminated prior
to the end of the initial term specified in ARTICLE III following a breach by
PSE&G resulting in termination of the AGREEMENT, VENTURE shall pay PSE&G the
amount, if any, by which any balance in the Payment Tracking Account exceeds the
damages found to be due to VENTURE as a result of such default. VENTURE shall
not be required to make any such payments following a default by PSE&G until
there has been a final determination of the amount of damages due to VENTURE
(Determination Date). Following the Determination Date, any amount due to PSE&G
shall be paid ratably during the period of time between the Determination Date
and the date on which, based on circumstances in existence as of such date, the
Payment Tracking Account would have terminated if PSE&G had not defaulted. The
unpaid portion of such an amount due PSE&G shall bear interest at the rate
specified in Paragraph 1 of this Section F.
4. To secure the obligation of VENTURE described in this Section F,
VENTURE shall provide security in accordance with the terms of this paragraph 4.
(a) Definitions. When used in this paragraph 4, the following terms shall
have the respective meanings set forth below:
(1) Contract Security Schedule - The Schedule
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prepared by VENTURE pursuant to Subparagraph (d) of this
Paragraph 4.
(2) Fair Market Value - The Fair Market Value of the COGENERATION
FACILITY determined pursuant to Subparagraph (c) of this
Paragraph 4.
(3) Lien - A lien or other security interest in the COGENERATION
FACILITY created in connection with the financing or refinancing
of the COGENERATION FACILITY and secured by the COGENERATION
FACILITY.
(4) PSE&G Security Value - At any time, the PSE&G Security Value
shall be the Fair Market Value of the COGENERATION FACILITY less
the outstanding principal amount of any obligation secured by a
Lien.
(b) In order to secure the repayment obligation of VENTURE under this
Section F, VENTURE will provide security in the form of a letter of credit
satisfactory to PSE&G for ten percent (10%) of any balance in the Payment
Tracking Account in any Period. VENTURE may propose other forms of security in
lieu of the letter of credit required under this Subparagraph (b) of Paragraph
4, which other forms may include insurance, performance bonds, or corporate
guarantees or any combination thereof. The acceptance or rejection of such
proposal shall be at PSE&G's sole discretion.
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(c) Valuation.
(1) For the purposes of this Paragraph 4, the Fair Market Value of the
COGENERATION FACILITY at any time shall be the summation of (a)
the present value of projected future earnings, before interest
and income taxes, (hereinafter referred to as EBIT), for each
year, or fraction thereof, of the remaining initial term of the
AGREEMENT and (b) the Residual Value of the COGENERATION
FACILITY. The present value of the EBIT for each remaining year
or fraction thereof shall be determined using a discount factor
based on PSE&G's then current incremental cost of capital for
that year. The cost of capital will be the blended cost,
reflecting the cost of debt and equity to PSE&G on an after tax
basis and shall be determined in accordance with generally
accepted accounting principles by outside financial auditors
normally used by PSE&G.
EBIT shall be calculated by subtracting projected operating
expenses from projected revenues. Projected revenues shall be the
projected payments to VENTURE under this AGREEMENT, plus any other
projected payments made by third parties to VENTURE from the
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operation of the COGENERATION FACILITY pursuant to the contracts which
would inure to the benefit of a purchaser of the COGENERATION FACILITY.
Projected operating expenses shall mean projected costs to VENTURE for
the following items:
(i) Fuel
(ii) COGENERATION FACILITY administrative, management, operating and
maintenance personnel whose place of work is the COGENERATION
FACILITY, including all required benefits and employee-related
overheads.
(iii) Maintenance materials and supplies and spare parts.
(iv) Expenses for subcontract maintenance and third party services
related to operating and maintaining the COGENERATION FACILITY.
(v) Cost of insurance maintained by the COGENERATION FACILITY.
(vi) Taxes paid to the City of Bayonne and/or County of Hudson.
The Residual Value of the COGENERATION FACILITY at any time shall
be based on the value of its equipment and other components when
dismantled and sold into the used
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equipment market. For the purposes of this Subparagraph (c) of
Paragraph 4, the Residual Value shall not reflect any potential future
earnings of the COGENERATION FACILITY even if it had useful life
remaining and were to remain in place at the property of BAYONNE.
Notwithstanding the foregoing, upon consent of PSE&G, such
consent not to be unreasonably withheld, the Residual Value may reflect
potential future earnings of the COGENERATION FACILITY beyond the
initial term of this AGREEMENT provided that VENTURE provides evidence
satisfactory to PSE&G that: (i) the COGENERATION FACILITY has
sufficient remaining useful life beyond the primary term, and that (ii)
a willing or legally obligated purchaser of power exists who would pay
for such power at rates which would produce a positive EBIT. Such
evidence shall be deemed satisfactory if submitted to PSE&G by an
appraiser mutually acceptable to the PARTIES.
VENTURE shall develop without the use of outside appraisers the
projected revenues and expenses as well as the Residual Value. VENTURE
will present its projections to PSE&G, such findings to be based on
actual
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information from past operating performance including revenues, energy
generation revenues received and expenses incurred for the COGENERATION
FACILITY.
PSE&G will accept VENTURE'S projections if its own projections of
the present value of future EBITS and Residual Value do not differ from
those of VENTURE by more than ten percent (10%). PSE&G will review its
projections and supporting data with VENTURE. If PSE&G projections
differ by more than ten percent (10%), the determination of the Fair
Market Value shall be made by an independent appraiser mutually
acceptable to the PARTIES which shall be binding on both PARTIES.
(2) Determination of the Fair Market Value of the COGENERATION FACILITY
shall be made within thirty (30) days of the DATE OF COMMERCIAL
OPERATION, and thereafter when required by PSE&G but no more
frequently than once each Period. Except as provided in subparagraph
(3) of this Paragraph (c), the cost of any such appraisal shall be paid
by VENTURE.
(3) Either PARTY may request an appraisal of the COGENERATION FACILITY in
addition to that specified in Subparagraph (2) of this Paragraph (c)
above provided, however, that
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the cost of any such appraisal if requested by
PSE&G shall be borne by PSE&G.
(d) Contract Security Schedule: Within thirty (30) days of the DATE OF
COMMERCIAL OPERATION, and on each occasion when PSE&G requires a valuation in
accordance with Subparagraph (2) of Paragraph (c) of this Section F, 4 until the
end of the period in which the Payment Tracking Account has a credit balance,
VENTURE shall prepare and submit to PSE&G a Contract Security Schedule showing,
for the following year, the following information:
(1) The Fair Market Value of the COGENERATION FACILITY.
(2) The PSE&G Security Value.
If at any time the PSE&G Security Value is less than one hundred fifty
percent (150%) of the balance in the Payment Tracking Account, PSE&G may at its
option require VENTURE to provide and maintain a letter of credit satisfactory
to PSE&G with regard to the amount by which the PSE&G Security Value is less
than one hundred fifty percent (150%) of the balance in the Payment Tracking
Account. To the extent that such amounts are not covered by any letter of credit
or other security provided pursuant to Subparagraph (b) of this Section F, 4,
VENTURE may propose other forms of security in lieu of the letter of credit
otherwise required pursuant to this Subparagraph (d) of Paragraph 4 which other
forms may include insurance, performance bonds, or corporate guarantees or any
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combination thereof. The acceptance or rejection of such proposal shall be at
PSE&G's sole discretion.
ARTICLE V
BILLING AND PAYMENT
After the DATE OF COMMERCIAL OPERATION, PSE&G shall read its recording
meter(s) at the COGENERATION FACILITY MONTHly to determine the amount of payment
to be made to VENTURE for any MONTH in accordance with the provisions of ARTICLE
IV and shall thereafter prepare and present to VENTURE, on or before the last
day of the subsequent MONTH, a statement and payment by wire transfer for
twenty-four and two tenths percent (24.2%) of the NET ELECTRICAL POWER OUTPUT
delivered to PSE&G during the MONTH. Such statement shall indicate the total
kilowatthours delivered and sold to PSE&G during the MONTH for both the ON-PEAK
PERIOD and the OFF-PEAK PERIOD, the Monthly Energy Charge, the Monthly Capacity
Charge and the Monthly service Charge as set forth in ARTICLE IV.
If the payment is not received by the due date specified above, PSE&G
shall pay to VENTURE an interest charge on unpaid amounts which shall accrue
daily from the due date until the date upon which payment is made at the then
current late payment charge for commercial customers prescribed in PSE&G's
Tariff for Electric Service, Standard Terms and Conditions as may be amended
from time to time.
In the event VENTURE disputes any statement,
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VENTURE shall present the dispute in writing and submit supporting documentation
to PSE&G within a thirty (30) day period from receipt of such statement. Upon
receipt of notice of the dispute and supporting documentation, PSE&G shall have
thirty (30) days from receipt of such notice to resolve any dispute with
VENTURE. In the event the dispute is not resolved within the thirty (30) day
period, either PARTY may submit the matter to arbitration for resolution in
accordance with ARTICLE XVII. The disputed amount of any statement disputed by
VENTURE, in accordance with the provisions of this ARTICLE V, which is
ultimately determined to be due and owing by PSE&G to VENTURE, from the date
originally due shall, until payment, accrue interest at the then current late
payment charge for commercial customers prescribed in PSE&G's Tariff for
Electric Service, Standard Terms and Conditions as may be amended from time to
time.
ARTICLE VI
OPERATIONS COORDINATION
During any term of this AGREEMENT, VENTURE shall use best efforts to
coordinate the operation of the PROJECT with the operation of the PUBLIC SERVICE
SYSTEM. To discharge its best efforts obligation to coordinate operation of the
PROJECT with the PUBLIC SERVICE SYSTEM, VENTURE shall: (i) maintain a power
factor at or as near unity as practicable at the RECEIPT POINT, unless requested
otherwise by PSE&G; (ii) control its voltage and speed to
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values acceptable to PSE&G consistent with sound utility practice; (iii)
coordinate its relaying and fusing so as to conform with PSE&G's system
protection practices, in effect from time to time; (iv) maintain the PROJECT in
a safe and reliable operating condition; (v) submit to PSE&G the MONTHLY
schedules and estimates required by this ARTICLE VI; and (vi) perform such other
actions, as may be reasonably requested by PSE&G, to enable PSE&G to (a) operate
the PUBLIC SERVICE SYSTEM in a safe and reliable manner; and (b) operate the
PUBLIC SERVICE SYSTEM so as to discharge PSE&G's statutory obligations to
provide safe, adequate and proper service to its retail and sale-for-resale
customers. Each PARTY shall use its best efforts to operate the COGENERATION
FACILITY and the PUBLIC SERVICE SYSTEM with due regard for the PUBLIC SERVICE
SYSTEM and the COGENERATION FACILITY.
As of the DATE OF COMMERCIAL OPERATION, VENTURE shall provide to PSE&G
by the first (1st) day of each MONTH the following: (i) an hourly schedule of
the estimated NET ELECTRICAL CAPACITY VENTURE plans to supply to the RECEIPT
POINT for acceptance and purchase by PSE&G in the succeeding MONTH; (ii) an
estimate of the generation of NET ELECTRICAL ENERGY which VENTURE plans to
supply to the RECEIPT POINT for acceptance and purchase by PSE&G in the
succeeding MONTH; (iii) an estimate of the generation of NET ELECTRICAL ENERGY
which VENTURE plans to supply to the RECEIPT POINT for acceptance and purchase
by PSE&G for the succeeding twelve (12) MONTHS; and (iv) the names and
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telephone numbers of responsible management level employees for contact by PSE&G
personnel at any time during the succeeding MONTH relative to any matter arising
out of, relating to, or resulting from PSE&G's obligation to provide service to
VENTURE under this AGREEMENT. In addition, VENTURE shall furnish to PSE&G
annually a schedule of planned maintenance and/or repair activities for the
succeeding thirty-six (36) MONTHS. VENTURE agrees to use its best efforts to
schedule planned maintenance only during the MONTHS of October, November, March,
April and May.
VENTURE agrees to notify PSE&G of its planned maintenance at least one
(1) MONTH prior to a scheduled outage. PSE&G will review the effect of the
proposed schedule on the overall maintenance schedules of PJM and PSE&G and
advise VENTURE of problems that may be created by VENTURE's scheduled outage
within ten (10) days of receipt of VENTURE's notice and suggest reasonable
alternative schedules.
Except in an emergency, VENTURE shall give prior notice of not less
than eight (8) hours for any anticipated outage other than planned maintenance.
VENTURE agrees to attempt to give notice to PSE&G as soon as practical in the
event of emergencies or other unanticipated outages.
VENTURE shall complete regular and required maintenance, testing and
inspections of the COGENERATION FACILITY substantially in accordance with
manufacturer's standard recommendations.
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VENTURE shall not violate any code, regulation and/or statute
applicable to the construction, installation, or operation of the
interconnection equipment and protective devices on VENTURE's side of the
RECEIPT POINT which violation is adverse to PSE&G.
VENTURE shall maintain and classify (in a timely manner) outage
statistics in accordance with the then current PJM interconnection outage
classification procedures and shall supply such statistics to PSE&G as
requested.
Pursuant to and consistent with VENTURE's obligation to coordinate
operation of the PROJECT with the operation of the PUBLIC SERVICE SYSTEM,
VENTURE shall install and maintain, at its expense, during any term of this
AGREEMENT, a telephone line reserved for communication by and between PSE&G
operating personnel and VENTURE operating personnel.
PSE&G shall use best efforts to coordinate PUBLIC SERVICE SYSTEM
maintenance, repair, rearrangement, relocation, removal or reinforcement
activities with VENTURE's planned maintenance of the COGENERATION FACILITY so as
to minimize any interruption, curtailment or reduction of acceptance of the
COGENERATION FACILITY's NET ELECTRICAL POWER OUTPUT; provided, however, the
scheduling, implementation and conduct of such activities by PSE&G shall remain
within the sole discretion of PSE&G. PSE&G will provide a schedule of planned
maintenance to VENTURE as soon
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as is practicable after such a schedule is available for distribution.
ARTICLE VII
NET ELECTRICAL POWER OUTPUT SPECIFICATIONS
The NET ELECTRICAL POWER OUTPUT supplied by VENTURE to the RECEIPT
POINT for receipt by PSE&G during the term of this AGREEMENT shall be at a
nominal voltage of 138,000 volts, 60 hertz, balanced three-phase alternating
current produced by synchronous generator(s) equipped with automatic voltage
regulation and automatic speed control. The NET ELECTRICAL POWER OUTPUT shall be
free from harmonics which would interfere with PSE&G's metering accuracy, the
PUBLIC SERVICE SYSTEM, or the quality of PSE&G's service to its retail and
sale-for-resale customer loads. In no event shall the operation of the
COGENERATION FACILITY result in total harmonic distortion as defined by NEMA MG
1-22, as revised, greater than five percent (5%) of the fundamental component as
measured at the POINT OF INTERCONNECTION.
ARTICLE VIII
METERING/RECORDS
PSE&G shall install, own, operate and maintain an electricity
recording meter at the SUBSTATION FACILITY which, in the judgment of PSE&G, is
required or necessary to enable PSE&G to make an accurate measurement of the
quantity
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of NET ELECTRICAL POWER OUTPUT received at the RECEIPT POINT from the
COGENERATION. The electricity recording meter shall be the same meter as
provided in and in accordance with ARTICLE XII of the TRANSMISSION AGREEMENT.
Unless otherwise agreed to by PSE&G and VENTURE and/or except as
otherwise provided in the TRANSMISSION AGREEMENT and this AGREEMENT, PSE&G's
electricity recording meter shall be utilized for the determination of the
payments reflected in any billing statement submitted to VENTURE under this
AGREEMENT.
ARTICLE IX
USE OF THE PUBLIC SERVICE SYSTEM
The nature and extent of and the terms and conditions relating to
VENTURE's use of the PUBLIC SERVICE SYSTEM are set forth in their entirety in
this AGREEMENT and the TRANSMISSION AGREEMENT. Except as otherwise provided in
and pursuant to the terms and conditions of any applicable PSE&G tariff on file
with the NJBPU or the FERC, VENTURE shall not be permitted to use the PUBLIC
SERVICE SYSTEM nor shall PSE&G be obligated to provide any service to VENTURE,
other than as provided in this AGREEMENT and the TRANSMISSION AGREEMENT. Any
rights to or interest in the PUBLIC SERVICE SYSTEM which VENTURE has or may
claim as a result of this AGREEMENT shall cease or expire upon termination of
this AGREEMENT.
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ARTICLE X
DEDICATION OF FACILITIES
No undertaking by PSE&G under any provision of this AGREEMENT shall
constitute the dedication to VENTURE or to the public of the PUBLIC SERVICE
SYSTEM.
ARTICLE XI
LIABILITY
Neither PARTY nor its officers, directors, partners, agents, servants,
employees, affiliates, parent, subsidiaries or respective successors or assigns
shall be liable to the other PARTY (except for Replacement Energy and Capacity
Costs as provided for in ARTICLE IV of this AGREEMENT or as otherwise
specifically provided in this AGREEMENT) for claims for incidental, special,
direct, indirect or consequential damages (Damages) whether such Damages claim
is based on a cause of action based in warranty, negligence, strict liability,
contract, operation of law or otherwise except where such claim for Damages
arises out of, relates to or results from the gross negligence of such PARTY or
the willful disregard by a PARTY of its obligations under this AGREEMENT;
provided, however, each PARTY shall have the right to seek to recover from the
other PARTY direct damages upon the occurrence of a breach of this AGREEMENT as
defined in and which has been established pursuant to and in accordance with
ARTICLE XVI of this AGREEMENT.
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ARTICLE XII
FORCE MAJEURE
An event of Force Majeure as used herein means an event beyond the
reasonable control of and which occurs without the fault or negligence of the
PARTY claiming Force Majeure which events may include but are not limited to:
acts of God; strikes, lockouts or other similar such industrial disturbances;
acts of the public enemy, wars, civil disturbances, blockades, military actions,
insurrections or riots; landslides, floods, washouts, lightning, earthquakes,
tornadoes, hurricanes, blizzards or other storms or storm warnings; explosions,
fires, sabotage or vandalism; mandates, directives, orders or restraints of any
governmental, regulatory or judicial body or agency (other than mandates,
directives, orders or restraints either sought, approved or not contested by the
PARTY asserting Force Majeure or issued in any bankruptcy or insolvency
proceeding for the relief of the PARTY asserting Force Majeure); breakage,
defects, malfunctioning, or accident to machinery, equipment, materials or lines
of pipe or wires; freezing of machinery, equipment, materials or lines of pipe
or wires; inability or delay in the obtaining of materials or equipment;
inability to obtain or utilize any permit, approval, easement, license or right-
of-way. The settlement of strikes, lockouts or other similar such industrial
disturbances shall be entirely within the discretion of the PARTY directly
affected. The requirement
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herein that any event of Force Majeure shall be remedied with all reasonable
dispatch shall not require the settlement of strikes, lockouts or other similar
such industrial disturbances when such course is, in the opinion of the PARTY
directly affected, inadvisable.
Notwithstanding this ARTICLE XII, for purposes of determining
VENTURE's payment of Replacement Energy and Replacement Capacity Costs as
provided in ARTICLE IV, Section E, an event of Force Majeure shall not include
equipment failures due to (a) ordinary wear and tear and (b) defects in
manufacture, design or construction.
In the event PSE&G or VENTURE is rendered unable, wholly or in part,
by an event of Force Majeure, to perform any obligation it has under this
AGREEMENT, it is agreed that, on PSE&G or VENTURE giving notice and full
particulars of such event of Force Majeure to the other PARTY, as soon
thereafter as practicable, the obligations of PSE&G or VENTURE, so far as they
are affected by such event of Force Majeure, shall be suspended during the
continuance of any inability or incapacity so caused, but for no longer period;
provided however, neither PARTY shall be relieved from any obligation to make
payment to the other for expenses already incurred. PSE&G or VENTURE shall use
best efforts to remedy the cause of such inability or incapacity with all
reasonable dispatch.
Neither PARTY shall be liable to the other for any claims, losses,
damages, liabilities or expenses sustained
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or incurred by PSE&G or VENTURE, arising out of, relating to, or resulting from
PSE&G's or VENTURE's inability or incapacity to perform its obligations under
this AGREEMENT due to any event of Force Majeure, as herein defined.
ARTICLE XIII
INDEMIFICATION
Each PARTY shall indemnify and hold harmless the other PARTY and each
and every of its officers, directors, partners, agents, servants, employees,
affiliates, parent, subsidiaries or respective successors and assigns of, from
and against any and all claims, demands and suits, actions, and liabilities,
losses, damages, and/or judgments, which may arise therefrom, as well as against
any fees, costs, charges or expenses which PSE&G or VENTURE, its officers,
directors, partners, agents, servants, employees, affiliates, parent,
subsidiaries or respective successors and assigns, incur in the defense of any
such claims, suits, actions or similar such demands made or filed by any third-
party, which in any manner arise out of, relate to, or result from negligence,
strict liability or breach of this AGREEMENT by the indemnifying PARTY including
but not limited to the design, construction, engineering, installation,
operation, maintenance, repair, replacement, supervision, inspection, testing,
protection, reinforcement, reconstruction, decommissioning, removal, use,
control or ownership of its facilities.
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In case a claim is asserted or action brought against either PARTY as
to which it believes it is entitled to indemnification under this ARTICLE XIII,
the PARTY seeking indemnification shall promptly notify the other in writing of
such claim or action. Prompt notice as contemplated in the preceding sentence
shall mean such notice as would be required to enable the indemnitor to assert
and prosecute appropriate defenses relative to such claim or such action in a
timely fashion. If the PARTY seeking indemnification fails to give the other
PARTY prompt notice of any claim or action as provided in this ARTICLE XIII,
that PARTY shall have no obligation to indemnify pursuant to this ARTICLE XIII.
Upon receipt of such notice request for indemnification, that PARTY shall
promptly make a determination of whether it believes it is required to indemnify
and shall promptly notify the PARTY seeking indemnification in writing of that
determination. If the PARTY to whom such notice and request is directed
determines that it is required to indemnify the other PARTY pursuant to this
ARTICLE XIII, it shall Assume the defense of such claim or action, including the
employment of counsel and shall assume thereafter the payment of all costs and
expenses relative to the defenses of such claim or action. The non-indemnifying
PARTY shall cooperate in all reasonable respects with the indemnifying PARTY in
the defense of such claim or action. The non-indemnifying PARTY shall have the
right, at its own expense, to employ separate counsel in any
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such action and to participate in the defense thereof. The indemnifying PARTY
shall not be liable for any settlement of any such claim or action effected
without its consent. Before settling any claim or action, the indemnifying PARTY
shall demonstrate to the other that it has sufficient financial means or has
made adequate arrangements to make all payments under any such settlement as and
when due.
ARTICLE XIV
INSURANCE
1. As of the DATE OF COMMERCIAL OPERATION, VENTURE shall obtain and
maintain in force as hereinafter provided to the extent commercially
available on reasonable terms:
(a) comprehensive general liability insurance, including contractual
liability coverage with a combined single limit of not less than five
million dollars ($5,000,000) for each occurrence;
(b) workmen's compensation or employee's liability insurance policy in
accordance with applicable New Jersey statutory requirements; and
(c) property insurance covering physical loss or damage to the COGENERATION
FACILITY which shall include the following:
(i) "boiler and machinery" property damage insurance with respect to
damage to the machinery, plant, equipment, storage
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facilities or similar apparatus included in the COGENERATION
FACILITY from risks normally insured against under machinery
policies in an amount equal to the replacement value of such
machinery, plant, equipment, storage facilities or similar
apparatus; and
(ii) business interruption insurance to provide coverage against loss
resulting from interruption of business and consequent reduction
in gross revenues caused by damage to the COGENERATION FACILITY
and extra expense incurred to continue the normal operation of
business following such damage in an amount at least equal to one
(1) year's gross operating revenues, minus non-continuing
expenses, including (to the extent commercially available)
coverage against loss resulting from interruption of business
arising because of damage to boilers and machinery.
Such property insurance may include deductible amounts for the account of
VENTURE not to exceed the following:
(1) all-risk property coverage - $250,000;
(2) boiler and machinery - $250,000 except $250,000 per occurrence
with respect to the gas turbines; $250,000 with respect to the
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steam turbine and $1.00 per KVA for the transformers; and
(3) business interruption coverage - 60 days.
2. The insurance carrier or carriers and form of policy shall be subject
to prior review and approval of PSE&G to assure compliance with provisions
of Paragraph 1 above, and shall be furnished by VENTURE to PSE&G within
thirty (30) days of the DATE OF COMMERCIAL OPERATION and thereafter on or
before January 1 of each year until this AGREEMENT is terminated. VENTURE
hereby agrees to provide PSE&G with at least thirty (30) days notice of:
(a) the cancellation of any policy of insurance required by this ARTICLE
XIV; or
(b) the reduction of any coverage below the levels required by this ARTICLE
XIV.
VENTURE shall also provide to PSE&G evidence of satisfactory workmen's
compensation coverage.
3. Within thirty (30) days of the DATE OF COMMERCIAL OPERATION, VENTURE
shall furnish a certificate of insurance to PSE&G which certificate shall
provide that such insurance shall not be terminated nor expire except upon
thirty (30) days prior written notice to PSE&G, and shall bear in substance
the following clauses:
(a) In consideration of the premium charged, PSE&G is named as an
additional insured in accordance with
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the terms of said policy and for acts and or omissions that are solely
and directly caused by VENTURE on VENTURE's comprehensive general
liability insurance with respect to all covered liabilities arising
out of VENTURE's use and ownership of the COGENERATION FACILITY.
(b) The inclusion of more than one insured under this policy shall not
operate to impair the rights of one insured against another insured;
and the coverages afforded by this policy will apply as though
separate policies had been issued to each insured. The inclusion of
more than one insured will not, however, operate to increase the limit
of the carriers' liability. PSE&G will not, by reason of its
inclusion under this policy, incur liability to the insurance carrier
for payment of premium for this policy.
(c) Any other insurance carried by PSE&G which may be applicable shall be
deemed excess insurance and VENTURE's insurance primary for all
purposes despite any conflicting provision in VENTURE's policy to the
contrary.
(d) It is expressly agreed and understood that the insurer(s) of the
COGENERATION FACILITY, naming PSE&G as an additional insured, shall
waive any right it has to subrogation with respect to PSE&G.
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4. VENTURE shall maintain such insurance in effect for so long as the
COGENERATION FACILITY is operated in parallel with PSE&G's electric system.
If VENTURE fails to comply with the provisions of this ARTICLE XIV,
Paragraph 4, VENTURE shall, at its own cost, defend, indemnify, and hold
harmless PSE&G, its directors, officers, employees, agents, assigns, and
successors in interest from and against any and all loss, damage, claim,
cost, charge, or expense of any kind of nature (including direct,
indirect, or consequential loss, damage, claim, cost, charge, or expense,
including attorney's fees and other costs of litigation) resulting from the
death or injury to any person or damage to any property, including the
personnel and property of PSE&G, to the extent that PSE&G would have been
protected had VENTURE complied with all of the provisions of this ARTICLE
XIV.
ARTICLE XV
WARRANTIES
Except with respect to any lien possessed by a FINANCIER, VENTURE
warrants and shall be obligated to supply to this RECEIPT POINT twenty-four and
two tenths percent (24.2%) of the NET ELECTRICAL POWER OUTPUT free and clear of
any liens and/or adverse claims which might attach to such NET ELECTRICAL POWER
OUTPUT prior to its delivery and sale to PSE&G. VENTURE agrees to indemnify and
hold harmless
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PSE&G against any and all claims, demands, suits, actions, costs, and
liabilities, damages, losses and/or judgments arising out of, relating to or
resulting from any such adverse claim or lien, as well as against any fees,
costs, charges or expenses which PSE&G might incur in the defense of any such
claim, suit, action or similar such demand made or filed by such person, its
successors or assigns, asserting such adverse claim. In effecting the right of
or obligation to indemnify pursuant to and in accordance with the provisions of
this ARTICLE XV the procedural provisions set forth in ARTICLE XIII of this
AGREEMENT shall govern.
ARTICLE XVI
EVENTS OF DEFAULT AND BREACH OF CONTRACT
SECTION A
DEFAULT BY VENTURE
VENTURE shall be in default under this AGREEMENT upon the happening or
occurrence of any of the following events or conditions, each of which shall be
deemed to be an "Event of Default," and each of which shall be considered a
breach of contract for purposes of this AGREEMENT unless (i) it is cured in
accordance with the provisions specified below, and (ii) VENTURE compensates
PSE&G for any direct damages which PSE&G suffers as a result of such default.
1. VENTURE breaches or fails to observe or perform, any of the obligations,
covenants, conditions, services or responsibilities under this
AGREEMENT, unless,
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within thirty (30) days after written notice from PSE&G specifying the
nature of such breach or failure, VENTURE either cures such breach or
failure or, if such cure cannot be completed within thirty (30) days,
commences and diligently pursues such cure.
2. There is an assignment for the benefit of VENTURE's creditors, or
VENTURE is adjudged bankrupt, or a petition is filed by or against
VENTURE under the provisions of any state insolvency law or under the
provisions of the Federal Bankruptcy Code, or the business or principal
assets of VENTURE are placed in the hands of a receiver, assignee or
trustee, or VENTURE is dissolved, or VENTURE's existence is terminated,
or its business is discontinued; provided, however, that the events
described in this Paragraph 2 shall not constitute an Event of Default
or otherwise affect the validity of this AGREEMENT, so long as the
terms, covenants and conditions of this AGREEMENT on the part of VENTURE
are performed, and in such event, this AGREEMENT shall continue to
remain in full force in accordance with the terms herein contained.
3. VENTURE takes any actions which prevent PSE&G from performing any of the
obligations, covenants, conditions, responsibilities or services under
this AGREEMENT, unless, within thirty (30) days
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after written notice from PSE&G specifying the nature of such action or
failure to act, VENTURE either cures such action or failure to act, or,
if a cure cannot be completed within thirty (30) days, submits a plan to
cure which is acceptable to PSE&G and commences and diligently pursues
such plan.
4. VENTURE, subsequent to the DATE OF COMMERCIAL OPERATION, fails to
deliver electric power to PSE&G for two hundred forty (240) days of
three hundred sixty-five (365) consecutive days for any reason other
than Force Majeure or a curtailment in accordance with ARTICLE II,
Section D(2), (3), (4), (5) or (6) of this AGREEMENT.
SECTION B
DEFAULT BY PSE&G
PSE&G shall be in default under this AGREEMENT upon the happening or
occurrence of any of the following events or conditions, each of which shall be
deemed to be an "Event of Default" and each of which shall be considered a
breach of contract for purposes of this AGREEMENT unless (i) it is cured in
accordance with the provisions specified below, and (ii) PSE&G compensates
VENTURE for any direct damages which VENTURE suffers as a result of such
default.
1. PSE&G breaches or fails to observe or perform any of the obligations,
covenants, conditions, services or responsibilities under this
AGREEMENT, unless within thirty (30) days after written notice from
VENTURE
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specifying the nature of such breach or failure, PSE&G either cures such
breach or failure, or, if such cure cannot be completed within thirty
(30) days, commences and diligently pursues such cure.
2. PSE&G fails to accept deliveries of electricity from the COGENERATION
FACILITY for any reason other than a reason permitted under ARTICLE II
or ARTICLE XII of the AGREEMENT and such failure continues for a period
of thirty (30) days following receipt of notice of such failure.
3. There is an assignment for the benefit of PSE&G's creditors, or PSE&G is
adjudged bankrupt, or a petition is filed by or against PSE&G under the
provisions of any state insolvency law or under the provisions of the
Federal Bankruptcy Code, or the business or principal assets of PSE&G
are placed in the hands of a receiver, assignee or trustee, or PSE&G is
dissolved, or PSE&G's existence is terminated, or its business is
discontinued; provided, however, that the events described in this
Paragraph 3 shall not constitute an Event of Default or otherwise affect
the validity of this AGREEMENT, so long an the payment for twenty-four
and two tenths percent (24.2%) of the NET ELECTRICAL POWER OUTPUT
delivered by the VENTURE to PSE&G as provided under ARTICLE IV hereof
continues to be paid and the terms, covenents and conditions of this
AGREEMENT on
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the part of PSE&G are performed, and in such event, this AGREEMENT shall
continue to remain in full force in accordance with the terms herein
contained.
4. PSE&G takes any actions which prevent VENTURE from performing any of the
obligations, covenants, conditions, responsibilities or services under
this AGREEMENT, unless within thirty (30) days after written notice from
VENTURE specifying the nature of such action or failure to act, PSE&G
either cures such action or failure to act, or, if such cure cannot be
completed within thirty (30) days, submits a plan to cure which is
acceptable to VENTURE and commences and diligently pursues such cure.
5. PSE&G fails to pay, when due, the payment provided under ARTICLE IV, and
such failure continues for a period of ten (10) days following the
receipt by PSE&G of notice of such failure; provided, however, PSE&G
shall not be considered in default if (i) it has paid the undisputed
portion of any payment due under this AGREEMENT and (ii) the PARTIES are
in the process of resolving any disputed portion in accordance with the
terms set forth in ARTICLE V of this AGREEMENT.
SECTION C
REMEDIES
In the event a PARTY claims that an Event of Default has occurred,
such PARTY shall provide the other
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PARTY with written notice thereof (hereinafter referred to as Notice of Breach).
The Notice of Breach shall state the basis for such claim and any remedy sought.
The PARTIES shall have thirty (30) days within which to resolve the dispute via
negotiation. If within such thirty (30) day period after service of the Notice
of Breach, the PARTIES are unable to resolve their differences by negotiation,
either PARTY shall have the right to submit the dispute for resolution either to
arbitration pursuant to ARTICLE XVII or to any regulatory body having
jurisdiction.
The nature and extent of any damage incurred or sustained by the non-
breaching PARTY, as a result of any Event of Default shall be determined and
calculated as of the date the Event of Default commenced.
Except as otherwise provided in ARTICLE V and ARTICLE XVI of this
AGREEMENT, neither PARTY shall refuse to make, suspend or delay any payment(s)
otherwise required to be made under this AGREEMENT or refuse to carry out any of
its obligations under this AGREEMENT for or on account of or as a result of an
alleged breach of this AGREEMENT or Event of Default.
Any waiver by a PARTY of any breach or Event of Default shall be
deemed to extend only to the particular breach or Event of Default waived and
shall not limit or otherwise affect any right(s) that such PARTY may have with
respect to any other or future breach or Event of Default,
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whether of a similar or different nature.
ARTICLE XVII
ARBITRATION
Any controversy, dispute or claim between the PARTIES to this
AGREEMENT, which the PARTIES are unable to resolve by negotiation or over which
any regulatory body lacks jurisdiction, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (AAA), then in effect, and the provisions of this ARTICLE XVII. If
arbitration is chosen by either PARTY, no suit at law which seeks to resolve any
controversy, dispute or claim which is the subject of this arbitration
proceeding between the PARTIES shall be instituted by either PARTY hereto,
except where such suit is instituted to confirm an arbitration award received
pursuant to this ARTICLE XVII. However, nothing contained herein shall deprive
either PARTY of any right to: (i) obtain injunctive or other equitable relief in
any court in the State of New Jersey, on an interim basis in accordance with
ARTICLE XVIII of this AGREEMENT or otherwise pending disposition of the
arbitration of any controversy, dispute or claim if such relief is available
under applicable principles of law and equity; and/or (ii) assert any crossclaim
or third-party claim in any suit at law instituted by a third-party; and/or
(iii) file and prosecute
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any complaint at and with the regulatory agency having jurisdiction or make and
prosecute any claim or position in any filing made with such regulatory agency
by either PARTY or some third-party.
Except as provided under ARTICLE XVIII, any controversy, dispute or
claim submitted to arbitration shall be settled by arbitration in Newark, New
Jersey in accordance with the laws of the State of New Jersey. Any award entered
pursuant to such arbitration shall be binding on both PARTIES and judgment upon
the award rendered or received may be entered in the Superior Court of the State
of New Jersey pursuant to N.J.S.A. 2A:24-1 et seq.
Exclusive jurisdiction relative to the entry of judgment on any
arbitration award relative to any controversy or claim between the PARTIES shall
be in any court of appropriate subject matter jurisdiction located in New
Jersey, and the PARTIES to this AGREEMENT expressly subject themselves hereby to
the personal jurisdiction of said court for entry of any such judgment and for
the resolution of any dispute, action, or suit arising in connection with the
entry of such judgment.
The controversy or claim to be arbitrated shall be referred to three
(3) arbitrators, one to be selected by each PARTY and the third to be selected
by the AAA. The selections to be made by the PARTIES shall be made from the list
of the National Panel of Arbitrators maintained by the AAA. The arbitrator to be
selected by the AAA shall be
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qualified to pass on any technical or engineering matters and shall be
independent of and acceptable to both PARTIES. All decisions and awards shall be
made by a majority of the arbitrators, except for decisions relating to
discovery as set forth herein.
In the event any arbitrator dies, or refuses to act, or becomes
incapable, incompetent or unfit to act before hearings have been completed
and/or before an award has been rendered, a successor arbitrator may be selected
by the Party, or the American Arbitration Association, as the case may be, who
originally made the selection. The selection of the successor arbitrator shall
be made consistent with the selection procedure set forth in the preceding
paragraph.
The arbitrators selected pursuant to this AGREEMENT shall be governed
by and apply the laws of the State of New Jersey and federal law, as applicable,
in conducting any arbitration proceeding and/or in making any award provided
that the PARTIES agree that the arbitrators may impose the remedy of specific
performance without regard to otherwise applicable New Jersey law.
Notice of a demand for arbitration (hereinafter referred to as Demand
for Arbitration) of any controversy or dispute between the PARTIES shall be
filed in writing with the AAA by the PARTY seeking arbitration and a copy of
same shall be served contemporaneously with such filing on the other PARTY. The
notice shall state, with specificity, the
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nature of the dispute and the remedy sought. After such notice has been filed,
the PARTIES may make discovery of any matter relevant to such dispute before the
hearing, to the extent and in the manner provided by the Rules Governing Civil
Practice in the Superior Court contained in the Rules Governing the Courts of
the State of New Jersey. Any question that may arise with respect to the
obligations of the PARTIES relative to discovery and/or relative to the
protection of the discovery materials shall be referred solely to the arbitrator
selected by the AAA. His determination shall be final and conclusive. Discovery
shall be completed not later than ninety (90) days after filing of the notice of
arbitration unless such period for discovery is extended by the arbitrator
selected by the AAA, upon a showing of good cause by either PARTY to the
arbitration.
The arbitrators may consider any material which is relevant to the
subject matter of any such controversy even if such material might also be
relevant to an issue or issues not subject to arbitration hereunder. A
stenographic record shall be made of any arbitration hearing.
Any costs associated with any arbitration under this ARTICLE XVII,
including but not limited to attorney fees and witness expenses, shall be paid
by the PARTY against whom an award is entered unless the arbitrators by their
award otherwise provide.
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Arbitration may not be utilized and the arbitrators selected in
accordance with this ARTICLE XVII shall not possess the authority or power to
alter, amend or modify any of the terms or conditions or charges set forth in
this AGREEMENT, and further, the arbitrators may not enter any award which
alters, amends or modifies such terms, conditions or charges in any form or
manner.
ARTICLE XVIII
SPECIFIC PERFORMANCE
Without regard to any provisions of this AGREEMENT to the contrary, in
addition to any of the rights and/or remedies referred to in this AGREEMENT,
either PARTY shall have the right to institute an action against the other PARTY
in a court of equity in the State of New Jersey or at the NJBPU to obtain
specific performance by such other PARTY of any of such other PARTY's
obligations under this AGREEMENT if available in accordance with applicable
principles of law and equity. Without regard to rights available at law or in
equity, PARTIES agree that arbitrators shall have the right to impose the remedy
of specific performance in any arbitration under ARTICLE XVII of this AGREEMENT
and neither PARTY shall have the right to object to such remedy on the basis
that such remedy is not otherwise available at law or in equity.
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ARTICLE XIX
ENTIRE AGREEMENT
This AGREEMENT constitutes the entire agreement between the PARTIES
with respect to the matters contained herein and all prior agreements with
respect thereto are superseded hereby. Each PARTY confirms that it is not
relying on any oral representations or warranties of the other PARTY except as
specifically set forth herein. No additions, amendments or modifications hereof
or of any terms included herein shall be binding unless duly executed by both
PARTIES.
ARTICLE XX
ASSIGNMENT/TRANSFER
VENTURE may at any time and from time to time during the term of this
AGREEMENT, assign its rights in this AGREEMENT to FINANCIER. PSE&G shall, at
VENTURE's request, execute a Consent to Assignment in a form similar to that
attached as Exhibit 3, provided that in connection with any such request,
VENTURE submits to PSE&G for review any relevant documents requested by PSE&G,
which documents shall be treated by PSE&G as confidential, and not disclosed to
any third-party without the written consent of VENTURE. Upon written notice to
PSE&G, VENTURE may transfer its rights and obligations under this AGREEMENT to
any entity controlling, controlled by or under common control with VENTURE.
Except as otherwise provided herein with respect to
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FINANCIER or any entity controlling, controlled by or under common control with
VENTURE, VENTURE may not assign its rights and/or transfer its rights and
obligations in this AGREEMENT without the prior written consent of PSE&G, which
consent shall not be unreasonably withheld or delayed. Nothing contained herein
shall prevent VENTURE from pledging or mortgaging all or any part of the
property of the PROJECT in connection with financing the PROJECT.
Except with respect to any entity controlling, controlled by or under
common control with VENTURE, no assignee, transferee, pledgee or mortgagee
and/or any person designated by such assignee, transferee, pledgee or mortgagee
may operate the PROJECT, pursuant to any rights such PARTY may have under any
mortgage, assignment, transfer, or security agreement, unless such entity or
person has been approved and authorized by PSE&G to operate the PROJECT, and in
connection with seeking to obtain such approval and authorization, agrees to be
bound by, subject to and to comply with the terms and conditions of this
AGREEMENT while operating the PROJECT. PSE&G shall not unreasonably delay or
withhold any such approval or authorization.
PSE&G may, on written notice to VENTURE, assign its rights and
transfer its obligations in this AGREEMENT to any entity controlling, controlled
by or under common control with PSE&G. Additionally, PSE&G may, on notice to and
with the prior written approval of VENTURE, assign and
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transfer its rights and obligations under this AGREEMENT to any entity which is
not controlling, controlled by or under common control with PSE&G. VENTURE shall
not unreasonably delay or withhold any approval of an assignment or
assignment/transfer by PSE&G provided that the assignee or assignee/transferee
agrees to be bound by, subject to and to comply with the terms and conditions of
this AGREEMENT.
ARTICLE XXI
CURE BY FINANCIER
During any term of this AGREEMENT, VENTURE shall provide PSE&G with
such information as to enable it to know the name(s) and address(es) of any
FINANCIER on a current basis. PSE&G acknowledges that VENTURE's present
FINANCIER is the Prudential Insurance Company of America, c/o PruCapital
Management, Inc., Three Gateway Center, Newark, NJ 07102, Attn: Regional Vice
President-Special Industries (East). For so long as VENTURE shall have
outstanding and unpaid any financing liabilities, PSE&G agrees to promptly
furnish to all FINANCIERS, then known to PSE&G, a copy of any Notice of Breach
or Demand for Arbitration given to VENTURE. Additionally, PSE&G shall not
terminate this AGREEMENT unless any notice of such termination or breach, as the
case may be, and the reasons therefor have been given to and received by each
FINANCIER then known to PSE&G thirty (30) days prior to the effective date of
the termination. PSE&G shall not terminate this AGREEMENT if, after notice
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thereof, and prior to any effective date of termination, FINANCIER has:
(i) cured the condition precipitating the Notice of Breach under ARTICLE
XVI; or
(ii) if the condition precipitating such Notice of Breach is not capable
of being cured prior to the date of termination, commenced in a
diligent manner to cure the condition precipitating the Notice of
Breach and for so long as the FINANCIER diligently continues such
efforts; or
(iii) if the condition precipitating the Notice of Breach in not capable
of being cured prior to the date of termination, FINANCIER has
caused the initiation of and is diligently prosecuting efforts to
gain possession of the PROJECT and for so long as the FINANCIER
diligently continues such efforts.
In the event FINANCIER gains possession of the PROJECT, FINANCIER
shall promptly designate a person or entity to operate the PROJECT. The name and
credentials of such person or entity so designated shall be promptly submitted
thereafter to and such person or entity so designated must be approved and
authorized by PSE&G to operate the PROJECT. Any approval of the person or entity
so designated shall not be unreasonably delayed or withheld by PSE&G. In the
event PSE&G approves the person or entity so designated, PSE&G shall not be
obligated to give
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authorization to the person or entity so designated to actually operate the
PROJECT unless and until the person or entity so designated agrees in writing to
be bound by, subject to and to comply with the terms and conditions of this
AGREEMENT for the period during which the person or entity so designated intends
to operate the PROJECT. Upon execution of the aforesaid instrument, the person
or entity so designated shall thereafter, inter alia, be responsible for all
obligations incurred by it under this AGREEMENT. However, FINANCIER, and the
person or entity so designated, shall have no responsibility whatsoever for any
obligation VENTURE incurred prior to the date on which FINANCIER takes
possession of the PROJECT.
In the event of a foreclosure and a resultant sale or transfer of the
PROJECT to a new entity (other than the FINANCIER), any obligation of PSE&G to
perform its obligations under the AGREEMENT shall be conditioned upon: (i) the
approval by PSE&G of any new operator of the PROJECT, which approval shall not
be unreasonably withheld or delayed; (ii) agreement by the now entity to comply
with the rules and regulations of the NJBPU, the FERC, and any other agency
having jurisdiction over the PROJECT relative to the sale or transfer of same;
(iii) receipt by such new entity of any license(s), permit(s) and approval(s) as
may be required in connection with the sale or transfer of the PROJECT; and (iv)
the execution and delivery of a written assumption agreement, in form
satisfactory to PSE&G,
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pursuant to which the now entity and/or operator agree to assume all obligations
under and agree therein to be bound by, subject to and to comply with the terms
and conditions of this AGREEMENT.
Notwithstanding any rights which FINANCIER may have, in the event
PSE&G interrupts acceptance and purchase of twenty-four and two tenths percent
(24.2%) of the NET ELECTRICAL POWER OUTPUT in connection with the occurrence of
the condition or event which precipitated the Notice of Termination or Notice
of Breach, PSE&G shall not be obligated to resume acceptance and purchase of
such NET ELECTRICAL POWER OUTPUT unless the condition or event or cause thereof
which precipitated the Notice of Termination or Notice of Breach is or has been
remedied in accordance with the provisions of this AGREEMENT. Prior to PSE&G
being obligated to resume such acceptance and purchase from the COGENERATION
FACILITY, PSE&G shall have the right to require FINANCIER to provide adequate
assurance to PSE&G that the condition or event precipitating the Notice of
Breach will not reoccur.
ARTICLE XXII
FINANCIER SECURITY AGREEMENTS
As provided in ARTICLE XX, VENTURE may assign any rights in this
AGREEMENT to FINANCIER and may pledge or mortgage any or all of the property of
the PROJECT. In the event FINANCIER alleges that a breach or an event of default
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has occurred under any operative agreement between FINANCIER and VENTURE and
FINANCIER thereafter elects to exercise any right(s) under any applicable
security, mortgage, assignment or other agreement then in effect between
FINANCIER and VENTURE, it is agreed that, upon receipt of such notice from
FINANCIER, PSE&G shall provide notice to VENTURE and thereafter PSE&G shall
accept the instructions of FINANCIER in accordance with the terms of any
applicable security, mortgage or assignment agreement. In such event, VENTURE
shall have no claim against PSE&G for, and hereby agrees to release PSE&G from,
any liability for any cost, expense, loss, damage or liability VENTURE may incur
or sustain arising out of, relating to or resulting from any action(s) which
PSE&G determines it is obligated to take pursuant to any operative agreement
between VENTURE and FINANCIER.
Notwithstanding the foregoing, in the event PSE&G provides a notice
to VENTURE under this ARTICLE XXII, and VENTURE notifies PSE&G that it disagrees
with and is actively contesting the FINANCIER'S allegation that an event of
default has occurred under any operative agreement between FINANCIER and
VENTURE, PSE&G may in its reasonable discretion elect not to accept the
instructions of such FINANCIER, provided that VENTURE shall (i) indemnify PSE&G
in accordance with the terms of ARTICLE XIII for any cost, expense, loss, damage
or liability which PSE&G may incur or sustain as a result of PSE&G's failure to
follow the instructions of such FINANCIER, and (ii) provide PSE&G with
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a non-cancellable surety bond, irrevocable bank letter of credit or other
security in form, substance and amount acceptable to PSE&G upon which PSE&G can
draw in the event it incurs or sustains any expense, loss, damage or liabilities
as a result of its failure to follow the instructions of such FINANCIER.
ARTICLE XXIII
DETERMINATION OF PSE&G COSTS
The costs for any work done or service performed by PSE&G personnel, as
required by this AGREEMENT, which costs are to be billed to and to be paid by
VENTURE pursuant to this AGREEMENT, shall be determined by PSE&G in accordance
with PSE&G's "Procedures for Work Done at the Expense of Others" then in effect.
ARTICLE XXIV
STANDARD FOR PERFORMANCE
Unless otherwise expressly provided for in this AGREEMENT, PSE&G
shall undertake and discharge any obligation it has in this AGREEMENT to, inter
alia, design, construct, install, operate, maintain, repair, replace, reinforce,
rearrange, purchase, select, examine, review, inspect or accept any facility or
equipment pursuant to and in accordance with any applicable PSE&G practice(s),
standard(s) and/or procedure(s). PSE&G shall use the same care and diligence in
controlling the costs of any such
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activity(ies) VENTURE is required to make payment for under this AGREEMENT as if
the activity(ies) were being performed by and for PSE&G's own account.
ARTICLE XXV
STANDBY ELECTRIC SERVICE
In the event VENTURE requires standby electric service to the
COGENERATION FACILITY same shall be furnished by PSE&G pursuant to an applicable
tariff on file with the NJBPU.
ARTICLE XXVI
SUCCESSORS AND ASSIGNS
This AGREEMENT shall be binding upon and shall inure to the benefit
of, or may be performed by, the successors and assigns of the PARTIES, except
that no assignment, pledge or other transfer of this AGREEMENT by any PARTY
shall operate to release the assignor, pledgor or transferor from any of its
obligations under this AGREEMENT, unless consent to the release is given in
writing by the other PARTY,, which consent shall not be unreasonably delayed or
withheld, or unless such transfer is incident to a reorganization or merger or
consolidation with or transfer of all or substantially all of the assets of the
transferor to another person or business entity which person or entity shall, as
part of such succession, assume all the
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obligations of the transferor under this AGREEMENT.
ARTICLE XXVII
CHOICE OF LAW
This AGREEMENT shall be interpreted, construed, governed by,
performed and enforced in accordance with the laws of the State of New Jersey
and federal law, where applicable. All questions concerning the validity,
construction and enforceability of this AGREEMENT as well as questions
concerning the sufficiency or other aspects of performance under this AGREEMENT
shall be determined under the laws of the State of Now Jersey without recourse
to the law governing conflict of laws.
ARTICLE XXVIII
CAPTIONS
The subject headings of the articles of this AGREEMENT are inserted
solely for the purpose of convenient reference and are not intended to, nor
shall same affect the meaning of any provision of this AGREEMENT.
ARTICLE XXIX
COUNTERPARTS
This AGREEMENT may be executed in counterparts. Each shall be deemed
an original but together shall constitute one and the same instrument.
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ARTICLE XXX
MISCELLANEOUS
This AGREEMENT and the obligations of the PARTIES hereunder are
subject to all present and future valid laws and to all valid present and future
orders, rules and regulations of any court or regulatory authority having
jurisdiction to the extent consistent with Section D of ARTICLE IV of this
AGREEMENT.
In case of conflict between any provisions hereof and any applicable
law, regulation or regulatory order, such applicable law, regulation or
regulatory order shall govern to the extent consistent with Section D of ARTICLE
IV of this AGREEMENT.
All terms defined in this AGREEMENT shall have the same defined
meanings when used in any notice, correspondence, report or other document made
or delivered pursuant to or in connection with this AGREEMENT, unless the
context shall otherwise require.
Each reference herein to VENTURE and PSE&G shall be deemed to
include their respective successors and assigns.
All of the covenants, warranties, undertakings and agreements of
VENTURE and PSE&G shall bind the respective PARTIES, their successors and
assigns.
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ARTICLE XXXI
RESERVATIONS
No PARTY shall be prejudiced or bound, except as otherwise
specifically provided herein, nor shall any PARTY be deemed to have approved,
accepted, agreed or consented to any concept, theory or principle underlying or
supposed to underlie any of the matters contained herein, including but not
limited to any concept, theory, principle or method used to calculate the rates
provided for herein.
The PARTIES further understand and agree that the provisions of this
AGREEMENT relate only to the specific matter referred to herein and no PARTY or
person waives any claim or right which it may otherwise have with respect to any
matter not expressly provided for herein.
ARTICLE XXXII
SURVIVAL OF OBLIGATIONS
Termination of this AGREEMENT for any reason shall not relieve
PSE&G or VENTURE of any obligation accruing or arising prior to such
termination.
ARTICLE XXXIII
NOTICES
Any notice, request, demand, communication or statement which either
PSE&G or VENTURE may desire to give to the other shall be in writing and, except
as otherwise provided for in this AGREEMENT, shall be considered as duly
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delivered when mailed by certified mail or delivered against receipt by
messenger or overnight courier addressed to said PARTY as follows:
(a) If to PSE&G:
Public Service Electric and Gas Company
80 Park Plaza - Mail Code T11A
P.O. Box 570
Newark, New Jersey 07101-0570
ATTENTION: MANAGER - COGENERATION
(b) If to VENTURE:
COGEN Technologies NJ Venture
1600 Smith Street
Suite 5000
Houston, Texas 77002
ATTENTION: Robert C. McNair
or to such other person or address as PSE&G or VENTURE may have specified in a
notice duly given as provided herein.
<PAGE>
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IN WITNESS WHEREOF, this AGREEMENT has been executed and delivered as
of the date and year first above written.
COGEN TECHNOLOGIES NJ VENTURE
By: COGEN Technologies NJ, Inc.,
Managing Venturer
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------
Robert C. McNair, President
PUBLIC SERVICE ELECTRIC
AND GAS COMPANY
By: /s/ [SIGNATURE APPEARS HERE]
----------------------------------
<PAGE>
AGREEMENT FOR PURCHASE OF ELECTRIC POWER
BETWEEN
COGEN TECHNOLOGIES NJ, INC.
AND
JERSEY CENTRAL POWER & LIGHT COMPANY
AGREEMENT entered into this 29th day of October, 1985, by and between COGEN
TECHNOLOGIES NJ, INC., a Delaware Corporation ("Seller"), and JERSEY CENTRAL
POWER & LIGHT COMPANY, a New Jersey Corporation ("Buyer") (collectively referred
to as "Parties").
ARTICLE 1
RECITALS
WHEREAS, Seller plans to construct and operate a facility for the
cogeneration of steam and electricity located at Bayonne, New Jersey ("Seller's
Facility" or "Cogeneration Facility");
WHEREAS, Seller desires to sell all the net electrical output of Seller's
Facility to the Buyer;
WHEREAS, Buyer desires to purchase all the net electrical output of
Seller's Facility;
WHEREAS, the Parties desire to agree on certain terms and conditions
concerning the purchase of Electricity by Buyer from Seller; and
WHEREAS, the Parties desire to set forth in writing their respective rights
and obligations with respect to the matters set forth above;
<PAGE>
NOW THEREFORE, in consideration of the mutual covenants contained herein
and other valuable consideration, receipt of which is hereby acknowledged, the
Parties agree as follows:
ARTICLE 2
DEFINITIONS
The following terms when used herein shall have the following meanings,
unless a different meaning shall be expressly stated or shall be apparent from
the context:
2.1 "Affiliate" means a corporation or other entity that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, another corporation or other entity.
2.2 "Agreement" means this contract, including all amendments thereto that
may be made from time to time.
2.3 "Annual Period" means any one of a succession of consecutive twelve
(12) month periods, the first of which shall begin on the first day of the month
immediately following the month in which the Date of Initial Commercial
Operation occurs.
2.4 "Cogeneration Facility" or "Seller's Facility" or "the Facility" means
the waste heat boiler, gas and steam turbines, generators and all appurtenant
structures, equipment, including Seller's interconnection facilities, and real
property interests owned or leased and operated by Seller at International
Maytex Tank Terminals in Bayonne, New Jersey, for the purposes of generating
electricity and steam and other forms of useful thermal output and having a
nameplate capacity of approximately 125 Megawatts.
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<PAGE>
2.5 "Commercial Operation" means the production of Electricity by Seller at
its Cogeneration Facility for sale upon the completion of testing of the
Cogeneration Facility.
2.6 "Date of Initial Commercial Operation" means 12:01 A.M. on the date
Seller designates in writing as the initial date of commercial operation of
Seller's Facility, which date shall not precede the Initial Delivery Date.
2.7 "Electrical Interconnection Facilities" or "Interconnection Facilities"
means all facilities required to be installed solely to interconnect and deliver
power from Seller's Facility to the system of the Wheeling Utility, including
but not limited to, the system protection equipment, connection, transformation,
switching, metering, safety and communications equipment, and any other system
additions or reinforcements that are reasonably required for interconnected
operation.
2.8 "Initial Delivery Date" means that day that Seller actually delivers or
is capable of and offers to deliver Electricity to Buyer, regardless of whether
Buyer accepts such delivery, which date shall precede the Date of Initial
Commercial Operation.
2.9 "Kwh" means kilowatt hours of Electricity.
2.10 "Net Electrical Energy" or "Electricity" means the gross amount of
Electricity in kilowatt hours generated by Seller's Facility less kwh consumed
for use by Seller's
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<PAGE>
Facility and transformation and transmission losses, if any, to the Point of
Delivery.
2.11 "Off-Peak Period" means all hours not falling within an "On-Peak
Period."
2.12 "On-Peak Period" means all hours from 8:00 A.M. to 8:00 P.M.
prevailing time Monday through Friday, fifty-two (52) weeks per year.
2.13 "Operate" means to provide the engineering, purchasing, repair,
supervision, training, inspection, testing, protection, operation, use,
management, replacement and maintenance of and for the Facility in accordance
with applicable industry standards and Prudent Electrical Practices.
2.14 "Party" or "Parties" means the signatories to this Agreement and
their successors and assigns.
2.15 "Point(s) of Delivery" means any point or points where Buyer's System
is interconnected with the system of the Wheeling Utility.
2.16 "Point of Interconnection" means the point at which the Electrical
Interconnection Facilities of Seller connect with Public Service Electric and
Gas Company's interconnection facilities in Bayonne, New Jersey.
2.17 "Prudent Electrical Practices" means those practices, methods and
equipment as changed from time to time, used in prudent electrical engineering
and operations to operate electrical equipment lawfully and with safety,
dependability, and efficiency and that are in accordance with the National
Electrical Safety Code, the National Electrical
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<PAGE>
Code or any other applicable Federal, State and Local codes.
2.18 "Scheduled Outage(s)" means an outage of the Facility that is
scheduled in advance for the purpose of performing periodic maintenance and
repairs on the Facility.
2.19 "Unscheduled Outage(s)" means an outage other than a scheduled
outage.
2.20 "Wheeling Utility" means Public Service Electric and Gas Company or
such other electric utility which connects with Seller's Facility and which
transmits Seller's Net Electrical Energy to Buyer at the Point(s) of Delivery.
ARTICLE 3
TERM
3.1 Duration of Agreement
A. This Agreement shall be effective upon approval by the Board of
Public Utilities of the State of New Jersey, pursuant to Article 16 and shall
continue in effect for a Base Term of twenty (20) Annual Periods beginning on
the Date of Initial Commercial Operation.
B. Notwithstanding the preceding paragraph, if the date of Initial
Commercial Operation has not occurred prior to December 31, 1987, Buyer may
thereafter terminate this Agreement by providing Seller forty-five (45) days'
written notice, unless prior to December 31, 1987, Seller has commenced a
program of continuous construction of the Facility and does
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<PAGE>
not, of its own volition, subsequently discontinue such construction program.
3.2 Renewal of Agreement. This Agreement shall be automatically renewed for
a period of an additional ten (10) Annual Periods, commencing with the
expiration of the Base Term pursuant to Article 3.1, unless either Party elects
to terminate this Agreement at the expiration of the Base Term. Such termination
shall be valid only if the terminating Party provides written notice of its
intent to terminate to the other Party at least three (3) full years prior to
the expiration of the Base Term.
ARTICLE 4
TERMS OF SALE
4.1 General. Seller agrees to sell and deliver and Buyer agrees to purchase
and accept delivery of all of the Net Electrical Energy generated by Seller's
Facility subject to the terms of this Agreement.
4.2 Seller's Obligation. Commencing as of the Date of Initial Commercial
Operation, Seller shall:
A. Use all reasonable efforts to operate and maintain the Cogeneration
Facility in accordance with Prudent Electrical Practices and prudent business
judgment and so as not to cause disturbances on the Buyer's or the Wheeling
Utility's electric systems;
B. Provide Buyer estimates of Electricity production and schedules of
maintenance on a periodic basis for
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<PAGE>
the purpose of coordinating the Facility's operations with those of Buyer's
system to the degree reasonably possible.
C. Provide Buyer prior to the first day of each month of each year its
estimate of the generation of Electricity at Seller's Facility for the twelve
(12) months beginning such month;
D. Provide Buyer prior to the first day of each month a schedule of
the generation of Electricity at Seller's Facility for such month;
E. Use all reasonable efforts to maximize delivery of Electricity
from Seller's Facility during On-Peak Periods; and
F. Use its best efforts to avoid Scheduled Outages during the months
of December, January, February, July, August and September.
4.3 Estimates and Schedules. The estimates and schedules provided by Seller
under Article 4.2(B), (C) and (D), above, shall be based on fuel availability,
Scheduled Outages, and other conditions anticipated at the time such schedules
and estimates are made but shall not be binding on Seller. Seller shall provide
a revised estimate or schedule as soon as practicable after it realizes that any
estimate or schedule provided to Buyer is no longer accurate for Buyer's
planning purposes.
4.4 Interruptions in Delivery. The Parties recognize
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<PAGE>
that the unavailability of fuel, emergencies at Seller's Facility, emergencies
on the system of the Wheeling Utility, accidents, or other unusual conditions
may necessitate departure from scheduled generation or delivery of Net
Electrical Energy by Seller. The occurrence of any such condition, circumstances
or event shall not give rise or result in liability of Seller for damages during
or as a result of such departure. However, Seller shall use its best efforts to
promptly resume scheduled generation.
4.5 Request for Additional Delivery. If Buyer requests delivery of
Electricity in excess of that which Seller was otherwise intending to supply, to
the extent Seller is capable of delivering additional Electricity and such
delivery is consistent with other obligations to steam customers as determined
by Seller, Seller shall accommodate such request to the maximum extent
practicable. Buyer shall bear any additional costs or expenses incurred by
Seller.
4.6 Conditions Excusing Buyer's Obligation to Purchase Electricity. In
addition to conditions of Force Majeure which, as set out in Article 11, excuse
Buyer from its obligation to purchase Electricity from Seller, Buyer may refuse
to purchase Electricity from the Seller when:
A. Buyer is unable to back down its own generation sufficiently to
accept the Electricity from the Facility without jeopardizing the integrity of
Buyer's system. Buyer will give prompt notice of the potential for such refusal
to purchase;
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<PAGE>
B. Buyer's distribution or transmission circuits are loaded to
capacity and further Electricity would cause an overload. Such refusal to
purchase may occur on an instantaneous basis; or
C. An emergency occurs on the Wheeling Utility system, such that
there would be no means of delivering the Electricity to the Buyer. Such refusal
to purchase may also occur on an instantaneous basis.
In the event that Buyer refuses to purchase Electricity from Seller
pursuant to this Article 4.6, Buyer shall be bound by the terms and conditions
set out in Articles 11.2 and 11.3 of this Agreement.
4.7 Conditions Requiring Curtailment or Interruptions of Delivery. Buyer
shall not be obligated to accept, and Buyer may require Seller to curtail,
interrupt or reduce deliveries of Electricity in order to construct, install,
maintain, repair, replace, remove, investigate or inspect any of its equipment
or any part of its system which would be placed in jeopardy by Seller's delivery
of Net Electrical Energy or if it determines that curtailment, interruption, or
reduction is necessary because of emergencies, forced outages, operating
conditions on its system, or as otherwise required by Prudent Electrical
Practices. Buyer will use its best efforts to avoid said interruptions,
curtailments or reductions and further to promptly resume acceptance of
Electricity from Seller and shall be bound by the terms and conditions set out
in Articles 11.2
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<PAGE>
and 11.3 of this Agreement.
ARTICLE 5
PRICE
Buyer shall pay Seller in accordance with the terms of Appendix A -
"Schedule of Electricity Purchase Prices" for Electricity delivered to Buyer.
ARTICLE 6
BILLINGS AND RECORDS
6.1 Billing.
A. Seller shall prepare and send to Buyer a statement setting forth
the amount due, if any, for the preceding calendar month. The billing statement
shall also set forth the amount of hourly Electricity expressed in Kwh measured
at the Point of Interconnection during such month and a breakdown of the amount
of Electricity measured during On-Peak and Off-Peak Periods, respectively.
B. (1) Buyer shall, within thirty (30) days of the receipt of Seller's
statement, pay Seller for all amounts billed pursuant to Article 6.1A.
(2) If Buyer disputes a bill prepared by Seller pursuant to Article
6.1A, Buyer shall render payment for the undisputed portion of such bill, with
the disputed portion subject to arbitration pursuant to Article 13.
(3) If Buyer fails to pay all or a portion of the amounts billed
within the time stated in Article 6.1B(l),
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<PAGE>
Buyer shall pay interest on the unpaid portion of the bill, which interest shall
accrue at the rate of one and one-half percent (1-1/2%) per month or one percent
(1%) above the Citibank Alternate Base Rate in effect at the time, whichever is
higher, from the due date until paid.
6.2 Records. Both Seller and Buyer shall keep a record of all invoices,
receipts, charts, computer printouts, punch cards or magnetic tapes related to
the volume or price of Electricity sales made under this Agreement. Such records
shall be made available for inspection by either Party upon reasonable notice.
All such materials shall be kept on record for a minimum of seven (7) years from
the date of their preparation or until the date of termination of this
Agreement, whichever date is later.
ARTICLE 7
MEASUREMENT AND METERING
7.1 Units of Measurement. For the purposes of billing under this Agreement,
Electricity shall be measured in Kilowatt hours (kwh).
7.2 Billing Measurements. For purposes of this Agreement, the place of
measurement will be located at the Electrical Interconnection Facilities between
Seller's Facility and the system of Wheeling Utility. For the purpose of billing
under this Agreement, Net Electrical Energy delivered to Buyer
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<PAGE>
at the Point or Points of Delivery shall be the quantities measured at the Point
of Interconnection between Seller's Facility and the Wheeling Utility adjusted
for differences, if any, between the measured quantities and the quantities
credited to Buyer by the Wheeling Utility for deliveries from Seller as
determined from the Buyer's Daily Megawatt Hour (MWH) Log of System Operations.
7.3 Measuring Equipment and Stations.
A. Seller shall insure that the Wheeling Utility shall (1) own,
operate and maintain an Electricity measuring station and all measuring
equipment necessary to permit an accurate determination of the quantity of
Electricity delivered to Buyer; and (2) exercise reasonable care in the
maintenance and operation of metering equipment so as to assure to the maximum
extent practicable an accurate determination of such quantities. Except as
provided in Article 7.4, the Wheeling Utility's meters shall be used for
quantity measurements under this Agreement.
B. Seller may own, operate and maintain an Electricity measuring
station and all measuring equipment necessary to permit an accurate
determination of the quantity of Electricity delivered to Buyer, provided that
such equipment shall be operated and maintained in a manner that does not
interfere with the operation of the Wheeling Utility's measuring equipment.
C. Buyer may own, maintain and operate, at its sole expense,
Electricity check measuring equipment, provided that
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<PAGE>
such equipment shall be operated and maintained in a manner that does not
interfere with the Seller's Facility or with the operation of the Wheeling
Utility's measuring equipment.
7.4 Adjustments. In the event one of the Wheeling Utility's meters is out
of service or registers inaccurately, measurement shall be determined by:
A. Using the registration of Seller's meters, if installed and
accurately registering; or
B. In the absence of an installed and accurately registering meter
belonging to Seller, using the registration of any check meter or meters of
Buyer, if installed and accurately registering; or
C. In the absence of an installed and accurately registering check
meter, making a calibration test or mathematical calculation, if the percentage
of error is ascertainable; or
D. In the absence of both an installed and accurately registering
check meter and an ascertainable percentage of error, estimating by reference to
quantities measured during periods under similar conditions when the Wheeling
Utility's meter was registering accurately.
7.5 Testing and Corrections.
A. The accuracy of the Wheeling Utility's measuring equipment shall be
tested and verified by Seller at reasonable intervals and, if requested, in
Buyer's presence. In the event that either Party notifies the other that it
desires a test of
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<PAGE>
its own or of the other Party's measuring equipment or of the Wheeling Utility's
measuring equipment, the Parties shall cooperate to secure a prompt verification
of the accuracy of such equipment. For purposes of this Article, "testing"
refers to the testing of equipment relied upon for billing purposes.
B. Seller shall bear the cost of the testing of Wheeling Utility's
measuring equipment done at reasonable intervals. In the event that either Party
requests a testing of its own or of the other Party's or of the Wheeling
Utility's measuring equipment at other than a reasonable interval, the Party
requesting the testing shall bear the cost of the testing.
C. If, upon testing, any electrical measuring equipment is found to be
in error by not more than plus or minus two percent (2%), previous recordings of
such equipment shall be considered accurate in computing deliveries of
Electricity hereunder, but such equipment shall be promptly adjusted to record
correctly. If, upon testing, any electrical measuring equipment shall be found
to be inaccurate by an amount exceeding plus or minus two percent (2%), then
such equipment shall be promptly adjusted to record properly and any previous
recordings by such equipment shall be corrected to zero error. If no reliable
information exists as to when the equipment became inaccurate, it shall be
assumed for correction purposes hereunder that such inaccuracy began at a point
in time midway between the testing date and the last previous date on which the
equipment was tested and found to be accurate.
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<PAGE>
7.6 Maintenance and Records.
A. Each Party shall have the right to be present whenever the other
Party reads, cleans, changes, repairs, inspects, tests, calibrates, or adjusts
the equipment used in measuring or checking the measurement of Electricity
delivered to Buyer. Each Party shall give timely notice to the other Party in
advance of taking any of such actions.
B. The records from the measuring or check measuring equipment shall
remain the property of the Seller or Buyer, respectively, but, upon request,
each Party will submit to the other its records and charts, together with
calculations therefrom, for inspection and verification, subject to return
within ten (10) days after receipt thereof.
ARTICLE 8
DELIVERY
Seller shall be responsible for making and keeping in force for the term of
this Agreement arrangements with the Wheeling Utility for the transmission of
Electricity generated by Seller's Facility to Points of Delivery on Buyer's
System. The cost of such delivery shall be borne by Seller. Buyer's obligation
to make payments to Seller under Article 6 of this Agreement is expressly
conditioned upon the existence and continuance of such arrangements.
ARTICLE 9
INTERCONNECTION FACILITIES
Seller shall, at its expense, make all arrangements
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<PAGE>
necessary to interconnect Seller's Facility with the utility grid of the
Wheeling Utility providing delivery to the Points of Delivery on Buyer's System.
ARTICLE 10
ACCESS TO SELLER'S FACILITY
Properly accredited representatives of Buyer shall, at reasonable times,
with reasonable notice to Seller, have access to Seller's Facility to make
inspections and obtain information required in connection with this Agreement.
ARTICLE 11
FORCE MAJEURE
11.1 Definition. Except for the obligations of either party to make
payments under this Agreement, the Parties shall be excused from performing
their respective obligations hereunder and shall not be liable in damages or
otherwise, if and only to the extent that they are unable to so perform or are
prevented from performing by an event of Force Majeure, including, without
limitations, storm, flood, lightning, drought, earthquake, fire, explosion,
civil disturbance, labor dispute, act of God or the public enemy, action of a
court or public authority, or any other cause, whether or not similar thereto,
beyond the reasonable control of the affected Party.
11.2 Burden of Proof. The burden of proof as to whether a Force Majeure
event has occurred shall be upon the Party
-16-
<PAGE>
claiming that it shall be excused from performing its obligations hereunder due
to the occurrence of such an event.
11.3 Effect of Force Majeure. If either party shall rely on the occurrence
of an event or condition of Force Majeure described in Article 11.1, above, as a
basis for being excused from performance of its obligations under this
Agreement, then the party relying on the Force Majeure event or condition shall:
A. provide prompt notice to the other party of the occurrence of the
event or condition giving an estimation of its expected duration and the
probable impact on the performance of its obligations hereunder;
B. exercise all reasonable efforts to continue to perform its
obligations hereunder;
C. expeditiously take action to correct or cure the event or condition
excusing performance;
D. exercise all reasonable efforts to mitigate or limit damages to the
other party to the extent such action will not adversely affect its own
interests; and
E. provide prompt notice to the other party of the cessation of the
event or condition giving rise to its excusal from performance.
No obligations of either Party that arose prior to the occurrence of the event
of Force Majeure shall be excused as a result of such occurrence.
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<PAGE>
ARTICLE 12
LIABILITY AND INDEMNIFICATION
12.1 Limitation on Liability for Damages, Losses or Expenses. Except for
breaches of this Agreement specified in Article 14.1A and Article 14.1D, neither
Buyer nor Seller, nor their respective officers, directors, agents, employees,
parent or affiliates, or their respective officers, directors, agents or
employees shall be liable to the other Party or its parent, subsidiaries,
affiliates, officers, directors, agents, employees, successors or assigns, for
any damages, losses or expenses connected with or resulting from breaches of
this Agreement, including, without limitation, claims in the nature of loss of
revenues, income or profits.
12.2 Indemnification.
A. Each Party shall indemnify the other Party, its officers, agents,
and employees against all loss, damages, expense, and liability to third persons
for injury to or death of persons or injury to property proximately caused by
the indemnifying Party's construction, ownership, operation, or maintenance of,
or by failure of, any of such Party's works or facilities used in connection
with his Agreement; provided, however, that neither Party, nor its officers,
agents, directors or employees shall be liable to the other Party, its
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<PAGE>
agents, officers, directors or employees for incidental, special, indirect, or
consequential damages of any nature connected with or resulting from performance
of this Agreement. The indemnifying Party shall, on the other Party's request,
defend any suit asserting a claim covered by this indemnity. The indemnifying
Party shall pay all costs that may be incurred by the other Party in enforcing
this indemnity.
B. Neither Party, nor its directors, officers, employees, agents or
representatives, nor any independent contractor engaged in connection with the
performance of this Agreement, shall be deemed an employee of the other Party.
ARTICLE 13
ARBITRATION OF DISPUTES
In the event any controversy or claim shall arise between Seller and Buyer
regarding any matter under this Agreement, the parties shall undertake in good
faith to resolve the same. If the parties cannot agree, such failure to agree
shall be deemed a dispute and the dispute shall, by written notice to the other,
be referred to and settled by arbitration in accordance with the then existing
commercial arbitration rules of the American Arbitration Association. Such
determination shall include but not be limited to a decision (i) as to whether
the obligation(s) in dispute were met and (ii) as to what damages or remedies
are due Seller and Buyer. This Article 13, however, is not intended to
constitute a waiver by either party
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<PAGE>
of the right to appeal to the courts the arbitrators' final determination.
Further, nothing contained herein shall in any way deprive either Party of its
right to obtain injunctive or other equitable relief. There will be three
arbitrators; one of which will be selected by Buyer, one of which will be
selected by Seller, and one of which will be selected by the American
Arbitration Association. The Parties shall equally share the cost of the
honorarium, if any. Both Parties agree to pay their own legal fees, including
stenographic costs and other hearing related expenses such as any service
charges required by the American Arbitration Association.
This Article 13 shall survive the termination or expiration of this
Agreement.
ARTICLE 14
BREACH OF CONTRACT
14.1 Definition. A breach of this Agreement shall be deemed to exist
upon the occurrance of any one or more of the following events:
A. Failure by Buyer to make payment of any amounts due Seller under this
Agreement, which failure continues for a period of thirty (30) days after notice
of such nonpayment;
B. Failure by Buyer or Seller to perform fully any other provision of
this Agreement, which failure continues for a period of thirty (30) days after
notice of such nonperformance;
C. The Seller fails to deliver any Electricity for 365 consecutive days
after the Date of Initial Commercial
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<PAGE>
Operation, for any reason other than Force Majeure;
D. Seller sells any Electricity to any other Party at times when
Buyer can accept it;
E. If by order of a court of competent jurisdiction, a receiver or
liquidator or trustee of either Party or of any of the property of either Party
shall be appointed, and such receiver or liquidator or trustee shall not have
been discharged within a period of sixty (60) days; or if by decree of such a
court, a Party shall be adjudicated bankrupt or insolvent or any substantial
part of the property of such Party shall have been sequestered, and such decree
shall have continued undischarged and unstayed for a period of sixty (60) days
after the entry thereof; or if a petition to declare bankruptcy or to reorganize
a Party pursuant to any of the provisions of the Federal Bankruptcy Act, as it
now exists or as it may hereafter be amended, or pursuant to any other similar
state statute applicable to such Party, as now or hereafter in effect, shall be
filed against such Party and shall not be dismissed within sixty (60) days after
such filing; or
F. If either Party shall file a voluntary petition in bankruptcy
under any provision of any federal or state bankruptcy law or shall consent to
the filing of any bankruptcy or reorganization petition against it under any
similar law: or, without limitation of the generality of the foregoing, if a
Party shall file a petition or answer or consent seeking relief or assisting in
seeking relief in a proceeding under any of the provisions of the Federal
Bankruptcy Act, as it now exists or
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<PAGE>
as it may hereafter be amended, or pursuant to any other similar state statute
applicable to such Party, as now or hereafter in effect, or an answer admitting
the material allegations of a petition filed against it in such a proceeding; or
if a Party shall make an assignment for the benefit of its creditors; or if a
Party shall admit in writing its inability to pay its debts generally as they
become due; or if a Party shall consent to the appointment of a receiver or
receivers, or trustee or trustees, or liquidator or liquidators of it or of all
or any part of its property.
14.2 Remedies for Breach. If either Party claims that the other Party has
breached this Agreement, as defined in Article 14.1, it shall provide such other
Party with notice thereof. If, within fifteen (15) days of the service of such
notice, such other Party disputes in writing that a breach by it has occurred,
the matter shall promptly be submitted to arbitration under Article 13 for
resolution. If there is no dispute that a breach has occurred, or if the
arbitrator determines that a breach has occurred, the non-breaching Party may
terminate this Agreement pursuant to Article 15.
14.3 Buyer's Rights and Obligations. Except as herein otherwise provided,
unless and until this Agreement has been terminated, Buyer shall not refuse to
make, suspend or delay any of the payments required under this Agreement as a
result of any breach or alleged breach by Seller.
14.4 Waiver of Breach. Either Party may waive breach by the other Party,
provided that no waiver by or on behalf of
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<PAGE>
either the Buyer or Seller of any breach of any of the covenants, provisions,
conditions, restrictions or stipulations contained in this Agreement shall take
effect or be binding on the Buyer or Seller unless the waiver is reduced to
writing and executed by the Buyer or Seller, and any such waiver shall be deemed
to extend only to the particular breach waived and shall not limit or otherwise
affect any rights that the Buyer or Seller may have with respect to any other or
future breach.
ARTICLE 15
TERMINATION FOR BREACH
15.1 General. In the event either Party elects to terminate this Agreement
pursuant to Article 14.2, the terminating Party shall give written notice of
such election to the opposing Party. Upon the giving of such notice, the
terminating Party shall be excused and relieved of all obligations under this
Agreement and shall be entitled to pursue to remedies specified in Article 15.2.
15.2 Remedies Upon Termination. The Party terminating this Agreement may
elect to seek damages and other relief from the opposing Party resulting from a
breach of this Agreement pursuant to the arbitration procedures specified in
Article 13. The terminating Party shall give notice of such election to the
opposing Party within thirty (30) days of the date of notice given pursuant to
Article 15.1, and in such event the Parties agree to be bound by the provisions
of Article 13, even
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<PAGE>
though this Agreement may otherwise be terminated and of no further force and
effect. Should the terminating Party not elect to proceed under Article 13, the
Parties shall be free to pursue all available legal and equitable remedies for
breach of this Agreement.
ARTICLE 16
REGULATORY APPROVAL
This Agreement does not become effective until the Board of Public
Utilities of the State of New Jersey issues an order approving this Agreement.
ARTICLE 17
NOTICE AND SERVICE
17.1 Notice. All notices, including communications and statements which are
required or permitted under the terms of this Agreement, shall be in writing,
except as otherwise provided.
17.2 Service.
A. Service of a notice may be accomplished by personal service,
telegram, or registered or certified mail.
B. 1. If a notice is sent by registered or certified mail, it shall be
deemed served within three (3) days, excluding Saturdays, Sundays or legal
holidays of the State of New Jersey, except as otherwise demonstrated by a
signed receipt.
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<PAGE>
2. If a notice is served by telegram, it shall be deemed served
eighteen (18) hours after delivery to the telegram company.
C. Notices may be sent to the Parties at the following addresses:
1. Seller: Cogen Technologies NJ, Inc.
14614 Falling Creek Drive
Suite 212
Houston, Texas 77068
Attn: Mr. Robert C. McNair
President
2. Buyer: Director, Technical Services
Jersey Central Power & Light Company
Madison Avenue at Punch Bowl Road
Morristown, New Jersey 07960
ARTICLE 18
AMENDMENTS
No amendment or modification of the terms of this Agreement shall be
binding on either the Buyer or Seller unless reduced to writing and signed by
both Parties.
ARTICLE 19
SUCCESSORS AND ASSIGNS
19.1 Assignment by Seller. This Agreement shall inure to the benefit of and
bind the respective successors and assigns of the parties hereto, provided,
however, that no assignment by Seller or any successor or assignee of Seller of
its rights and obligations hereunder, shall be made or become effective
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<PAGE>
without the prior written consent of Buyer in each case being obtained (such
consent not to be unreasonably withheld).
19.2 Assignment by Buyer. Buyer may only assign this Agreement and its
rights and obligations hereunder with the prior written consent of Seller in
each case being obtained (such consent not to be unreasonably withheld).
ARTICLE 20
CHOICE OF LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of New Jersey.
ARTICLE 21
SEVERABILITY AND RENEGOTIATION
21.1 Severability. Should Article 4 of this Agreement, or any substantial
portion thereof, for any reason be declared invalid or unenforceable by final
and unappealable order of any court or regulatory body having jurisdiction
thereafter, this Agreement shall be automatically terminated on the date such
order becomes final and unappealable. Should any other part of this Agreement,
for any reason, be declared invalid, such decision shall not affect the validity
of the remaining
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<PAGE>
portions, which remaining portions shall remain in force and effect as if this
Agreement had been executed with the invalid portion thereof eliminated, and it
is hereby declared the intention of the parties hereto that they would have
executed the remaining portion of this Agreement without including therein any
such part, parts or portion which may for any reason be hereafter declared
invalid.
21.2 Renegotiation. Notwithstanding the provisions of Article 21.1, should
any term or provision of this Agreement other than Article 4 be found invalid by
any court or regulatory body having jurisdiction thereover, the Parties shall
immediately renegotiate such term or provision of the Agreement to eliminate
such invalidity.
ARTICLE 22
OTHER AGREEMENTS
This Agreement supersedes any and all oral or written agreements and
understandings heretofore made relating to the subject matters herein, and this
Agreement constitutes the entire agreement and understanding of the Parties
relating to the subject matters herein.
ARTICLE 23
CAPTIONS
All indices, titles, subject headings, section titles and similar items are
provided for the purpose of reference and
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<PAGE>
convenience and are not intended to be inclusive, definitive or to affect the
meaning, content or scope of this Agreement.
ARTICLE 24
COUNTERPARTS
This Agreement may be executed in any number of counterparts, and each
executed counterpart shall have the same force and effect as an original
instrument.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first set forth above.
ATTEST: COGEN TECHNOLOGIES NJ, INC.
/s/ [Signature appears here] By: /s/ Robert C. McNair
- ------------------------------ -----------------------------------
Asst. Secretary Robert C. McNair, President
ATTEST: JERSEY CENTRAL POWER & LIGHT COMPANY
/s/ [Signature appears here] By: /s/ [Signature appears here]
- ------------------------------ -----------------------------------
Secretary
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<PAGE>
AMENDMENT TO
AGREEMENT
FOR PURCHASE OF ELECTRIC POWER
BETWEEN
COGEN TECHNOLOGIES NJ, INC.
AND
JERSEY CENTRAL POWER & LIGHT COMPANY
DATED
OCTOBER 29, 1985
WHEREAS, Cogen Technologies NJ, Inc. ("Seller") and Jersey Central
Power & Light Company ("Buyer") entered into an "Agreement for Purchase of
Electric Power Between Cogen Technologies NJ, Inc. and Jersey Central Power &
Light Company" ("Power Purchase Agreement") dated October 29, 1985; and
WHEREAS, the Seller and Buyer wish to make certain minor technical
changes to the Power Purchase Agreement.
NOW, THEREFORE, pursuant to Article 18 of the Power Purchase Agreement,
the Seller and Buyer agree that the following changes shall be made to the Power
Purchase Agreement and are hereby incorporated therein by reference, with the
Articles of this Amendment corresponding to the Articles in the Power Purchase
Agreement.
<PAGE>
-2-
ARTICLE 12
On page 18, delete Article 12.1 and substitute the following in lieu
thereof:
12.1 Limitation on Liability for Incidental, Indirect, or
Consequential Damages, Losses or Expenses. Except for breaches of this
Agreement specified in Article 14.1A and Article 14-1D, neither Buyer
nor Seller, nor their respective officers, directors, agents,
employees, parent or affiliates, or their respective officers,
directors, agents or employees shall be liable to the other Party or
its parent, subsidiaries, affiliates, officers, directors, agents,
employees, successors or assigns, for any incidental, indirect, or
consequential damages, losses or expenses connected with or resulting
from breaches of this Agreement, including, without limitation, claims
in the nature of loss of revenues, income or profits.
Except as hereinabove amended, the Power Purchase Agreement shall
remain in full force and effect without any further amendment, modification, or
alteration.
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to
the Power Purchase Agreement to be duly
<PAGE>
-3-
executed by their respective officers thereunto duly authorized as of this
5th day of September, 1986.
ATTEST: COGEN TECHNOLOGIES NJ, INC.
/s/ [Signature appears here] BY: /s/ Robert C. McNair
- ----------------------------- -------------------------------------
Assistant Secretary Robert C. McNair
President
ATTEST: JERSEY CENTRAL POWER & LIGHT COMPANY
/s/ C. A. Marks BY: /s/ B.J. McCarthy
- ----------------------------- -------------------------------------
C. A. Marks B.J. McCarthy
Assistant Secretary Vice President
<PAGE>
SECOND AMENDMENT
TO
POWER PURCHASE AGREEMENT
AGREEMENT entered into as of this day of August 1988, by and between
COGEN TECHNOLOGIES NJ VENTURE, a New Jersey general partnership ("Seller"), and
JERSEY CENTRAL POWER & LIGHT COMPANY, a New Jersey corporation ("Buyer")
(collectively referred to as "Parties").
W I T N E S S E T H :
WHEREAS, COGEN TECHNOLOGIES NJ, INC. ("Cogen") and Buyer have entered into
a certain Power Purchase Agreement, dated October 29, 1985, as amended on
September 5, 1986, (the "Power Purchase Agreement") providing, among other
things for the Buyer to purchase the Net Electrical Energy, as therein defined,
of Cogen's proposed Bayonne cogeneration facility having an estimated nameplate
capacity of approximately 125 MW.
WHEREAS, Cogen has assigned the Power Purchase Agreement to the Seller;
WHEREAS, the Seller has increased the estimated nameplate rating of its
cogeneration facility to 165 MW due to further refinements achieved during the
design and construction thereof; and
<PAGE>
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WHEREAS, as an accommodation to Seller, Buyer is willing to agree to
purchase hourly, payable on a monthly basis, 75.8% of the net electrical output
from each discrete generator of Seller's cogeneration facility but in any event
only up to a maximum aggregate of 125 MWH/hr. on an average annual basis.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt of which is hereby acknowledged, the Parties
agree as follows:
1. Article 2.4 of the Power Purchase Agreement is hereby amended to read in
its entirety as follows:
"Cogeneration Facility" or "Seller's Facility" or "the Facility" means
the three General Electric natural gas turbines (Serial #295326, 295327,
295328), three waste heat recovery boilers, and one General Electric
extraction steam turbine (Serial #198043) and all appurtenant structures
and equipment, including Seller's interconnection facilities, and real
property interest owned or leased and operated by Seller at
International Matex Tank Terminals in Bayonne, New Jersey, for the
purposes of generating electricity and steam and other forms of useful
thermal output, and having an aggregate nameplate capacity of
approximately 165 Megawatts.
<PAGE>
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2. Article 2.10 of the Power Purchase Agreement is hereby amended to read
in its entirety as follows:
"Net Electrical Energy" or "Electricity" means seventy-five and eight-
tenths percent (75.8%) of the gross amount of electricity generated by
Seller's Facility less seventy-five and eight-tenths percent (75.8%) of
the Kwh consumed for use by Seller's Facility whether purchased or
supplied by the Seller and transformation and transmission losses, if
any, to the Point of Delivery.
3. All electrical generating units which are not included within the
definition of Seller's Facility and which are added to the Seller's Facility at
any time shall not be considered part of Seller's Facility for purposes of the
Power Purchase Agreement and the electrical output of such units shall be
separately metered from the Seller's Facility.
4. The Seller will, on a best-effort basis, assist JCP&L in obtaining
from Public Service Electric & Gas on a timely basis, and at a cost to JCP&L
reflective of the cost of supplying the same, copies of the magnetic tape
cartridges used to calculate the deliveries of Net Electrical Energy.
5. Except as expressly amended by the Second Amendment and the amendment
dated September 5, 1986, the Power Purchase Agreement as executed on October 29,
1985 shall remain in full force and effect.
6. This Second Amendment may be executed in several counterparts, all of
which taken together shall be one and the same original instrument.
<PAGE>
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IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be
signed by their respective officers thereunto duly authorized as of the day and
the year first set forth above.
ATTEST: COGEN TECHNOLOGIES NJ VENTURE
/s/ MaryAnn McLendon By: /s/ Robert C. McNair
- ---------------------------- --------------------------------
Assistant Secretary Robert C. McNair, President
Cogen Technologies, NJ, Inc.
Managing Venturer
ATTEST: JERSEY CENTRAL POWER & LIGHT COMPANY
/s/ C. A. Marks By: /s/ [Signature appears here]
- ---------------------------- ------------------------------------
C. A. Marks
Assistant Secretary
<PAGE>
OPERATION AND MAINTENANCE AGREEMENT
By and Between
COGEN TECHNOLOGIES NJ VENTURE,
AS "OWNER"
AND
GENERAL ELECTRIC COMPANY,
AS "OPERATOR"
June 6, 1997
<PAGE>
TABLE OF CONTENTS
Section Page
------- ----
I. DEFINITIONS.............................................. 2
Actual kWh............................................... 2
Affiliate................................................ 2
Agreement................................................ 2
Annual Fee Adjustment Amount or "AFAA"................... 2
Annual Operating Plan.................................... 2
Applicable Adjustment Amount............................. 2
Approved Annual Operating Plan........................... 2
Approved O&M Plan........................................ 2
Approved Operating Budget................................ 2
Base Index............................................... 2
Bayonne Approved Operating Budget....................... 2
Camden Approved Operating Budget......................... 2
Camden Facility.......................................... 2
Camden O&M Agreement..................................... 3
Capital Improvements..................................... 3
Confidential Information................................. 3
Constant Personnel....................................... 3
Consumables.............................................. 3
CPI Adjusted Payments.................................... 3
Defaulting Party......................................... 3
Default Rate............................................. 3
Denominator.............................................. 3
Direct Costs............................................. 3
Effective Hourly Rate.................................... 3
Equipment................................................ 3
Event of Default......................................... 3
Execution Date........................................... 4
Existing O&M Agreement................................... 4
Existing O&M Agreement Termination Date.................. 4
Exxon.................................................... 4
Facility................................................. 4
Facility Data............................................ 4
Facility Manager......................................... 4
FERC..................................................... 4
FM kWh................................................... 4
Force Majeure............................................ 4
Forced Outage............................................ 4
Fourth Year Termination Fee.............................. 4
Fuel..................................................... 4
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Section Page
------- ----
Gas Service Agreement..................................... 5
GE........................................................ 5
GE Equipment.............................................. 5
GE O&M Personnel.......................................... 5
GE O&M Personnel Overhead................................. 5
IMTT-Bayonne.............................................. 5
IMTT-Bayonne Plant........................................ 5
IMTT-BX................................................... 5
JCP&L..................................................... 5
Key Personnel............................................. 5
Key Regional Office Personnel............................. 5
kWh....................................................... 5
Lender.................................................... 6
Linden Approved Operating Budget.......................... 6
Linden Facility........................................... 6
Linden O&M Agreement...................................... 6
Major Inspection.......................................... 6
Major Overhauls........................................... 6
Non-Defaulting Party...................................... 6
Numerator................................................. 6
O&M Fee................................................... 6
O&M Plan.................................................. 6
Operating Budget.......................................... 6
Operating Procedures...................................... 6
Operator.................................................. 6
Operator Confidential Information......................... 6
Operator Indemnitees...................................... 6
Operator Personnel........................................ 6
Operator Personnel Overhead............................... 7
OSHA...................................................... 7
Overhead Percentage Rate.................................. 7
Owner..................................................... 7
Owner Confidential Information............................ 7
Owner Indemnitees......................................... 7
Parts..................................................... 7
Parts Discount............................................ 7
Permitted Transferee...................................... 7
Plant Capacity............................................ 7
Plant Manager............................................. 7
POPI...................................................... 7
Power Purchase Agreement.................................. 7
-ii-
<PAGE>
Section Page
------- ----
Power Purchasers.......................................... 7
Project Year.............................................. 8
Prudent Utility Practices................................. 8
PSE&G..................................................... 8
Published Price........................................... 8
PURPA.................................................... 8
Qualifying Cogeneration Facility.......................... 8
Rated Capacity............................................ 8
Regional Office........................................... 8
Reimbursable Costs........................................ 9
Related Agreements........................................ 9
Repairs................................................... 9
Scheduled Outage.......................................... 9
Services.................................................. 9
Services Discount......................................... 9
Seventh Year Termination Fee.............................. 9
Site...................................................... 9
Site Lease................................................ 9
Special Improvements...................................... 9
SSOI...................................................... 9
Standby Boilers........................................... 9
Steam Purchase Contracts.................................. 10
Steam Purchasers.......................................... 10
Target Rated Capacity..................................... 10
Termination Agreement..................................... 10
Test Plan................................................. 10
Transition Stage.......................................... 10
Transition Stage Operating Budget......................... 10
Transition Stage Operating Plan........................... 10
Transition Stage Plan..................................... 10
Unscheduled Maintenance................................... 10
W-2 Wages................................................. 10
Water Supply Agreement.................................... 10
Work...................................................... 10
II. RESPONSIBILITIES OF OPERATOR.............................. 11
2.1 Services Generally................................... 11
2.2 Compliance with Related Agreements................... 16
2.3 QF Status............................................ 16
2.4 Annual Operating Plan................................ 16
2.5 Monthly Summary...................................... 18
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Section Page
------- ----
2.6 Emergencies.......................................... 18
2.7 Inspections.......................................... 18
2.8 Operating Procedures and Training.................... 19
2.9 Transition Stage..................................... 20
2.10 Limited Authority.................................... 21
III. RESPONSIBILITIES OF OWNER................................. 21
3.1 Services, Operation, Obligations..................... 21
3.2 Payments............................................. 22
3.3 Right to Perform Upon Operators Default.............. 22
IV. OPERATING COSTS AND EXPENSES.............................. 23
4.1 Procedure for Incurring Costs........................ 23
4.2 Procedure for Payment of Direct Costs................ 23
4.3 Limitation on Ability to Incur Direct Costs.......... 23
4.4 Payment for Special Improvements..................... 24
4.5 Payment for Unscheduled Maintenance.................. 24
4.6 Payment for Major Overhauls.......................... 24
4.7 Payment for Capital Improvements..................... 24
4.8 GE Equipment......................................... 24
4.9 Wage Increases in Excess of CPI...................... 25
V. PAYMENTS TO OPERATOR...................................... 26
5.1 O&M Fee.............................................. 26
5.2 Reimbursable Costs .................................. 26
5.3 CPI Adjustment ...................................... 29
5.4 Procedure for Payment of Reimbursable Costs.......... 29
5.5 Late Payments........................................ 30
VI. FACILITY PERFORMANCE, LIQUIDATED DAMAGES AND BONUS........ 30
6.1 Annual Fee Adjustment Amount......................... 30
6.2 Quarterly Meetings................................... 35
6.3 Partial Project Year................................. 35
6.4 Payment of Annual Fee Adjustment Amount.............. 35
6.5 Application of CPI Adjustment........................ 35
6.6 Change in Conditions or Circumstances................ 35
6.7 First and Second Project Years....................... 35
6.8 Employee Bonuses..................................... 35
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<PAGE>
Section Page
------- ----
VII. WARRANTY; CORRECTION OF DEFECTS........................... 36
7.1 Warranty.............................................. 36
7.2 Consequence of Breach................................. 36
7.3 Vendor Warranties..................................... 36
VIII. TERM...................................................... 36
IX. TERMINATION............................................... 38
9.1 Event of Default...................................... 38
9.2 Termination upon Breach............................... 38
9.3 Termination for Insolvency............................ 38
9.4 Owner's Additional Remedies........................... 39
9.5 Transfer of Operators Upon Termination................ 39
9.6 Condition of Facility Upon Termination................ 40
9.7 Survival of Obligations............................... 40
X. INSURANCE................................................. 40
10.1 Operator Insurance Coverage.......................... 40
10.2 Owner Insurance Coverage............................. 41
10.3 Form and Content of Insurance........................ 42
10.4 Additional Requirements.............................. 43
XI. NOTIFICATIONS............................................. 45
XII. ASSIGNMENT; LENDER'S RIGHTS............................... 46
12.1 Assignment........................................... 46
12.2 Lender's Rights...................................... 46
12.3 Estoppel Certificates................................ 47
12.4 Legal Opinion........................................ 48
XIII. INDEMNIFICATION........................................... 48
13.1 Operator Indemnity................................... 48
13.2 Owner Indemnity...................................... 49
13.3 No Limitation........................................ 49
XIV. REPRESENTATIONS AND WARRANTIES............................ 49
14.1 Representations and Warranties of Owner.............. 49
14.2 Representations and Warranties of Operator........... 50
XV. BOOKS, RECORDS AND REPORTS................................ 51
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Section Page
------- ----
15.1 Books and Records.................................... 51
15.2 Reports ............................................ 51
XVI. FORCE MAJEURE............................................. 51
16.1 Force Majeure........................................ 51
16.2 Effect of Force Majeure.............................. 52
16.3 Extended Force Majeure............................... 52
16.4 Payments to Operator During an Event of Force Majeure 53
XVII. LIMITATION OF LIABILITY................................... 53
17.1 Operator............................................. 53
17.2 Owner................................................ 53
XVIII. RESOLUTION OF DISPUTES.................................... 54
18.1 Resolution by Parties................................ 54
18.2 Mediation by Expert.................................. 54
18.3 Arbitration.......................................... 56
18.4 Selection of Arbitrators............................. 57
18.5 Notice............................................... 57
18.6 Award................................................ 57
18.7 Survival............................................. 57
XIX. CONFIDENTIALITY AND INTELLECTUAL PROPERTY................. 57
19.1 Confidential Information............................. 57
19.2 Return of Confidential Information................... 58
19.3 Continuation of Confidentiality Obligations.......... 59
19.4 Ownership of Confidentiality Information............. 59
19.5 Intellectual Property................................ 59
XX. MISCELLANEOUS............................................. 60
20.1 Governing Law....................................... 60
20.2 Severability........................................ 60
20.3 Entire Agreement.................................... 60
20.4 Amendments.......................................... 60
20.5 Waiver.............................................. 60
20.6 Original and Counterparts........................... 60
20.7 Independent Contractor.............................. 60
20.8 Limited Recourse.................................... 60
20.9 Captions............................................ 61
20.10 Exhibits............................................ 61
20.11 Effectiveness of Agreement.......................... 61
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Section Page
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Exhibit A Monthly O&M Report Format
Exhibit B Consent to Assignment
Exhibit C Schedule of Parts and Services for GE Equipment
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<PAGE>
OPERATION AND MAINTENANCE AGREEMENT
This Agreement is entered into this 6th day of June, 1997 (the
"Execution Date"), by and between Cogen Technologies NJ Venture, a joint venture
organized under the laws of the State of New Jersey ("Owner"), and General
Electric Company, a corporation organized and existing under the laws of the
State of New York ("Operator").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Owner owns the Facility (as defined herein); and
WHEREAS, Owner and Stewart & Stevenson Operations, Inc. ("SSOI")
entered into that certain Operation and Maintenance Agreement dated March 28,
1994 (the "Existing O&M Agreement"), pursuant to which SSOI operates and
maintains the Facility for Owner in accordance with the terms thereof; and
WHEREAS, Owner and SSOI entered into that certain Agreement to
Terminate Operation and Maintenance Agreement dated June 4, 1997, (the
"Termination Agreement"), pursuant to which Owner has the right to terminate the
Existing O&M Agreement by delivery of written notice to SSOI in accordance with
the terms thereof; and
WHEREAS, Owner intends to terminate the Existing O&M Agreement
pursuant to the terms of the Termination Agreement; and
WHEREAS, Owner desires to engage the services of an entity qualified
and competent to operate and maintain the Facility after the Existing O&M
Agreement Termination Date; and
WHEREAS, Operator has represented that it is qualified and capable to
operate and maintain gas-fired, combined cycle cogeneration facilities such as
the Facility; and
WHEREAS, Owner desires to appoint Operator and Operator desires to
operate and maintain the Facility after the Existing O&M Agreement Termination
Date; and
WHEREAS, Owner and Operator desire to enter into this Agreement in
order to set forth their agreements relative to the operation and maintenance of
the Facility starting on the Existing O&M Agreement Termination Date;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
I.
DEFINITIONS
The following definitions shall apply to this Agreement:
Actual kWh shall have the meaning set forth in Section 6. 1 (a)
hereof.
Affiliate shall mean any person or corporation or other entity that,
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, another person or corporation or
entity. The term "control" with respect to any entity means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such entity, whether through the ownership of voting
securities, by contract or otherwise.
Agreement shall mean this Operation and Maintenance Agreement,
including all Exhibits attached hereto, as the same may be amended from time to
time in accordance herewith.
Annual Fee Adjustment Amount or "AFAA" shall have the meaning set
forth in Section 6.1 hereof.
Annual Operating Plan shall have the meaning set forth in Section
2.4(a) hereof.
Applicable Adjustment Amount shall have the meaning set forth in
Section 5.3 hereof.
Approved Annual Operating Plan shall have the meaning set forth in
Section 2.4(a) hereof.
Approved O&M Plan shall have the meaning set forth in Section 2.4(a)
hereof.
Approved Operating Budget shall have the meaning set forth in Section
2.4(a) hereof.
Base Index shall have the meaning set forth in Section 5.3 hereof.
Bayonne Approved Operating Budget shall mean an Approved Operating
Budget for the Facility as set forth in Section 2.4 hereof.
Camden Approved Operating Budget shall mean an Approved Operating
Budget for the Camden Facility as set forth in Section 2.4 of the Camden O&M
Agreement.
Camden Facility shall mean the cogeneration plant owned by Camden
Cogen L.P. located in Camden, New Jersey.
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Camden O&M Agreement shall mean that certain Operation and Maintenance
Agreement dated of even date herewith, by and between Camden Cogen L.P., as
"Owner," and Operator, as "Operator," relating to the Camden Facility.
Capital Improvements shall have the meaning set forth in Section
2.1(2) hereof.
Confidential Information shall have the meaning set forth in Section
19.1 hereof.
Constant Personnel shall mean, at the time of determination, such
Operator Personnel and GE O&M Personnel as were employed on the first day of the
then current Project Year and are also scheduled to be employed in the same
positions on the first day of the next Project Year pursuant to the Approved
Annual Operating Plan for such next Project Year.
Consumables shall mean, collectively, all items consumed or needing
regular periodic replacement during operation and maintenance of the Facility,
including, but not limited to, spare parts, water treatment chemicals,
lubricants, office supplies, air filters, gaskets, hand tools, and all other
consumable materials and parts required for the normal operation of the
Facility, but not including Fuel and water.
CPI Adjusted Payments shall have the meaning set forth in Section 5.3
hereof.
Defaulting Party shall have the meaning set forth in Section 9.2
hereof.
Default Rate shall mean the lesser of (i) the rate of interest
announced by The Chase Manhattan Bank, N.A., from time to time, at its principal
office located at 1 Chase Manhattan Plaza, New York, New York 10081 (or any
successor financial institution), as its prime commercial lending rate, plus 1%
or (ii) the maximum lawful nonusurious rate of interest that may be charged
under applicable law.
Denominator shall have the meaning set forth in Section 6.1(a) hereof.
Direct Costs shall mean those costs incurred by Operator for goods and
services in connection with the operation and maintenance of the Facility which
are paid directly by Owner to the vendor of such goods and services.
Effective Hourly Rate shall mean, as of the date of determination, the
sum of (i) the aggregate then current effective hourly rate for all salaried
Constant Personnel and (ii) the aggregate then current straight time hourly
rates for all hourly paid Constant Personnel.
Equipment shall mean any and all materials, supplies, equipment and
facilities, of whatever nature, intended to become or which are a part of the
Facility.
Event of Default shall have the meaning set forth in Section 9.1
hereof.
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<PAGE>
Execution Date shall have the meaning set forth in the preamble of
this Agreement.
Existing O&M Agreement shall have the meaning set forth in the
preamble of this Agreement.
Existing O&M Agreement Termination Date shall mean the date, if ever,
on which Owner terminates the Existing O&M Agreement pursuant to the Termination
Agreement.
Exxon shall mean Exxon Company, U.S.A., a division of Exxon
Corporation, a New Jersey corporation.
Facility shall mean, collectively, (i) Owner's combined-cycle
cogeneration facility with three GE frame six gas turbines and one GE steam
turbine located on the Site, (ii) the associated facilities, structures,
buildings and offices, all interconnections with Steam Purchasers' facilities as
described and set forth in the Steam Purchase Agreements, all interconnections
with PSE&G's facilities as described and set forth in the Power Purchase
Agreements, all mechanical and electrical systems and controls, drainage
systems, air pollution control and water treatment facilities, access roads,
security fencing and all other Equipment located at the Site and (iii) the
Standby Boilers.
Facility Data shall mean all facility and equipment design data
pertaining to the Facility, including, without limitation, plant data manuals,
equipment user/maintenance manuals, facility drawings and system descriptions,
inspection reports and operating plans.
Facility Manager shall mean Operator's employee, who shall be present
on the Site during regular business hours on all business days to oversee the
operation, maintenance, inspection and repair of the Facility and all parts
thereof, and who shall be authorized to make decisions on behalf of Operator.
The Facility Manager shall serve as Operator's single point of contact for all
matters regarding the operation, maintenance, inspection and repair of the
Facility.
FERC shall mean the Federal Energy Regulatory Commission.
FM kWh shall have the meaning set forth in Section 6.l (a) hereof.
Force Majeure shall have the meaning set forth in Section 16.1 hereof.
Forced Outage shall mean an outage of the Facility which is not a
Scheduled Outage.
Fourth Year Termination Fee shall have the meaning set forth in
Article VIII hereof.
Fuel shall mean natural gas, kerosene or any other fuel suitable for
operating the Facility.
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<PAGE>
Gas Service Agreement shall mean that certain letter agreement dated
October 10, 1986, by and between Owner and PSE&G, as amended from time to time.
GE shall mean General Electric Company, a New York corporation.
GE Equipment shall mean the gas and steam turbine generation equipment
and associated electrical and control systems components, now existing or
hereafter installed or located at the Facility, and which were supplied by GE
prior to or during the term of this Agreement, including, without limitation,
steam turbines; gas turbines (including components supplied in connection with
uprate packages); generators; load gears; speedtronic controls; steam turbine
controls; admission/extraction valves; stop valves; control consoles;
datatronics; accessory system compartment containing heavy duty, multi-shaft,
accessory gear, electric motor starting system, combined lube and hydraulic oil
system and all terminal boxes, conduit and wiring; generator auxiliary
compartment which contains all static excitation equipment, metering and
relaying current and potential transformers, lightning arrestors and generator
neutral grounding system; and any future improvements and/or enhancements to any
of the foregoing.
GE O&M Personnel shall mean all employees of Operator involved in the
performance of the Work, including, without limitation, all employees located at
the Regional Office, but expressly excluding the Operator Personnel.
GE O&M Personnel Overhead have the meaning set forth in Section 5.2
hereof.
IMTT-Bayonne shall mean IMTT Bayonne, a Delaware partnership.
IMTT-Bayonne Plant shall mean IMTT-Bayonne's plant located at 10 Hook
Road, Bayonne, New Jersey 07002.
IMTT-BX shall mean IMTT-BX, a Delaware partnership with offices
located at the IMTT-Bayonne Plant at 10 Hook Road, Bayonne, New Jersey 07002.
JCP&L shall mean Jersey Central Power & Light Company, a New Jersey
corporation.
Key Personnel shall mean the Key Regional Office Personnel, the
Facility Manager and all other personnel reporting directly to the Facility
Manager.
Key Regional Office Personnel shall mean the following personnel who
will be located in the Regional Office: the general manager, the financial
analyst, the plant engineer, the environmental, health and safety engineer, the
sourcing specialist and such other personnel as Owner may designate.
kWh shall mean kilowatt-hour.
-5-
<PAGE>
Lender shall mean the entity or entities providing Owner with the
construction, term, permanent or other debt or equity financing for the Facility
and/or the operation thereof and/or any entity or entities providing a letter of
credit for other security in connection with financing of the Facility and/or
the operation thereof.
Linden Approved Operating Budget shall mean an Approved Operating
Budget for the Linden Facility as set forth in Section 2.4 of the Linden O&M
Agreement.
Linden Facility shall mean the cogeneration plant owned by Cogen
Technologies Linden Venture, L.P. located in Linden, New Jersey.
Linden O&M Agreement shall mean that certain Operation and Maintenance
Agreement dated of even date herewith, by and between Cogen Technologies Linden
Venture, L.P., as "Owner," and Operator, as "Operator," relating to the Linden
Facility.
Major Inspection shall have the meaning set forth in Section 6.1(a)
hereof.
Major Overhauls shall have the meaning set forth in Section 2.1(2)
hereof.
Non-Defaulting Party shall have the meaning set forth in Section 9.2
hereof.
Numerator shall have the meaning set forth in Section 6.1(a) hereof.
O&M Fee shall have the meaning set forth in Section 5.1 hereof.
O&M Plan shall have the meaning set forth in Section 2.4(a) hereof.
Operating Budget shall have the meaning set forth in Section 2.4(a)
hereof.
Operating Procedures shall have the meaning set forth in Section
2.8(a) hereof.
Operator shall have the meaning set forth in the preamble of this
Agreement.
Operator Confidential Information shall have the meaning set forth in
Section 19.1 hereof.
Operator Indemnitees shall have the meaning set forth in Section 13.2
hereof.
Operator Personnel shall mean all employees of POPI involved in the
performance of the Work or, in the event that during the term of this Agreement
POPI ceases to provide personnel for performance of the Work, then such
personnel who perform the functions that were previously performed by the
employees of POPI.
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<PAGE>
Operator Personnel Overhead shall have the meaning set forth in
Section 5.2 hereof.
OSHA shall mean the Occupational Safety and Health Administration.
Overhead Percentage Rate shall have the meaning set forth in Section
5.2 hereof.
Owner shall have the meaning set forth in the preamble of this
Agreement.
Owner Confidential Information shall have the meaning set forth in
Section 19.1 hereof.
Owner Indemnities shall have the meaning set forth in Section 13.1
hereof.
Parts shall mean replacement parts and/or assemblies (either in land
or improved) to replace existing parts and/or assemblies which are removed from
service, and any future improvements and/or enhancements to any such parts
and/or assemblies.
Parts Discount shall have the meaning set forth in Section 4.8 hereof.
Permitted Transferee shall mean (i) any Affiliate of Lender or (ii)
any other person or entity who succeeds to the rights and interests of Lender
under any mortgage.
Plant Capacity shall have the meaning set forth in Section 6.1(a)
hereof.
Plant Manager shall mean the person designated by Owner, pursuant to
Section 3.1(4) hereof, to serve as Owner's administrative representative at the
Site.
POPI shall mean Plant Operating Personnel, Inc., a Delaware
corporation.
Power Generation Factor shall have the meaning set forth in Section
6.1 (a) hereof.
Power Purchase Agreement shall mean (i) that certain Agreement for
Purchase of Electric Power dated October 29, 1985, by and between Cogen
Technologies NJ, Inc., as "Seller," and JCP&L, as "Buyer," as amended from time
to time, (ii) that certain Agreement dated June 13, 1985, by and between Cogen
Technologies NJ, Inc., as "Seller," and IMTT-Bayonne, as "Buyer," as amended
from time to time, (iii) that certain Power Purchase and Operations Coordination
Agreement dated June 5, 1989, by and between Owner and PSE&G, as amended from
time to time and (iv) any subsequent or other agreements entered into by Owner
providing for the sale of electricity generated at the Facility.
Power Purchasers shall mean JCP&L, IMTT-Bayonne, PSE&G, and any other
future purchasers of electricity generated at the Facility.
-7-
<PAGE>
Project Year shall mean any calendar year during the term of this
Agreement, provided that (1) the first Project Year shall be deemed to begin on
the Existing O&M Agreement Termination Date and extend through the next
occurring December 31 and (ii) the twelfth Project Year shall be deemed to end
November 1, 2008.
Prudent Utility Practices shall mean those practices, methods, acts,
techniques, standards and equipment, as changed from time to time, that are then
generally accepted by the electric utility industry and commonly used in prudent
electric utility engineering and operations to operate and maintain equipment
lawfully, safely, dependably and economically, and as would have been (i)
expected to accomplish the desired result in a manner consistent with applicable
laws, applicable governmental permits, reliability, safety, environmental
protection, economy and expediency and (ii) implemented using that degree of
skill, diligence and foresight which would reasonably and ordinarily be expected
from a skilled and experienced operator complying with all applicable laws and
engaged in the same type of undertaking, including, without limitation, those
established by the North American Electric Reliability Council, as applicable to
units of the size and service of the Facility.
PSE&G shall mean Public Service Electric & Gas Company, a corporation
organized under the laws of the State of New Jersey.
Published Price shall mean (i) with respect to Parts, the published
prices provided by Operator's or any of its Affiliates' parts centers and/or
available through Operator's or any of its Affiliates' computerized pricing
systems, or if at any time during the term of this Agreement Operator and its
Affiliates do not have such published prices for any Parts, then the normal and
customary charges that are paid by Operator's and its Affiliates' other
customers for such Parts in the United States and (H) with respect to Services
and/or Repairs, the published prices or rates that Operator or any of its
Affiliates' charge for such Services and/or Repairs, or if at any time during
the term of this Agreement Operator and its Affiliates do not have published
prices or rates for any Services and/or Repairs, then the normal and customary
charges that are paid by Operator's and its Affiliates' other customers for such
Services and/or Repairs in the United States.
PURPA shall mean the Public Service Regulatory Policies Act of 1978
(U.S.C.A., Title 16, Section 824a-3, subsection (j), as amended, a law of the
United States of America.
Qualifying Cogeneration Facility shall have the meaning set forth in
PURPA.
Rated Capacity shall have the meaning set forth in Section 6.l(b)
hereof.
Rated Capacity Test shall have the meaning set forth in Section 6.1(b)
hereof.
Regional Office shall mean the office established by Operator at
location designated by Owner for the sole purpose (and no others) of
administering and performing its
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<PAGE>
obligations under (i) this Agreement, (ii) the Camden O&M Agreement and (iii)
the Linden O&M Agreement.
Reimbursable Costs shall have the meaning set forth in Section 5.2
hereof.
Related Agreements shall mean and include the Power Purchase
Agreements, all easements used in connection with the Facility, the Steam
Purchase Contracts, the Gas Service Agreement, the Water Supply Agreement, the
Site Lease and the order of FERC granting the Facility status as a Qualifying
Cogeneration Facility.
Repairs shall mean services for assembly, disassembly and/or repair
provided by GE Apparatus Service Department, or if at any time during the term
of this Agreement GE Apparatus Service Department does not provide such
services, then such successor entity or other division of GE providing such
services.
Scheduled Outage shall mean a planned outage of the Facility or any
portion thereof necessary for regular inspection and maintenance.
Services shall mean services for assembly, disassembly, diagnosis
and/or repair provided by GE Power Generation Services, or if at any time during
the term of this Agreement GE Power Generation Services does not provide such
services, then such successor entity or other division of GE providing such
services.
Services Discount shall have the meaning set forth in Section 4.8
hereof.
Seventh Year Termination Fee shall have the meaning set forth in
Article VIII hereof.
Site shall mean the certain tract of land located at 10 Hook Road in
Bayonne, New Jersey, upon which the Facility is constructed, such tract being
within the boundaries of the IMTT Bayonne Plant, as more fully described in the
Site Lease, together with easements appurtenant thereto or used in connection
therewith.
Site Lease shall mean that certain Lease Agreement dated October 18,
1986, by and between Bayonne Industries, Inc. and IMTT-Bayonne, as "Lessor," and
Owner, as "Lessee," as amended from time to time.
Special Improvements shall have the meaning set forth in Section 4.4
hereof.
SSOI shall have the meaning set forth in the preamble of this
Agreement.
Standby Boilers shall mean Owner's standby boilers located in IMTT-
Bayonne's boiler house at the IMTT-Bayonne Plant.
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<PAGE>
Steam Purchase Contracts shall mean (i) that certain Agreement dated
June 13, 1985, by and between Cogen Technologies NJ, Inc., as "Seller," and
IMTT-Bayonne, as "Buyer," as amended from time to time, (ii) that certain
Agreement dated February 27, 1987, by and between Owner, as "Seller," and Exxon,
as "Buyer," as amended from time to time, such Agreement having been
subsequently assigned by Exxon to IMTT-BX, and (iii) any subsequent or other
agreements entered into by Owner providing for the sale of steam produced at the
Facility.
Steam Purchasers shall mean IMTT-Bayonne, IMTT-BX and any other future
purchasers of steam produced at the Facility.
Target Rated Capacity shall have the meaning set forth in Section
6.1(b) hereof.
Termination Agreement shall have the meaning set forth in the preamble
of this Agreement.
Test Plan shall have the meaning set forth in Section 6.l(b) hereof.
Transition Stage shall have the meaning set forth in Section 2.9(a)
hereof.
Transition Stage Operating Budget shall have the meaning set forth in
Section 2.9(d) hereof.
Transition Stage Operating Plan shall have the meaning set forth in
Section 2.9(d) hereof.
Transition Stage Plan shall have the meaning set forth in Section
2.9(d) hereof.
Unscheduled Maintenance shall mean all maintenance, repair and
replacement requirements of the Facility during each Project Year which are not
contemplated in the Approved Annual Operating Plan, or any approved revision
thereof, for each such Project Year.
W-2 Wages shall mean the amount listed in box 1 on Internal Revenue
Service Form W-2, or if such form ceases to be used, then the sum of such
amounts as would have been included in the calculation of the number to be
inserted in such box 1 if such form were still in use.
Water Supply Agreement shall mean and refer to that certain letter
agreement dated June 1, 1988, by and between Owner and the City of Bayonne, New
Jersey, which guarantees the water supply to the Facility for a period of thirty
(30) years.
Work shall mean all obligations, services, duties and responsibilities
assigned to or agreed to be undertaken by Operator and its subcontractors
pursuant to this Agreement.
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<PAGE>
II.
RESPONSIBILITIES OF OPERATOR
2.1 Services Generally. Operator hereby agrees to provide all
operations and maintenance services necessary or advisable in order to safely,
dependably and efficiently operate and maintain the Facility (as contemplated by
the Related Agreements). Without limiting the generality of the foregoing,
Operator shall perform the following services on behalf of Owner in connection
with the operation and maintenance of the Facility:
(1) Provide all services necessary or advisable to use, operate and
maintain the Facility's three (3) gas turbine units and associated waste heat
steam generators arranged in combined cycle with one (1) steam turbine in good
operating condition with the objective of maximizing output of steam and
electricity while minimizing Fuel consumption consistent with (i) Prudent
Utility Practices, (ii) the thermal and mechanical limits and other requirements
specified in the nameplates thereon or in vendor and manufacturer warranty
requirements or recommendations relating thereto so as to maximize the residual
value of the Facility, (iii) the applicable terms of the Related Agreements and
all easements related to the operation of the Facility and the sale of steam and
electricity, (iv) all applicable federal, state and local laws, regulations,
orders, licenses, approvals, certificates and permits, including all Qualifying
Cogeneration Facility requirements, (v) procedures established pursuant to the
Facility Data and the Operating Procedures as revised from time to time, (vi)
the requirements of insurance policies required hereunder and Owner's insurance
carrier so as to maintain insurance coverage in full force and effect with
respect to the Facility or any part thereof, (vii) the applicable Annual
Operating Plan, and (viii) the reasonable instructions of Owner;
(2) Maintain the Facility, including, without limitation, its associated
facilities, structures, buildings and offices, all interconnections with Steam
Purchasers' facilities up to the Steam Purchasers' meters, all interconnections
with PSE&G up to the potheads located on the Site, all mechanical and electrical
systems and controls, drainage systems, air pollution control and water
treatment facilities, access roads, security fencing and all other Equipment,
and (i) develop, implement and maintain a maintenance management program which
(a) meets all applicable vendor and manufacturer warranty and preventive and
predictive maintenance requirements and specifications, (b) meets Prudent
Utility Practices, and (c) includes provisions for continuously improving such
program, (ii) develop, implement and maintain emergency preparedness procedures
that allow an immediate and appropriate response to events such as fires,
explosions, bomb threats, release of toxic chemicals, employee illnesses and
other accidents, (iii) perform or cause to be performed routine and scheduled
inspections, and monitoring of the Facility and daily work (such as cleaning the
Equipment and maintaining levels of liquids), (iv) perform or cause to be
performed all necessary Unscheduled Maintenance, subject to Owner's approval
when required pursuant to Section 4.5 hereof, and (v) perform or cause to be
performed such overhaul or repair of major components of the Equipment (the
"Major Overhauls") and perform such replacement of major components of the
Equipment
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<PAGE>
(the "Capital Improvements") as may be recommended or required by the
manufacturer of any such Equipment or requested by Owner or as may become, in
Operator's reasonable discretion, upon consultation with and approval from
Owner, otherwise necessary or appropriate;
(3) Establish and maintain an effective work force required for the
operation and maintenance of the Facility in accordance with the terms of this
Agreement and the Related Agreements through proper hiring, training,
supervising and qualifying procedures, and administer all matters pertaining to
labor relations, salaries, wages, working conditions, hours of work, termination
of employment, employee benefits, safety and all related matters in connection
with these duties in accordance with applicable laws;
(4) Maintain or cause to be available a sufficient number of personnel
adequately trained in effective operation and maintenance such that the Facility
can be operated in accordance with the terms of this Agreement and the Related
Agreements in the event of a strike by or other labor problem with Operator's
normal work force;
(5) Maintain an inventory of spare parts, Consumables and items of
equipment as Owner requires or, subject to Owner's prior approval, as Operator
determines are necessary or advisable to perform the operation and maintenance
services required hereunder, provided that (i) Operator shall surrender such
inventory to Owner upon termination of this Agreement and (ii) the cost of
maintaining such inventory shall be a Reimbursable Cost to Operator;
(6) Coordinate with Owner all deliveries and services under and monitor the
contracts with respect to Consumables, water, and Fuel; review performance under
such contracts and determine compliance therewith; and to the extent not
hereinafter undertaken by Owner, perform Owner's obligations under such
contracts;
(7) Maintain a spare parts and tools inventory control and reporting
system, which system shall include, without limitation, (i) procedures for
receiving, storing, trending the history of and cataloging spare parts and
tools, (ii) the ability to access the inventory of spare parts and tools for the
Camden Facility and (iii) the ability to access the inventory of spare parts and
tools for the linden Facility; and store spare parts and tools on the Site and
at a central location in conjunction with the storage of spare parts and tools
for the Camden Facility and the Linden Facility in a manner reasonably
calculated to assure their continued good condition, including storage in
accordance with vendors' and manufacturers' warranty requirements and
recommendations in order to insure them against risks reasonably expected to
occur during periods of such storage. The decision as to which spare parts will
be stored on Site and which spare parts will be stored at a central location
shall be mutually agreed upon by Owner and Operator;
(8) Schedule, hire, and supervise subcontractors and vendors as may be
necessary for the performance of the services required hereunder and regularly
provide
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<PAGE>
Owner with an updated list of all such subcontractors and vendors; provided that
(i) Operator shall obtain owner's prior written approval of any subcontractor or
vendor intended to be used for Major Overhauls, Capital Improvements or
operation of the Facility, (ii) Operator shall remain fully liable for the
management and satisfactory performance of its subcontractors and vendors, (iii)
Operator shall use reasonable efforts to ensure that all contracts and sub-
contracts can be freely assigned to Owner or a successor operator on termination
of this Agreement and (iv) Owner may, upon delivery of written notice to
Operator, require that a subcontractor or vendor be replaced in the event that
Owner considers that such subcontractor's or vendor's performance has been
unsatisfactory;
(9) Assist Owner in maintaining good community relations;
(10) Maintain good labor relations and, to the extent the work force at the
Facility is or becomes affiliated with labor unions, use best efforts to obtain
a no strike clause in any collective bargaining agreement and consult with and
obtain approval from Owner before taking any action inconsistent with any such
collective bargaining agreement;
(11) On behalf of Owner, generate, maintain and store all operating and
maintenance logs (which shall include an up-to-date record of (i) real and
reactive power production for each clock hour, (ii) Fuel consumption, (iii)
steam output, (iv) emission outputs, (v) water consumption, (vi) changes in
operating status, Scheduled Outages and Forced Outages, (vii) all OSHA
reportable and lost time accidents, and (viii) any unusual conditions found
during inspections) relating to the use, operation and maintenance of the
Facility. All such information shall be considered proprietary and confidential
information and shall not be disclosed to any third party for any reason without
the prior written consent of Owner;
(12) Maintain current revisions of all Facility drawings and
specifications, technical documents, instruction books, equipment diagrams and
other information illustrating a material, product or system relating to the
Facility;
(13) Keep accurate cost ledgers regarding the Work pursuant to the terms of
Section 15.1 hereof and in accordance with generally accepted accounting
principles, consistently applied, in such forms as shall be reasonably required
by Owner;
(14) Maintain records and provide to Owner all data and/or reports required
of Owner and/or Operator to federal, state and local agencies (excluding any
reports to be filed for federal, state and local income tax purposes);
(15) Assist Owner in the renewal and maintenance of all licenses, approvals
and permits required in connection with the operation and maintenance of the
Facility, as modified from time to time;
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(16) Collect, handle, transport and dispose of all waste and refuse from
the Site in accordance with all applicable laws, provided that Owner signs all
manifests prior to waste leaving the Site;
(17) Provide reasonable access to the Facility and all records relating to
the operation and maintenance of the Facility to all agents, representatives and
inspectors of Owner, Lender and governmental authorities;
(18) Monitor the sufficiency of the Fuel, water and backup electrical power
supplied to the Facility in terms of quality and quantity and advise Owner of
any deficiency thereof and any noncompliance of Fuel with the appropriate
specifications; work directly with suppliers of the Fuel, water and backup
electrical power to ensure adequate deliveries, and likely future requirements
for the Facility; and verify invoices with respect thereto for payment by Owner;
(19) Supply all tools, materials and services necessary or advisable for
the operation and maintenance of the Facility, including, but not limited to,
(i) all such materials, tools, equipment and services required for the day to
day operation and maintenance of the Facility and (ii) all Consumables,
including, without limitation, lubricating oils, chemicals, filters and greases
recommended by equipment manufacturers and suppliers or as required to operate,
maintain and protect the Facility;
(20) Take reasonable precautions for the safety of personnel performing
operations and maintenance services and comply with (i) all safety rules and
guidelines outlined in the Facility Data and (ii) all applicable federal, state
and local safety laws, regulations, orders, licenses, approvals, certificates,
permits, and other safety requirements (including, without limitation,
applicable requirements under OSHA) necessary or advisable to prevent accidents
or injury to persons or damage to property on, about or adjacent to the Site,
including erecting and properly maintaining guards and barriers as needed for
the protection of workers and the public and posting danger signs warning
against any hazards on the Site; and strive to eliminate or abate safety hazards
created by or otherwise resulting from the performance of its operations and
maintenance services hereunder;
(21) Conduct, and allow Owner to participate in, the process of
interviewing, selecting and hiring individuals to fill the Key Personnel
positions and complete such process no later than the Existing O&M Agreement
Termination Date, all such individuals being subject to Owner's approval, and in
the event any such Key Personnel positions become vacated during the term of
this Agreement, Operator shall conduct, and allow Owner to participate in, the
process of interviewing, selecting and hiring replacements to fill such
vacancies, all such replacements being subject to Owner's approval. Without the
prior written approval of Owner, Operator shall not remove any individual from a
Key Personnel position prior to such individual being in such position for a
minimum of two (2) years; provided, however, if Owner notifies Operator that the
performance of an
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individual is unsatisfactory, then Operator shall promptly replace such
individual in accordance with the terms hereof;
(22) Participate in and provide services during the Transition Stage, as
set forth in Section 2.9 hereof;
(23) Exercise Owner's rights under subcontractor and vendor warranties,
monitor and report to Owner concerning the remaining term of all warranties and,
prior to the expiration of any such warranty, perform such inspections as are
reasonable to ensure that any final warranty work is not required; provided,
however, Operator shall not file suit to enforce any such warranty without the
prior written consent of Owner;
(24) Keep and maintain the Facility free and clear of all liens and
encumbrances resulting from performance of the Work by Operator or its
subcontractors;
(25) Keep Owner informed of the operating status of the Facility through
daily, weekly and monthly reports, as may be agreed on from time to time,
through ongoing written and verbal communication;
(26) Determine and recommend to Owner for approval any necessary or
advisable Capital Improvements, modifications or alterations to the Facility;
(27) Determine the need for any change, deletion or addition to the
obligations, services or duties performed by Operator pursuant to this Section
2. 1 and the change in cost attributable thereto, if any, where such change,
deletion or addition is caused by a reason outside of the control of Operator,
including, without limitation, a Capital Improvement or change in Operating
Procedures. Except as provided in Section 2.6 hereof, any change, deletion or
addition to the obligation, services or duties specifically enumerated in this
Section 2.1 shall be submitted to Owner for approval, prior to implementation,
as a modification to the Approved Annual Operating Plan for the given Project
Year;
(28) Work diligently to operate and maintain the Facility in a first-class
manner and provide all other work as is reasonably necessary or advisable to
perform Operator's operations and services pursuant to this Agreement;
(29) Maintain all insurance coverage as required to be provided by Operator
under Article X hereof;
(30) Comply with the terms and conditions of each Approved Annual Operating
Plan, this Agreement and the Related Agreements;
(31) Operate and maintain the Standby Boilers;
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(32) Maintain a document control system for documents critical to Facility
operation and maintenance;
(33) Without any duty of inquiry, notify Owner if Operator becomes aware of
(i) a default by any of the parties to the Related Agreements, (ii) any breach
of any consents, licenses or permits which are required in connection with
operation of the Facility, (iii) any occurrence which constitutes a violation of
law or (iv) the occurrence of any event of force majeure under the Related
Agreements;
(34) Be responsible for payment in respect of fines and penalties imposed
on it or on Owner for breaches of applicable laws, permits or licenses where
such fines or penalties result from a failure by Operator to comply with Prudent
Utility Practices;
(35) Assist and cooperate with Owner in obtaining Owner status as a
"qualified business" under and complying with the New Jersey Urban Enterprise
Zones Act;
(36) As soon as reasonably practicable notify Owner, Power Purchasers and
Steam Purchasers of any outage, whether or not such outage is scheduled; and
(37) Setup, staff, operate and maintain the Regional Office.
2.2 Compliance with Related Agreements. Operator (i) has reviewed the
Related Agreements, (ii) shall abide by all of the terms thereof applicable to
the operation and of the Facility pursuant to the terms of this Agreement and
(iii) shall not operate and maintain the Facility in a manner which would cause
Owner to be in breach of any of the terms of the Related Agreements. Owner shall
provide Operator with written notice of any changes to such terms that may
affect Operator's provision of operation and maintenance services hereunder, and
such notice, unless otherwise agreed in writing by the parties, shall modify
Operator's obligation hereunder. This Section 2.2 shall not be deemed to make
Operator a party to any or all of the Related Agreements.
2.3 QF status. Operator shall operate and maintain the Facility so as
to maintain its status as a Qualifying Cogeneration Facility.
2.4 Annual Operating Plan. (a) Subject to the terms of the next
succeeding sentence hereof, not later than one hundred twenty (120) days prior
to the first day of each Project Year, Operator shall prepare and submit to
Owner for approval a proposed operating and maintenance plan providing
information for each month during the upcoming Project Year (the "O&M Plan").
The O&M Plan for the first, Project Year shall be submitted to Owner for
approval on the date on which this Agreement is executed unless previously
submitted. The O&M Plan shall describe, in detail acceptable to Owner and on a
monthly basis, anticipated maintenance and overhaul schedules, staffing plans,
equipment acquisitions and spare parts and Consumables inventories (including a
breakdown of capital items and expense items), schedules of subcontract
services, plant performance data regarding required environmental performance,
projected Fuel
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usage and such other matters as Owner may reasonably require. Any actions
proposed under the O&M Plan shall be consistent with the Facility Data, the
Operating Procedures, Prudent Utility Practices, the Related Agreements and this
Agreement. Contemporaneously with the delivery of the O&M Plan, Operator shall
submit to Owner a proposed budget for operating and maintaining the Facility
during the upcoming Project Year (the "Operating Budget"), which shall include
the estimated cost, based on time and materials and all fees contemplated in
this Agreement, for all anticipated operating and maintenance services to be
provided by Operator during each month of the upcoming Project Year in the
account structure and format provided by Owner (the O&M Plan and the Operating
Budget are hereinafter sometimes together called the "Annual Operating Plan").
When approved pursuant to subparagraph (b) below, the Annual Operating Plan
shall be an "Approved Annual Operating Plan" and shall consist of an "Approved
O&M Plan" and an "Approved Operating Budget".
(b) Owner shall give its approval or disapproval of the Annual
Operating Plan no later than thirty (30) days after receipt thereof from
Operator. If Owner objects to all or any portion of the proposed Annual
Operating Plan, Owner shall furnish its objections in writing to Operator, and
Owner and Operator shall amend such Annual Operating Plan in order to
accommodate to Owner's satisfaction those items to which Owner objects.
(c) An Approved Annual Operating Plan shall constitute authorization
for Operator to operate and maintain the Facility in accordance with such
Approved Annual Operating Plan and the terms of this Agreement, it being
recognized and agreed that Operator shall operate and maintain the Facility in a
prudent and efficient manner so as to maximize both the current performance and
the residual value of the Facility and shall endeavor to ensure that the actual
costs of operating and maintaining the Facility are as low as reasonably
practicable and in any event do not exceed the Approved Operating Budget either
in total or, to the extent reasonably practicable, in any one budgetary
category. Operator shall notify Owner as soon as reasonably possible of any
significant deviations or discrepancies between the costs and expenses actually
incurred by Operator during each Project Year and the costs and expenses
projected to be incurred by Operator as set forth in the Approved Operating
Budget for each such Project Year.
(d) In the event Operator desires to request an adjustment to an
Approved Annual Operating Plan at any time during the Project Year, Operator
shall submit a proposed revised Annual Operating Plan for Owner's consideration,
which Owner shall approve or disapprove within fifteen (15) days after
submission thereof. If the proposed revised Annual Operating Plan is disapproved
by Owner within such fifteen (15) day period, Owner shall furnish Operator with
the reasons for such disapproval and shall immediately begin discussions with
Operator in an effort to reach a mutually agreeable revised Annual Operating
Plan. Upon such agreement, Operator shall revise the Annual Operating Plan with
respect thereto. Until the revised Annual Operating Plan is approved in writing
by Owner, Operator shall not, except in an emergency as described in Section 2.6
hereof, act outside of the Approved Annual Operating Plan for such Project Year
without the prior written consent of Owner. Once approved, Operator's authority
as to the revised, or any additionally revised, Annual Operating Plan shall be
the same as that authorized for the original Approved Annual Operating Plan.
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2.5 Monthly Summary. Within two (2) business days after the end of
each calendar month of each Project Year, Operator shall submit to Owner, in a
form reasonably acceptable to Owner, a preliminary report containing operating
data, meter readings, and other billing documentation for such month sufficient
to generate monthly invoices for the sale of electricity and steam produced at
the Facility. In addition, within ten (10) days after the end of each month of
each Project Year, Operator shall submit to Owner, in a form similar to Exhibit
A attached hereto and made a part hereof for all purposes and otherwise
acceptable to Owner, a monthly operating report summarizing in reasonable detail
all areas of operation and maintenance and all activities performed by Operator
during such month. Operator shall submit the proposed forms of such reports to
Owner for approval on or before thirty (30) days after the date on which this
Agreement is executed.
2.6 Emergencies. Immediately upon the occurrence or imminent
likelihood of an accident or emergency involving the Facility or adjoining
property and endangering the safety of any person or property, or materially
adversely affecting the performance of the Facility or the Facility's compliance
with applicable law, Operator shall, after consultation with the Plant Manager
if the circumstances allow, and without the necessity of obtaining any other
approvals which might otherwise be required hereunder and exercising reasonable
care without special instruction or authorization from Owner, take any
reasonable and necessary or advisable action deemed by Operator to be reasonably
necessary or advisable under the circumstances to prevent, avoid or mitigate
injury, damage or loss to persons or property or to avoid penalties, fines or
damages under applicable law. Operator shall notify Owner thereof as soon as
practicable.
2.7 Inspections.
(a) In addition to its daily activities associated with the operation
and maintenance of the Facility, Operator shall conduct inspections of the
Facility at regular intervals, as required by vendors' or manufacturers'
recommendations and Prudent Utility Practices. Within ten (10) days after the
Execution Date for the first (1st) Project Year and no later than one hundred
twenty (120) days prior to each Project Year thereafter, Operator shall submit
to Owner for approval Operator's proposed inspection schedule (which inspection
schedule shall be included as part of each O&M Plan to be submitted to Owner)
and shall incorporate into the proposed inspection schedule any reasonable
amendments proposed by Owner. Any inspection conducted pursuant to this Section
2.7 shall be conducted in such a manner so as to minimize the impact on the
production of electricity and steam from the Facility.
(b) During such inspections, Operator shall make any necessary
decisions and promptly perform all Work as may be necessary to effect (after
Owner's approval, if necessary) the maintenance, repair or replacement of any
part of the Facility the necessity of which becomes apparent during such
inspection.
(c) Within twenty (20) business days after (i) each inspection and
(ii) the completion of any maintenance or repair work performed after such an
inspection, Operator shall prepare and deliver to Owner a report of the results
of such inspection or any Work completed
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after such inspection, as the case may be, containing a summary of Operator's
observations and recommendations relating thereto. Operator shall arrange for
its personnel to attend any meetings or conferences with Owner's personnel as
Owner may from time to time request to review the results of Operator's
inspections and maintenance work.
(d) Operator shall cooperate in connection with inspections of the
Facility by Owner, the Plant Manager, Lender and any other designees of Owner.
Such inspections may occur at any time, provided that they do not unreasonably
interfere with the performance of Operator's obligations hereunder, and further
provided that if Owner or Owner's designated representative desires to conduct
any such inspection after normal business hours, Owner shall give Operator
reasonable notice thereof. Operator agrees to correct, in accordance with the
terms of Section 7.2 hereof, any failure to comply with the obligations and
standards set forth in this Agreement for the operation and maintenance of the
Facility.
2.8 Operating Procedures and Training.
(a) Owner and Operator shall use due diligence to obtain from any
Equipment vendor or manufacturer all instruction manuals and spare parts lists
not timely submitted by such Equipment vendor or manufacturer, it being
understood that Owner shall coordinate this effort with Operator's assistance
and Owner may pursue all appropriate rights and remedies available to Owner
under any equipment supply agreements. To the extent any supplementary materials
are required for Operator training that are not provided by Equipment vendors or
manufacturers, Operator shall provide such materials, at Operator's sole cost
and expense, except where such supplementary materials are required in
connection with a Reimbursable Cost. "Operator shall review the operating
procedures in effect at the Facility as of the Execution Date (the "Operating
Procedures") and shall prepare and submit to Owner a complete set of revisions
to the Operating Procedures sufficient to ensure the continued safe and
efficient operation and maintenance of the Facility in accordance with vendors'
and manufacturers' warranty requirements and recommendations, Prudent Utility
Practices, the Related Agreements and this Agreement. The Operating Procedures
shall, among other things, include Facility specific preventive and predictive
maintenance procedures integrating (i) vendor and manufacturer recommendations
and warranty requirements, (ii) requirements of the Related Agreements, (iii)
Operator's experience, (iv) adequate safety and fire prevention, response and
reporting measures and procedures, (v) adequate security measures and
procedures, and (vi) the monitoring of the performance of the Facility. In
addition, the Operating Procedures shall include, without limitation, (i)
employee manuals outlining proper employee conduct and general expectations,
rules and procedures, (ii) safety manuals, (iii) emergency preparedness and
response manuals, and (iv) environmental compliance manuals. Within twenty (20)
days of Owner's receipt thereof, Owner shall review revisions to the Operating
Procedures, provide reasonable written comments and suggestions, and Operator
shall duly consider such comments and suggestions in revising the Operating
Procedures. Owner's review and approval of the Operating Procedures shall not
relieve Operator of its obligation to operate and maintain the Facility in
accordance with this Agreement. Operator shall, as often as necessary but not
less often than annually, review and, if necessary, revise and update
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the Operating Procedures, but shall not implement any amendments thereto without
Owner's prior written consent.
(b) Operator shall provide training materials, instructional
personnel and management oversight as necessary to develop and implement a
comprehensive training program for operation of the Facility (including the
Standby Boilers). Operator shall ensure that its personnel are fully trained and
qualified to operate and maintain the Facility in accordance with vendors' and
manufacturers' warranty requirements and recommendations, Prudent Utility
Practices, the Related Agreements and this Agreement.
2.9 Transition Stage.
(a) As the Existing O&M Agreement Termination Date approaches, an
orderly transition from SSOI to Operator must occur. Operator shall participate
in an orderly process of transition from the operation and maintenance of the
Facility by SSOI to the operation and maintenance of the Facility by Operator
(the "Transition Stage"). For purposes of this Agreement, the Transition Stage
shall have commenced as of the Execution Date. During the Transition Stage,
Operator shall cooperate and coordinate with SSOI and shall report to and be
subject to the authority of Owner.
(b) During the Transition Stage, Operator shall (i) plan and prepare
for hiring of the personnel necessary for the operation and maintenance of the
Facility, (ii) establish the Annual Operating Plan for use during the first
(1st) Project Year and obtain approval of Owner thereof, (iii) establish the
inspection schedule for the Facility (which inspection schedule shall be
included as part of the first (1st) Annual Operating Plan and shall be the same
for the first Project Year as the inspection schedule established for such
period of time pursuant to the terms of the Existing O&M Agreement unless Owner
or Operator recommends a change to such inspection schedule) and obtain approval
of Owner thereon, (iv) prepare a detailed monthly report format as described in
Section 2.5 hereof and obtain approval of Owner thereon, and (v) set up and
staff the Regional Office.
(c) At such time as Owner has given written notice to Operator to
commence Transition Stage operations, Operator shall make available, on a phase-
in basis, sufficient personnel experienced in the operation and maintenance of
cogeneration facilities such as the Facility. In addition, Operator shall
perform all such duties and obligations otherwise set forth in this Agreement to
the extent that such duties and obligations are not inconsistent with its
transition role.
(d) Using a format similar to that described in Section 2.4 hereof for
the development of the Annual Operating Plan, Operator shall prepare and submit
to Owner a "Transition Stage Operating Plan," comprised of the "Transition
Stage Plan" and the "Transition Stage Operating Budget." The Transition Stage
Operating Plan shall include expenditures and activities to occur during the
Transition Stage as described in this Section 2.9, and shall be submitted to
Owner for its review and comment on the Execution Date. If Owner objects to all
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or any portion of the proposed Transition Stage operating Plan, Owner shall
promptly furnish its objections to Operator, and Owner and Operator shall work
diligently to resolve such objections.
(e) During the Transition Stage, Operator shall review and report to
the Owner on the status of, and where appropriate, make written recommendations
to Owner with respect to (i) operation and maintenance facilities, tools,
equipment, supplies and spare parts inventories, (ii) reporting, accounting,
maintenance management and communication systems necessary for Operator to
operate and maintain the Facility in accordance with the terms of this
Agreement, (iii) security and safety systems and plans, including any necessary
or desirable special clothing or safety gear for operations and maintenance
personnel, and (iv) such other facilities and systems as shall be necessary or
desirable to operate and maintain the Facility and to fulfill Operator's ongoing
responsibilities under this Agreement.
(f) Upon the Existing O&M Agreement Termination Date, care, custody
and control of the Facility will pass from SSOI to Owner under the terms of the
Existing O&M Agreement and from Owner to Operator under the terms of this
Agreement and the Transition stage shall end. Operator shall thereafter operate
and maintain the Facility in accordance with this Agreement and provide any and
all technical and engineering support required for the safe and efficient
operation and maintenance of the Facility.
(g) During the Transition Stage, Operator or its authorized
representative shall, if reasonably requested by Owner, attend any and all
review meetings between SSOI and Owner. Operator shall, if reasonably requested
by Owner, review and comment upon plans, specifications, documents, or other
data generated by SSOI.
2.10 Limited Authority. Operator shall not have any authority to (i)
negotiate any change to the tariff under the Power Purchase Agreement, (ii)
settle or compromise claims on behalf of Owner under any Related Agreement,
(iii) agree to any amendments to, or waivers, consents or approvals in
connection with, any Related Agreement, (iv) serve any notice of a breach under
any of the Related Agreements, or (v) transfer, dispose of, lease or create any
encumbrance on any assets of Owner.
III.
RESPONSIBILITIES OF OWNER
3.1 Services, Operations, Obligations. Except as otherwise provided
in Section 3.1(3) hereof, Operator shall have no obligation to provide any of
the following services or perform any of the following work which services and
work shall be provided and performed by Owner:
(1) Arrange for a supply of Fuel and water, at no cost to Operator, in such
quantities as are necessary for the performance by Operator of the Work;
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(2) Provide for the sale of steam and electricity generated by the Facility
and for the billing and Collection of revenues therefrom;
(3) Obtain or cause to be obtained all governmental licenses, permits and
approvals necessary to operate the Facility, including environmental licenses,
permits and approvals; provided, however, that Operator shall (i) provide to
Owner such technical information and other assistance as is required from time
to time to obtain licenses, permits or approvals or renewals or extensions
thereof and (ii) keep such records and provide such reports to appropriate
governmental agencies as may be required of Owner or Operator by any such
licenses, permits and approvals;
(4) Designate and advise Operator of the Plant Manager (who shall act and
be designated as Owner's authorized representative);
(5) Provide and grant to Operator full access to the Facility and such
portions of the Site as are necessary to allow Operator to perform the Work;
(6) Arrange for start-up power and back-up power in such quantities as is
necessary for the performance by Operator of the Work;
(7) Pay all applicable federal, state and local taxes (except for sales
taxes which are the responsibility of Operator) attributable to the Facility and
the sale of steam and electricity therefrom, including the preparation of all
tax returns and reports to be filed for federal, state and local income tax
purposes; and
(8) Maintain all insurance coverage as required to be provided by Owner
under Article X hereof.
3.2 Payments. Owner shall compensate Operator for the Work performed
hereunder pursuant to the terms of Articles IV, V and VI hereof.
3.3 Right to Perform Upon Operator's Default. If at any time Operator
fails to perform any obligation hereunder and such failure is likely to cause
injury to any person or damage to the Facility, to exceed or breach the terms or
conditions of any permit or easement, or to breach the terms of any Related
Agreement, Owner, in addition to all other rights and remedies it has under this
Agreement, may, but shall have no duty to, perform or have performed by a third
party any such obligation not performed by Operator. Such performance by Owner
shall reduce any compensation payable to Operator hereunder during the
Transition Stage or in any Project Year by an amount equal to the cost to Owner
of effecting such performance.
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IV.
OPERATING COSTS AND EXPENSES
4.1 Procedure for Incurring Cost. Owner, and not Operator, shall be
ultimately liable for all Reimbursable Costs and Direct Costs expended hereunder
in connection with the Facility and Operator shall receive payment for
Reimbursable Costs in accordance with the terms of Sections 5.2 and 5.4 hereof.
Operator shall submit a written requisition to Owner for any single item
requiring an expenditure in excess of Five Thousand and 00/100 Dollars
($5,000.00) or as otherwise may be required by Owner, and after receipt of
written approval from Owner, but not before, Operator shall be authorized to
prepare Operator's purchase order for such item. Operator shall (i) verify the
receipt at the Site of all materials and services to be delivered to the
Facility covered by Owner's and Operator's purchase orders, (ii) verify the
accuracy of vendors' invoices in connection therewith, and (iii) forward
invoices for Direct Costs to Owner for approval, processing, and payment by
Owner in accordance with the terms of Section 4.2 hereof.
4.2 Procedure for Payment of Direct Costs. Operator shall
periodically, but not more often than once a week, deliver to Owner invoices
received by Operator from third parties for all Direct Costs, accompanied by a
summary of all such invoices which itemizes all such invoices by operating cost
account number. Such invoices shall also be accompanied by a statement from
Operator confirming that all such invoices are accurate, due and payable,
together with all relevant documentation reasonably necessary for Owner to
verify the accuracy thereof. Each invoice submitted to Owner shall be paid by
Owner directly to the payee of such invoice on or before the date such invoice
is due, provided that if Owner disputes any amount set forth in any such
invoice, Owner shall pay the undisputed portion on or before such due date, and
Owner, Operator and such payee shall attempt in good faith to resolve all
disputed items as soon as reasonably practicable.
4.3 Limitation on Ability to Incur Direct Costs. Operator shall
prepare Operator's purchase order for costs and expenses incurred in connection
with the operation and maintenance of the Facility during each month of a
Project Year pursuant to the terms hereof, to the extent and only to the extent
such costs and expenses:
(i) are included within the Approved Operating Budget, and any
approved revision thereof, for the applicable Project Year;
(ii) are incurred in connection with the performance of any
Unscheduled Maintenance, Special Improvements or Capital Improvements as
approved in writing by Owner;
(iii) are incurred in connection with an emergency under Section 2.6
hereof; or
(iv) are otherwise approved by Owner in writing.
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4.4 Payment for Special Improvements. The actual cost of any
alterations, modifications, improvements or additions to the Facility which are
required by any governmental or regulatory agency or are otherwise required to
comply with applicable laws, regulations or requirements ("Special
Improvements") shall be the sole responsibility of Owner. If any such costs are
necessary or advisable and become known to Operator, Operator shall promptly so
inform Owner who shall promptly determine the most feasible manner in which to
pay for such costs. Operator shall not be authorized to incur any expenditure in
relation to any Special Improvements without the prior written consent of Owner.
4.5 Payment for Unscheduled Maintenance. The actual cost of
Unscheduled Maintenance shall be the sole responsibility of Owner. Operator
shall not incur any expenditure in relation to any Unscheduled Maintenance
without the prior written consent of Owner, except in the event of an emergency
as described in Section 2.6 hereof.
4.6 Payment for Major Overhauls. The actual cost of Major Overhauls
shall be the sole responsibility of Owner. Operator shall not incur any
expenditure in relation to any Major Overhauls without the prior written consent
of Owner.
4.7 Payment for Capital Improvements. The actual cost of Capital
Improvements shall be the sole responsibility of Owner. Operator shall not incur
any expenditure in relation to any Capital Improvements without the prior
written consent of Owner.
4.8 GE Equipment. Owner agrees to purchase from Operator, and Operator
agrees to sell to Owner, (i) all Parts that Owner desires to purchase during the
term of this Agreement for GE Equipment, at a discount of thirty-five percent
(35%) less than the Published Price for such Parts (the "Parts Discount"), (ii)
all Services that Owner desires to purchase during the term of this Agreement
for GE Equipment, at a discount of fifteen percent (15%) less than the
Published Price for such Services (the "Services Discount") and (iii) all
Repairs that Owner desires to purchase during the term of this Agreement for GE
Equipment, at a discount of fifteen percent (15%) less than the Published Price
for such Repairs. The parties anticipate that, over the term of this Agreement,
Operator will sell to Owner, and Owner will purchase from Operator, Parts and
Services for GE Equipment based on the schedule set forth on Exhibit C attached
hereto and made a part hereof for all purposes, which Parts and Services have an
estimated value of approximately Twenty-Five Million and 00/100 Dollars
($25,000,000.00) based on current prices and including the Parts Discount and
Services Discount. The foregoing provisions of this Section 4.8 are expressly
made, subject to the following:
(a) the foregoing shall not be construed as an obligation by Owner to
purchase from Operator any Parts, Services and/or Repairs for GE
Equipment during the term of this Agreement, but is only an
obligation by Owner that if Owner does in fact purchase any Parts,
Services and/or Repairs for GE Equipment during the term of this
Agreement, then Owner shall purchase such Parts, Services and/or
Repairs for GE Equipment from Operator;
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(b) the decision whether to purchase Parts, Services and/or Repairs
for GE, Equipment and the timing of any such purchases shall be
made by Owner in Owner's sole and absolute discretion;
(c) if at any time Operator is unable to provide Parts, Services
and/or Repairs for GE Equipment in a timely or cost effective
manner, then Owner shall have the right to obtain such Parts,
Services and/or Repairs that Operator is unable to provide in a
timely or cost effective manner from alternate sources;
(d) Owner shall evaluate Operator on its performance in managing each
Forced Outage and Scheduled Outage in a cost effective and time
efficient manner, and, subject to Owner's sole and complete
discretion, refund to Operator up to fifty percent (50%) of the
Services Discount attributable to the Services performed during
such outage; and
(e) upon the expiration or other termination of this Agreement, Owner
shall have no further obligation to purchase from Operator, and
Operator shall have no further obligation to sell to Owner, Parts,
Services and/or Repairs for GE Equipment.
Owner shall have the right to have a financial audit of Operator's books,
accounts and records conducted by a third party selected by Owner which is
reasonably acceptable to Operator for the sole purpose of verifying the accuracy
of the Published Prices, including, without limitation, the right to audit such
books, accounts and records to determine the prices and rates for Parts,
Services and/or Repairs for GE Equipment paid by Operator's and its Affiliates'
other customers; provided, however, the results of such audit and the books,
accounts and records reviewed in connection therewith shall be deemed to be
Operator Confidential Information. If such audit reveals errors in the
calculation of any amounts paid by Owner. Operator shall promptly reimburse
Owner for any amounts improperly paid by Owner. Furthermore, if such audit
reveals errors of more than two percent (2%) in the calculation of the Published
Prices, then Operator shall pay to Owner the cost of the audit.
4.9 Wage Increases in Excess of CPI. In the event that Operator finds
it necessary to increase salaries and/or wages, then, without the prior written
consent of Owner, Operator shall not increase the Effective Hourly Rate from one
Project Year to the next Project Year by an amount which exceeds the percentage
increase in the Base Index from the beginning of such Project Year to the
beginning of such next Project Year; provided, however, there shall be no
obligation on behalf of Owner to approve any such increase in salaries and/or
wages.
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V.
PAYMENTS TO OPERATOR
5.1 O&M Fee. As compensation for the performance of the Work by
Operator, Owner shall pay to Operator an operations and maintenance fee in the
amount of Fifteen Thousand Six Hundred Twenty-Five and 00/100 Dollars
($15,625.00) per month (the "O&M Fee"), beginning with the thirteenth (13th)
full calendar month after the month in which the Existing O&M Agreement
Termination Date occurs and continuing for each month thereafter throughout the
term of this Agreement. The O&M Fee shall be payable monthly, in arrears, with
the first such payment being due and payable on the last business day of the
thirteenth (13th) full calendar month after the month in which the Existing
O&M Agreement Termination Date occurs, and with a like payment on the last
business day of each month thereafter throughout the term of this Agreement. If
the last day of the term of this Agreement does not fall on the last day of a
month, the O&M Fee for such partial month shall be prorated. If during the term
of this Agreement conditions or circumstances change from those in effect on
the Existing O&M Agreement Termination Date such that there is either a material
increase or decrease in the responsibilities and obligations of Operator
hereunder from those responsibilities and obligations of Operator as of the
Existing O&M Agreement Termination Date, then Owner and Operator shall meet and
negotiate an equitable adjustment to the O&M Fee.
5.2 Reimbursable Costs. To the extent not paid by Owner as Direct
Costs pursuant to Article IV hereof, Owner shall reimburse Operator for those
costs and expenses actually incurred by Operator in connection with the
operation and maintenance of the Facility during each month of a Project Year or
during the Transition Stage pursuant to the terms hereof, to the extent and only
to the extent such costs and expenses (collectively, the "Reimbursable Costs")
are:
(i) included within the approved Transition Operating Budget and any
approved revision thereof;
(ii) included within the Approved Operating Budget, and any approved
revision thereof, for the applicable Project Year;
(iii) incurred in connection with the performance of any Unscheduled
Maintenance as approved in writing by Owner;
(iv) incurred in connection with an emergency under Section 2.6 hereof;
(v) subject to the limitations set forth in Section 4.9 hereof, the
actual salaries, straight time hourly wages and overtime hourly
wages (including vacation and holiday pay for hourly personnel)
for all Operator Personnel (whether employed directly by Operator
or through a contractor) to the extent pertaining to the Work,
plus (a) the actual cost of associated payroll taxes,
unemployment and disability insurance, worker's compensation,
fringe
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benefits and other statutory compensation or all such Operator
Personnel to the extent pertaining to the Work and (b) five
percent (5%) of the W-2 Wages for all such Operator Personnel
to the extent pertaining to the Work ((a) and (b) above
collectively referred to herein as "Operator Personnel
Overhead"); provided, however, the amount of Operator Personnel
Overhead, other than such Overhead that is required by law, that
is allowed to be included in Reimbursable Costs shall be limited
to (x) twenty-three and 05/100 percent (23.05%) of the W-2 Wages
for all such Operator Personnel per Project Year during each of
the first (1st) through fifth (5th) Project Years and (y) twenty-
four and 05/100 percent (24.05%) of the W-2 Wages for all such
Operator Personnel per Project Year during each of the sixth
(6th) through twelfth (12th) Project Years;
(vi) (a) subject to the limitations set forth in Section 4.9 hereof,
the actual salaries for all GE O&M Personnel to the extent
pertaining to the Work, plus (b) thirty-six percent (36%) of the
W-2 Wages for all such GE O&M Personnel to the extent pertaining
to the Work (the "Overhead Percentage Rate") to offset Operator's
actual cost of associated payroll taxes, unemployment and
disability insurance, worker's compensation, fringe benefits and
other statutory compensation for all such GE O&M Personnel to the
extent pertaining to the Work (such actual cost collectively
referred to herein as "GE O&M Personnel Overhead"), whether such
actual costs are more or less than such percentage; provided,
however, if the amount of GE O&M Personnel Overhead that is
required by law increases or decreases over that in effect as of
the Existing O&M Agreement Termination Date, then the Overhead
Percentage Rate shall be increased or decreased, as the case may
be, to the extent of any such increase or decrease in GE O&M
Personnel Overhead that is required by law; or
(vii) otherwise approved by Owner in writing.
Subject to the limitations imposed in the immediately preceding paragraph,
the term Reimbursable Costs shall include, but not be limited to, the following
costs incurred by Operator in its performance of the Work:
(viii) the actual delivered cost of supplies, Consumables, spare parts
and/or replacement components and all other items Operator is
required to provide and does provide for the Facility under this
Agreement;
(ix) special training costs conducted off-site or by non-Operator
personnel, as approved in advance and in writing by Owner;
(x) community and labor relations costs provided by non-Operator
personnel, as approved in advance and in writing by Owner;
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(xi) relocation and recruitment costs of salaried employees and
recruitment costs (but not relocation costs) of non-salaried
employees;
(xii) the actual costs of suppliers, subcontractors, attorneys,
certified accountants and other third party advisors, as approved
in advance and in writing by Owner;
(xiii) upon Owner's request and subject to Owner's prior written
approval, the cost of services (other than the Work) at mutually
agreed upon prices, terms and conditions;
(xiv) the actual delivered cost for the purchase of certain materials
such as tools, office equipment and office supplies; and
(xv) a fraction of the actual costs incurred by Operator to staff,
operate and maintain the Regional Office, the numerator of which
fraction is the total of all costs and expenses set forth in the
Bayonne Approved Operating Budget for the Project Year in
question and the denominator of which fraction is the total of
all costs and expenses set forth in the Camden Approved Operating
Budget, the Bayonne Approved Operating Budget and the Linden
Approved Operating Budget for such Project Year.
Unless Owner shall otherwise agree in writing, or unless otherwise included
in the approved Transition Stage Operating Budget or an Approved Operating
Budget, the term Reimbursable Costs shall not include and Operator shall not be
entitled to reimbursement for;
(xvi) salaries or other compensation of Operator's officers,
executives, general managers, estimators, auditors, attorneys,
labor consultants, risk managers, accountants, purchasing and
contracting agents and other employees at Operator's principal
office and branch offices, except employees of Operator at the
Facility and the Regional Office;
(xvii) expenses of Operator's principal and branch offices other than
the field office at the Facility and the Regional Office;
(xviii) any of Operator's general and administrative expenses of any
kind;
(xix) all costs of insurance paid by Operator and payments for
deductibles or self-insured retentions associated with such
insurance;
(xx) all costs and expenses incurred in connection with any
engineering services provided by Operator in connection with the
performance of the Work (e.g., maintaining Facility drawings,
specifications and technical documents
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up-to-date) to the extent performed by Operator's employees other
than the Operator Personnel or the GE O&M Personnel;
(xxi) all costs and expenses incurred in connection with the
preparation of all reports required to be made by Operator
pursuant to the terms of this Agreement to the extent performed
by Operator's employees other than the Operator Personnel or the
GE O&M Personnel; and
(xxii) all employee bonuses paid by Operator to the Operator Personnel
and the GE O&M Personnel pursuant to Section 6.8 hereof.
5.3 CPI Adjustment. The O&M Fee and the Annual Fee Adjustment Amount
(together, the "CPI Adjusted Payments") shall be adjusted on the first day of
each Project Year (except the first Project Year) throughout the term of this
Agreement and any extensions hereof. On each such date each of the CPI Adjusted
Payments shall be adjusted to a new CPI Adjusted Payment calculated in
accordance with the following equation:
New CPI Adjusted Payment = (Applicable Adjustment Amount)
multiplied by (A/B)
"Applicable Adjustment Amount" equals the original dollar amount set
forth in this Agreement for a given CPI Adjusted Payment.
"A" equals the average of the Consumer Price Index for all urban
consumers for the New York/New Jersey area (1982-84 = 100), published by
the Bureau of Labor Statistics, United States Department of Labor (the
"Base Index") for the last three full calendar months prior to the
commencement of the Project Year for which the new CPI Adjusted Payments
are to be computed.
"B" equals the Base Index for the last calendar month prior to the
month in which the Existing O&M Agreement Termination Date occurs.
5.4 Procedure for Payment of Reimbursable Costs. On or before the
tenth (10th) day of each month commencing after the Existing O&M Agreement
Termination Date, Operator shall render an invoice to Owner for all Reimbursable
Costs, if any, paid by Operator during the preceding month. Such invoices shall
be accompanied by a certificate from Operator confirming that all such
Reimbursable Costs have been paid, together with all relevant documentation
necessary for Owner to verify the accuracy thereof, including all relevant
invoices for Consumables, spare parts and replacement components and labor costs
and benefits computations incurred by Operator for the relevant staff and
specialists. Each invoice submitted to Owner shall be paid by Owner by wire
transfer not later than the tenth (10th) day of the next calendar month after
the month in which such invoice was received, but in no event shall Owner be
required to pay an invoice earlier than thirty (30) days after receipt of such
invoice provided that if Owner disputes any amount set forth in any such
invoice, (i) Owner shall promptly notify
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Operator of such dispute, (ii) Owner shall pay the undisputed portion to
Operator within said period and (iii) Owner and Operator shall attempt in good
faith to resolve disputed items as soon as reasonably practicable.
5.5 Late Payments. All payments that are past due and are not
disputed, or disputed and subsequently demonstrated to be payable to Operator,
shall accrue interest from the date such payments are due until such payments
are made at a per annum rate equal to the Default Rate.
VI.
FACILITY PERFORMANCE, LIQUIDATED DAMAGES AND BONUS
6.1 Annual Fee Adjustment Amount. To provide incentive for Operator to
Operate and maintain the Facility in such a way so as to maximize profitability
and efficiency of operation, achieve target operating levels of performance, and
protect the overall life and viability Of the Facility, the O&M Fee earned by
Operator shall be subject to an annual adjustment. The amount Of such adjustment
(the "Annual Fee Adjustment Amount" or "AFAA") shall be the sum of bonuses
earned by and/or liquidated damages assessed against Operator in each of six (6)
separate categories of evaluation. The six (6) categories of evaluation are:
(i) Power Generation,
(ii) Change in Rated Capacity,
(iii) Steam Delivery,
(iv) Net Plant Heat Rate,
(v) O&M Costs, and
(vi) Subjective Factors.
In each category the maximum bonus or liquidated damage will be limited to
a specific dollar amount. The AFAA shall be the sum of the bonuses earned and
liquidated damages assessed in each individual category and in any Project Year
shall never exceed One Hundred Twenty-Five Thousand and 00/100 Dollars
($125,000.00), plus or minus, as the case may be.
(a) Power Generation. The maximum bonus or liquidated damages capable
of being earned by or assessed against Operator in the Power Generation category
of the AFAA in any Project Year shall be Twenty-Five Thousand and 00/100 Dollars
($25,000.00). To determine the amount of bonus or liquidated damages
attributable to such category, a calculation will be made to determine the Power
Generation Factor (as defined hereinbelow) for a Project Year. Subject to the
Twenty-Five Thousand and 00/100 Dollars ($25,000.00) limitation, if the Power
Generation Factor is greater than or equal to ninety-five percent (95%),
Operator shall be entitled to a bonus under the Power Generation category of the
AFAA calculated in accordance With the following formula:
Bonus = $12,500 + [(PGF - .95) x $416,667]
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For a given Project Year, if the Power Generation Factor is less than
ninety-five percent (95%), but not less than ninety-two and one-half percent
(92.50%), the AFAA for the Power Generation category for such Project Year
shall be zero. Subject to the Twenty-Five Thousand and 00/100 Dollars
($25,000.00) limitation, if the Power Generation Factor is less than ninety-two
and one-half percent (92.50%), Operator shall be assessed liquidated damages
under the Power Generation category of the AFAA calculated in accordance with
the following formula:
Liquidated Damages = $12,500 + [(.925 - PGF) X $416,667)]
For purposes of the foregoing calculations, the following definitions shall
apply:
"Actual kWh" shall be equal to the amount of kWh actually generated by the
Facility in a Project Year.
"FM kWh" shall be equal to the sum of the product, if any, for each
calendar month during a given Project Year, of (i) the applicable Plant
Capacity for a given calendar month for that portion of the Facility that, as a
result of Force Majeure, either is unable to generate electricity or generates
electricity at a reduced capacity multiplied by (ii) the actual number of hours
in such calendar month up to but not exceeding twenty-four (24) that the
Facility was affected by such event of Force Majeure.
"Power Generation Factor ("PGF")" shall be equal to the quotient of (i) the
sum of the Actual kWh and the FM kWh for a Project Year (the "Numerator")
divided by (ii) the sum of the product, for each calendar month during such
Project Year, of (x) the applicable Plant Capacity for a given calendar month
multiplied by (y) the number of hours in such calendar month (the
"Denominator"); provided, however, that the Denominator shall be reduced by (a)
the sum total of, for each event of Force Majeure in such Project Year, the
product of the applicable Plant Capacity for a given calendar month for that
portion of the Facility that, as a result of an event of Force Majeure, either
is unable to generate electricity or generates electricity at a reduced
capacity, multiplied by the actual number of hours in such calendar month in
excess of twenty-four (24) that the Facility was affected by such event of Force
Majeure and (b) the sum total of, for each major inspection (such major
inspections being recommended by the original equipment manufacturer's turbine
maintenance procedures to be performed approximately every 24,000 and 48,000
operating hours) (a "Major Inspection") performed in such Project Year, the
product of the applicable Plant Capacity for the calendar month in which the
Major Inspection occurs for that portion of the Facility that, as a result of a
Major Inspection, either is unable to generate electricity or generates
electricity at a reduced capacity multiplied by the actual number of hours in
excess of one hundred twenty (120) hours that the Facility was affected by such
Major Inspection. The Power Generation Factor shall be expressed as a decimal,
rounded to the nearest one-thousandth.
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"Plant Capacity", for a given calendar month, shall mean the ambient
temperature and steam export adjusted output of the Facility, expressed in
kilowatts, based upon gas turbine output curves provided by the gas turbine
manufacturer.
(b) Change in Rated Capacity. The maximum bonus or liquidated damages
capable of being earned by or assessed against Operator in the Change in Rated
Capacity category of the AFAA in any Project Year shall be Twelve Thousand Five
Hundred and 00/100 Dollars ($12,500.00). As incentive to attain the level of
Rated Capacity required by Owner, Operator shall be entitled to receive a bonus
or, alternatively, be assessed liquidated damages in the Change in Rated
Capacity category of the AFAA based on the results of the quarterly Rated
Capacity Test compared with the results of the quarterly Rated Capacity Test
conducted during the corresponding period in the immediately preceding Project
Year (the "Target Rated Capacity"); provided, however, if either Owner or
Operator desires not to use the results of the quarterly Rated Capacity Test
conducted during the corresponding period in the immediately preceding Project
Year as the Target Rated Capacity, then the Target Rated Capacity shall be
mutually agreed to by Owner and Operator, but, if Owner and Operator cannot
agree prior to the running of such test, then the Target Rated Capacity for such
test shall be the Rated Capacity as demonstrated by the quarterly Rated Capacity
Test conducted during the corresponding period in the immediately preceding
Project Year. By no later than forty-five (45) days prior to each quarterly
Rated Capacity Test, Operator shall prepare and submit for Owner's approval a
plan for such Rated Capacity Test (the "Test Plan") which shall clearly identify
the measures to be taken by Operator to meet the Target Rated Capacity. The Test
Plan shall be subject to Owner approval, provided, however, in the event that
Owner objects to all or any portion of the Test Plan, Owner shall notify
Operator in writing and Owner and Operator shall promptly meet to resolve any
differences in order to establish an approved Test Plan by no later than twenty
(20) days prior to the quarterly Rated Capacity Test.
For each Rated Capacity Test conducted during a Project Year, Operator
shall be entitled to receive a bonus of Three Thousand One Hundred Twenty-Five
and 00/100 Dollars ($3,125.00 in the Change in Rated Capacity category of the
AFAA if the Rated Capacity, as demonstrated by such Rated Capacity Test, is
greater than or equal to one hundred one percent (101%) of the Target Rated
Capacity for such Rated Capacity Test. Operator shall be assessed liquidated
damages of Three Thousand One Hundred Twenty-Five and 00/100 Dollars ($3,125.00)
in the Change in Rated Capacity category of the AFAA if the Rated Capacity, as
demonstrated by such Rated Capacity Test, is less than ninety-nine percent (99%)
of the Target Rated Capacity for such Rated Capacity Test. In the event the
Rated Capacity, as demonstrated by such Rated Capacity Test is greater than
ninety-nine percent (99%) of the Target Rated Capacity for such Rated Capacity
Test, but less than one hundred one percent (101%) of the Target Rated Capacity
for such Rated Capacity Test, Owner may, in Owner's sole discretion, pay
Operator a bonus in the Change in Rated Capacity category of the AFAA of up to
Three Thousand One Hundred Twenty-Five and 00/100 Dollars ($3,125.00).
If an event of Force Majeure prevents or disrupts the running of a
scheduled Rated Capacity Test, Operator shall neither be assessed liquidated
damages nor receive a bonus under
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such test. The sole effect of Force Majeure under this Section 6.1(b) shall be
to cause a rescheduling of such Rated Capacity Test. After conducting four (4)
Rated Capacity Tests, and paying bonuses and/or liquidated damages in accordance
with this Section 6.1(b), in the first two (2) Project Years, Owner and Operator
shall meet and, in consideration of actual Facility operation, actual Rated
Capacity Test results and the amounts of bonuses paid and/or liquidated damages
assessed, reevaluate the method used in determining the Change in Rated Capacity
category of the AFAA.
For purposes of this Section 6.1(b), the following definitions shall apply:
"Rated Capacity" shall mean the capacity of the Facility, expressed in
kilowatts, as determined by a Rated Capacity Test.
"Rated Capacity Test" shall mean a quarterly test conducted, in accordance
with the Test Plan, to determine the Rated Capacity of the Facility. Each Rated
Capacity shall be conducted on the date determined by Owner, but no later than
March 31st for the first such test during a Project Year, no later than June
30th for the second such test during a Project Year, no later than September
30th for the third such test during a Project Year and no later than December
31st for the fourth such test during a Project Year.
(c) Steam Delivery. The maximum bonus or liquidated damages capable of
being earned by or assessed against Operator in the Steam Delivery category of
the AFAA in any Project Year shall be Twelve Thousand Five Hundred and 00/100
Dollars ($12,500.00). If, over the course of a Project Year, fewer than two (2)
interruptions occur in the delivery of steam to Steam Purchasers, then Operator
shall receive a bonus in the amount of Twelve Thousand Five Hundred and 00/100
Dollars ($12,500.00) under the Steam Delivery category of the AFAA for such
Project Year. If two (2) or three (3) interruptions occur in the delivery of
steam to Steam Purchasers during a Project Year, then the AFAA for the Steam
Delivery category of the AFAA for such Project Year shall be zero. If more than
three (3) interruptions occur in the delivery of steam to Steam Purchasers
during a Project Year, Operator shall be assessed liquidated damages in the
amount of Twelve Thousand Five Hundred and 00/100 Dollars ($12,500.00) under the
Steam Delivery category of the AFAA for such Project Year. In no event shall the
amount of bonus earned or liquidated damages assessed in the Steam Delivery
category of the AFAA exceed Twelve Thousand Five Hundred and 00/100 Dollars
($12,500.00) in any Project Year. As used in this Section 6.1(c), "interruption"
shall not include (i) any interruption caused by an event of Force Majeure that
affects the operation of both of (x) the combined cycle cogeneration facility,
and (y) the Standby Boilers, (ii) any interruption in the delivery of steam
during the calendar months of November, December, January, February, March or
April where delivery of steam is resumed within thirty (30) minutes after such
interruption or (iii) any interruption in the delivery of steam during the
calendar months of May, June, July, August, September or October where delivery
of steam is resumed within two (2) hours after such interruption.
(d) Net Plant Heat Rate. The maximum bonus or liquidated damages
capable of being earned by or assessed against Operator in the Net Plant Heat
Rate category of the AFAA
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in any Project Year shall be Eighteen Thousand Seven Hundred Fifty and 00/100
Dollars ($18,750.00). Over the course of a Project Year, operation of the
Facility at the optimum net plant heat rate increases profitability. Owner shall
evaluate Operator on its ability to achieve the optimum net plant heat rate,
and, subject to Owner's sole and complete discretion, award Operator a bonus of
up to Eighteen Thousand Seven Hundred Fifty and 00/100 Dollars ($18,750.00) or
assess Operator with liquidated damages of up to Eighteen Thousand Seven Hundred
Fifty and 00/100 Dollars ($18,750.00) in the Net Plant Heat Rate category of the
AFAA. The initial net plant heat rate shall be determined pursuant to a
performance test conducted within sixty (60) days after the Existing O&M
Agreement Termination Date.
(e) O&M Costs. The maximum bonus or liquidated damages capable of
being earned by or assessed against Operator in the O&M Costs category of the
AFAA shall be Twenty-Five Thousand and 00/100 Dollars ($25,000.00). During each
Project Year, this Agreement contemplates the existence of an Approved Operating
Budget. Developing reliable budgets based on obtainable forecasts and realistic
expectations, and receiving such budgets and any revisions thereof in a timely
manner, are essential elements of Owner's ability to monitor its investment in
the Facility. Owner shall evaluate and compare the Approved Operating Budget for
a given Project Year against the costs and expenses actually incurred and,
subject to Owner's sole and complete discretion, award Operator a bonus of up to
Twenty-Five Thousand and 00/100 Dollars ($25,000.00) or assess Operator with
liquidated damages of up to Twenty-Five Thousand and 00/100 Dollars ($25,000.00)
in the O&M Costs category of the AFAA.
(f) Subjective Factors. The maximum bonus or liquidated damages
capable of being earned by or assessed against Operator in the Subjective
Factors category of the AFAA in any Project Year shall be Thirty-One Thousand
Two Hundred Fifty and 00/100 Dollars ($31,250.00). The Subjective Factors
category of the AFAA depends solely upon Owner's subjective evaluation of
Operator's overall performance of its obligations and services rendered
hereunder. Subject to Owner's sole and complete discretion, Owner shall evaluate
Operator's performance with respect to various qualitative factors, which, for
illustrative purposes only and, not by way of limitation, may include:
frequency of insurance claims and increases in related insurance costs,
community and public relations, compliance with permits, and easements, safety
and environmental records, turn-over of personnel development of apprentice
programs, personnel management relevant to Urban Enterprise Zone criteria,
timeliness of response to and handling of events of Force Majeure, working
relationship with Owner and Lender, professionalism, profitability of the
Facility and overall handling and care of the Facility. Periodically but no more
often than every three (3) months during each Project Year, Owner shall deliver
to Operator a list of the various qualitative factors to be used by Owner in its
subjective evaluation of Operator's performance for the remainder of such
Project Year. Based on Owner's subjective evaluation of Operator's performance
during a Project Year, Owner shall, in Owner's sole and complete discretion,
either award Operator a bonus of up to Thirty-One Thousand Two Hundred Fifty and
00/100 Dollars ($31,250.00) or assess Operator liquidated damages of up to
Thirty-One Thousand Two Hundred Fifty and 00/100 Dollars ($31,250.00) under the
Subjective Factors category of the AFAA for such Project Year.
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6.2 Quarterly Meetings. Owner and Operator shall schedule and attend
regular quarterly meetings to discuss Operator's performance Of the Work and
Owner's evaluation thereof and, when necessary, to review and revise the list of
qualitative factors described in Section 6.1(f) above.
6.3 Partial Project Year. In any partial Project Year, the amounts
attributable to each category of the AFAA and the overall limitation placed on
the AFAA itself shall be prorated based on the number of calendar days in such
partial Project Year divided by 365 or 366, as the case may be.
6.4 Payment of Annual Fee Amount. Not later than thirty (30) days
after the end of each Project Year, Owner shall render a statement to Operator,
with all necessary and appropriate supporting documentation, calculating the
amount of bonus payments due to Operator and/or the amount of liquidated damages
due to Owner under each category of the AFAA. If the AFAA results in an amount
payable by Operator to Owner, such amount shall be set off against that portion
of the O&M Fee for such Project Year that has not yet been advanced to Operator,
and the balance, if any, shall be paid by Operator to Owner within thirty (30)
days after Owner delivers the statement therefor to Operator. If the AFAA
results in an amount payable by Owner to Operator, such amount shall be paid by
Owner within thirty (30) days after Owner delivers the statement therefor to
Operator. A party's obligation to pay the AFAA to the other party shall survive
the termination of this Agreement, even though such AFAA may not be capable of
being calculated until after the termination of this Agreement.
6.5 Application of CPI Adjustment. Each of the dollar amounts
indicated in Section 6.1 above shall be adjusted in accordance with the
provisions of Section 5.3 hereof.
6.6 Change in Conditions or Circumstances. If during the term of this
Agreement conditions or circumstances change from those in effect on the
Existing O&M Agreement Termination Date such that there is either a material
increase or decrease in the responsibilities and obligations of Operator
hereunder from those responsibilities and obligations of Operator as of the
Existing O&M Agreement Termination Date, then Owner and Operator shall meet and
negotiate an equitable adjustment to the manner in which the AFAA is determined,
including, without limitation, revisions to the categories of evaluation used in
determining the AFAA, the relative weightings thereof and the overall limit on
the AFAA, if necessary.
6.7 Second Project Year. Notwithstanding anything to the contrary
herein contained, for purposes of the calculation of the AFAA for the second
(2nd) Project Year, each of the dollar amounts indicated in Section 6.1 above
shall be reduced by fifty percent (50%), subject, however, to proration in
accordance with Section 6.3 hereof.
6.8 Employee Bonuses. Beginning with the second (2nd) Project Year
and for each Project Year thereafter, Operator shall pay to the Operator
Personnel and the GE O&M Personnel as bonuses in the aggregate not less than
twenty-five percent (25%) of the AFAA for each such Project Year; provided,
however, Owner may pay, in Owner's sole discretion,
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additional bonuses to the Operator Personnel and the GE O&M Personnel during any
Project Year.
VII.
WARRANTY; CORRECTION OF DEFECTS
7.1 Warranty. Operator warrants that (i) the Work hereunder shall be
performed in a first-class, competent, cost-conscious manner by appropriately
qualified personnel, (ii) the Work shall be performed in accordance with the
terms and conditions of this Agreement, including all standards set forth
herein, and (iii) all aspects of such Work shall be suitable for their required
purposes.
7.2 Consequence of Breach. In the event Operator breaches any warranty
described in Section 7.1 above, Operator shall re-perform any defective service,
replace any unfit or unqualified personnel and train new personnel, and repair
or replace any components of the Facility damaged as a consequence of such
breach. Any such re-performance, training, repair or replacement by Operator
pursuant to this Section 7.2 shall be at Operator's sole cost and expense.
7.3 Vendor Warranties. Operator shall use its best efforts to obtain
not less than one-year vendor warranties for all spare parts and replacement
parts, other than parts having a useful life of less than one year and parts
supplied by Owner pursuant to Article III. Any warranties obtained by Operator
from outside vendors or subcontractors shall be assignable and passed through to
Owner, but, during the term of this Agreement, Operator shall maintain,
administer and enforce such warranties for the benefit of Owner; provided,
however, Operator shall not file suit to enforce any such warranty without the
prior written consent of Owner.
VIII.
TERM
Unless sooner terminated as provided herein, the term of this
Agreement shall begin on the Execution Date and shall extend for an initial
term expiring on November 1, 2008; provided, however, Owner shall have the
right, in Owner's sole discretion, to (i) terminate this Agreement for
convenience effective as of the end of the fourth (4th) Project Year by
delivering to Operator written notice of such termination on or before one
hundred eighty (180) days prior to the end of the fourth (4th) Project Year and
payment of the Fourth Year Termination Fee (as defined hereinbelow) in
accordance with the terms hereof, (ii) terminate this Agreement for convenience
effective as of the end of the seventh (7th) Project Year by delivering to
Operator written notice of such termination on or before one hundred eighty
(180) days prior to the end of the seventh (7th) Project Year and payment of the
Seventh Year Termination Fee (as defined hereinbelow) in accordance with the
terms hereof, and (iii) terminate this Agreement for convenience, at no cost to
Owner, effective as of the end of the tenth (10th) Project Year by delivering to
Operator written notice of such termination on or before one hundred eighty
(180) days prior to the end of the tenth (10th) Project Year.
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The "Fourth Year Termination Fee" shall be due and payable as follows:
(i) Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00), which shall
be due and payable by Owner to Operator within thirty (30) days after the
termination of this Agreement, plus
(ii) the reasonable costs actually incurred by Operator in transferring,
relocating and/or terminating Operator's personnel at the Facility and
terminating subcontracts pertaining to the Facility up to a maximum of One
Hundred Fifty Thousand and 00/100 Dollars ($150,000.00), which shall be
due and payable by Owner to Operator within thirty (30) days after receipt
by Owner from Operator of an invoice accompanied by all relevant
documentation reasonably necessary for Owner to verify the accuracy
thereof, plus
(iii) an amount equal to ten percent (10%) of the Published Price (as
determined at the time of acquisition) of the Parts for GE Equipment
actually purchased by Owner from Operator during the term of this
Agreement, which amount shall be due and payable within thirty (30) days
after receipt by Owner from Operator of an invoice accompanied by all
relevant documentation reasonably necessary for Owner to verify the
accuracy thereof, but in no event earlier than thirty (30) days after the
termination of this Agreement.
The "Seventh Year Termination Fee" shall be due and payable as follows:
(i) Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00), which shall
be due and payable by Owner to Operator within thirty (30) days after the
termination of this Agreement, plus
(ii) the reasonable costs actually incurred by Operator in transferring,
relocating and/or terminating Operator's personnel at the Facility and
terminating subcontracts pertaining to the Facility up to a maximum of One
Hundred Fifty Thousand and 00/100 Dollars ($150,000.00), which shall be
due and payable by Owner to Operator within thirty (30) days after receipt
by Owner from Operator of an invoice accompanied by all, relevant
documentation reasonably necessary for Owner to verify the accuracy
thereof plus
(iii) an amount equal to five percent (5%) of the Published Price (as
determined at the time of acquisition) of the Parts for GE Equipment
actually purchased by Owner from Operator during the term of this
Agreement, which amount shall be due and payable within thirty (30) days
after receipt by Owner from Operator of an invoice accompanied by all
relevant documentation reasonably necessary for Owner to verify the
accuracy thereof, but in no event earlier than thirty (30) days after the
termination of this Agreement.
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IX.
TERMINATION
9.1 Event of Default. Should any of the following events or conditions
occur, the same shall constitute an event of default under this Agreement
(herein called an "Event of Default"):
(a) Operator breaches any of its material obligations under this
Agreement.
(b) Owner breaches any of its material obligations under this
Agreement.
(c) If any representation or warranty of Operator or Owner under
Article XIV hereof shall prove untrue in any material respect.
(d) If in any two (2) successive Project Years, Operator incurs the
maximum liquidated damages possible under Article VI hereof for each such
successive Project Year, then such occurrence shall be an Event of Default by
Operator.
(e) If Operator's aggregate limit of liability over the term of this
Agreement as set forth in Section 17.1 hereof is reached, then such occurrence
shall be an Event of Default by Operator.
9.2 Termination upon Breach. If either party commits an Event of
Default, the other party (hereinafter the "Non-Defaulting Party") may give such
party in default (the "Defaulting Party") a written notice describing such
default in reasonable detail and demanding that the Defaulting Party cure such
default, provided, however, Operator shall have no right to cure the Events of
Default set forth in Sections 9.1(d) and (e) above. If the Defaulting Party
does not cure its default within twenty (20) days after its receipt of such
notice, or if the default is such that it cannot be cured within such period of
time and the Defaulting Party does not promptly commence action within such
twenty (20) day period Which is calculated to cure such default and thereafter
diligently pursue such action to completion, the Non-Defaulting Party shall have
the right to terminate this Agreement by written notice to the Defaulting Party,
without prejudice to any remedies at law or in equity which are available to the
Non-Defaulting Party by reason of the Defaulting Party's default Provided
Operator is performing all of its obligations under this Agreement in accordance
with the terms and conditions hereof, it shall not constitute an Event of
Default if Operator fails to earn a bonus for any Project Year, so long as
Operator shall pay Owner when due any associated liquidated damages required to
be paid under Article VI hereof and promptly makes all corrections to the
Facility as may be required hereunder. Notwithstanding anything stated herein, a
good faith dispute with respect to the payment of any amount claimed to, be due
hereunder, for so long as such dispute remains unresolved and contested in good
faith, shall not be considered an Event of Default.
9.3 Termination for Insolvency. Subject to Article XII hereof, either
party may terminate this Agreement by written notice to the other party if the
other party (i) commences a
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proceeding under Federal or state bankruptcy, insolvency or reorganization law,
or (ii) has such a proceeding filed against it and fails to have such proceeding
stayed or vacated within sixty (60) days or upon the end of any such stay, fails
to have such involuntary proceeding vacated within sixty (60) days thereafter,
or (iii) admits the material allegations of any petition in bankruptcy filed
against it, or (iv) is adjudged bankrupt, or (y) makes a general assignment for
the benefit of its creditors, or (vi) has a receiver appointed for all or a
substantial portion of such party's assets which receiver is not discharged
within sixty (60) days after his appointment. Any termination of this Agreement
pursuant to this Section 9.3 shall be considered to be by reason of anticipatory
breach of contract, and such termination shall be without prejudice to any
rights the terminating party may have by reason of such anticipatory breach.
9.4 Owner's Additional Remedies. After termination of this Agreement
by Owner by written notice pursuant to Section 9.2 or 9.3 hereof, Owner may, in
addition to its other rights hereunder, take possession of and utilize any
materials, tools, equipment, manuals, records and other property of any kind
furnished by Operator, paid for by Owner, and necessary or intended to be used
to operate the Facility. Operator shall not be entitled to receive any further
payments under this Agreement except for payments for services provided prior to
termination of this Agreement. Operator and Owner shall continue to be bound by
such provisions of this Agreement that shall survive the termination hereof. In
addition, Operator shall remain liable for all liquidated damages hereunder
which have accrued but have not yet been paid at the time of such termination.
9.5 Transfer of Options Upon Termination. Upon termination of this
Agreement for any reason, Operator shall fully cooperate with Owner in the
transfer of the performance of Operator's obligations hereunder to Owner or a
third party designated by Owner. Without limiting the foregoing, Operator shall
provide Owner and such third party with such information as may be reasonably
necessary for the safe and proper operation and maintenance of the Facility. The
parties acknowledge Owner's interest that the Facility be operated and
maintained during the final Project Year of this Agreement or portion thereof,
whether or not commensurate with the term hereof, to the same standards as it is
operated and maintained throughout the term of this Agreement and that personnel
of Owner have an opportunity to gain experience in the operation and maintenance
of the Facility during such final Project Year. Accordingly, Operator agrees
that Owner may send its personnel to the Facility during the final Project Year
for the purposes of monitoring Operator's performance under the terms of this
Agreement and gaining experience in operation and maintenance of the Facility,
without charge to Owner (except for the cost of Owner's personnel), provided
that Owner's personnel do not interfere with the continuing operation and
maintenance of the Facility by Operator pursuant to the terms hereof. Owner,
however, shall remain fully liable for the actions and inactions of its
employees during such time period. Upon termination of this Agreement, Operator,
to the extent permitted by law, shall assign to Owner any existing warranties
obtained by Operator on the Facility or any portion thereof and shall promptly
deliver to Owner all copies of the Facility Data, drawings, books and originals
or certified copies of all records relating to the operation and maintenance of
the Facility that are required to be maintained by Operator hereunder as of the
date of such termination.
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9.6 Condition of Facility Upon Termination. Upon expiration or
termination of this Agreement, Operator shall leave the Facility in as good
condition as on the Existing O&M Agreement Termination Date, normal wear and
tear excepted, and with the equivalent supply of Consumables (other than spare
parts) and other operating items as were provided by Owner to Operator. All
special tools, improvements, inventory of supplies, spare parts, safety
equipment (as provided to or obtained by or provided by Operator during the term
of this Agreement) and any other items furnished by Operator hereunder will be
left at the Facility and Will become or remain the property of Owner without
additional charge.
9.7 Survival of Obligations. Termination of this Agreement for any
reason shall not relieve Owner or Operator of any obligation accrued or accruing
prior to such termination. Without limiting the generality of the foregoing,
Owner and Operator shall continue to be bound by Section 6.4, Article VII,
Sections 9.4, 9.5, 9.6 and 9.7, Article XIII, Article XVII, Article XVIII,
Article M, Article XX, and such provisions shall survive the termination of this
Agreement.
X.
INSURANCE
10.1 Operator Insurance Coverage. Operator shall secure and maintain
as a minimum during the term of this Agreement the following insurance:
(a) Worker's Compensation, subject to statutory limits.
(b) Employer's Liability, with limits as follows:
(i) Bodily Injury by Accident - $1,000,000 per accident;
(ii) Bodily Injury by Disease - $1,000,000 policy limit; and
(iii) Bodily Injury by Disease - $1,000,000 per each employee.
(c) Comprehensive (Business) Automobile Liability including automobile
contractual liability endorsement, in an amount equal to a "combined single
limit" coverage for bodily injury and property damage limit of One Million and
00/100 Dollars ($1,000,000.00) per accident, in comprehensive form and covering
hired, owned and non-owned vehicles, including, without limitation, vehicles
leased by Operator from Owner. Such insurance shall name Owner and Leader as
Additional Insureds.
(d) Comprehensive (Commercial) General Liability Insurance in an
amount equal to at least One Million and 00/100 Dollars ($1,000,000.00) per
occurrence, "combined single limit" coverage. Such insurance shall contain such
coverages as Operator normally maintains for its own protection to include
Premises/Operations, Explosion, Collapse and Underground Hazards, Broad Form
Contractual, Independent Contractors, Products/Completed Operations, Broad Form
Property Damage (excluding care, custody and control), Personal Injury, Cross
Liability including a Broad Form
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Contractual endorsement to meet the liability assumed in Section 13.1 hereof.
Such insurance shall name Owner and Lender as Additional Insureds.
(e) Excess (or Umbrella) Lability insurance providing total or excess
limits for, and following the form of, the policies referred to in Section 10.1
(b) (c) and (d) so as to bring the total of each up to Twenty-Five Million and
00/100 Dollars ($25,000,000.00) per occurrence, and in the annual aggregate
where applicable. Such insurance shall name Owner and Lender as Additional
Insureds.
(f) Aircraft and Marine insurance should any aircraft or watercraft be used
in the Work. Such insurance shall be at limits at least equal to those specified
in Section 10.1(e) above. Such insurance shall name Owner and Lender as
Additional Insureds.
10.2 Owner Insurance Coverage. Owner shall secure and maintain during
the term of this Agreement the following insurance:
(a) Worker's Compensation, subject to statutory limits.
(b) Employer's Liability, with limits as follows:
(i) Bodily Injury by Accident - $1,000,000 per accident;
(ii) Bodily Injury by Disease - $1,000,000 policy limit; and
(iii) Bodily Injury by Disease - $1,000,000 per each employee.
(c) Commercial General liability Insurance covering legal liability of
the insured for damage to property of third parties or bodily injury to third
parties arising out of the ownership, operation and maintenance of the Facility,
in an amount equal to One Million and 00/100 Dollars ($1,000,000.00) per
occurrence, "combined single limit" property damage/bodily injury coverage. Such
insurance policy shall be endorsed naming Lender as an Additional Insured and
Operator as an Additional Insured in connection with claim arising out of or
relating in any way to Operator's presence on the Site or for the Work to be
performed pursuant to this Agreement only, and shall include
Premises/Operations, Explosion, Collapse and Underground Hazards, Broad Form
Contractual. Independent Contractors, Products/Completed Operations, Broad Form
Property Damage, Personal Injury, Cross Liability (Insured vs. Insured) and a
Broad Form Named Insured endorsement; provided, however, if a claim is made
under such insurance and the claim is not based upon the negligence or willful
misconduct of Operator, then Operator acknowledges it shall have no right to any
recovery with respect to such claim and, in furtherance thereof, Operator shall
execute and deliver to Owner the appropriate waiver forms necessary for a check
to be issued by the insurer solely in the name of Owner.
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(d) Excess (Or Umbrella Liability insurance providing total or excess
limits for, and following the form of, the policies referred to in Section 10.2
(b) and (c) so as to bring the total of each up to Twenty-Five Million and
00/100 Dollars ($25,000,000.00) per occurrence, and in the annual aggregate
where applicable. Such insurance policy shall be endorsed naming Lender as an
Additional Insured and Operator as an Additional Insured in connection with
claims arising out of or relating in any way to Operator's presence on the Site
or for the Work to be performed pursuant to this Agreement only; provided,
however, if a claim is made under such insurance and the claim is not based upon
the negligence or willful misconduct of Operator, then operator acknowledges it
shall have no right to any recovery with respect to such claim and, in
furtherance thereof, Operator shall execute and deliver to Owner the appropriate
waiver forms necessary for a check to be issued by the insurer solely in the
name of Owner.
(e) Property Insurance on an "All Risk basis covering physical damage or
loss to all real and personal property of Owner located at the Site and to off-
premises, electrical, gas, and steam transmission lines and facilities, and
other equipment for which Owner has an insurable interest and in an amount not
less than one hundred percent (100%) of the full replacement value of such
property. Such coverage shall meet all requirements for property insurance set
forth in the Related Agreements, shall name Lender as an Additional Named
Insured and shall name Operator as an Additional Insured.
(f) Boiler and Machinery Insurance on the Facility for all insurable
objects, including but not limited to pressure vessels, turbines and equipment,
electrical generators, motors, air tanks, boilers, machinery, pressure piping or
similar apparatus, on a comprehensive form in an amount not less than one
hundred percent (100%) of the full replacement value of such property. Such
insurance policy shall cover objects at all locations required to be insured
under Section 10.2(e) above and shall name Lender and Operator as Additional
Insureds. Owner shall have the right at any time, and from time to time, at
Owner's sole option, to combine the Property Insurance and the Boiler and
Machinery Insurance into a single policy. Owner shall be relieved of the
obligation to renew the business interruption coverage under said Property
Insurance and Boiler and Machinery Insurance in the event such business
interruption coverage cannot be purchased at commercially reasonable rates.
10.3 Form and Content of Insurance. All policies, and binders with
respect to insurance provided pursuant to this Article X shall be as follows:
(a) Form of Policies. All insurance provided for hereunder shall be
placed on forms reasonably acceptable to Owner, Operator, and Leader.
(b) Insurance Companies. All insurance required hereunder shall be
issued by and binding upon insurance companies reasonably acceptable to
Owner, Operator and Lender that are licensed or authorized to do business
in the State of New Jersey.
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(c) Additional Insureds shall include the officers, directors and employees
of each entity so named as its interests may appear.
(d) Severability. All liability insurance shall contain a severability of
interest provision providing that, except with respect to the total limits of
liability, the insurance shall apply to each Insured or Additional Insured in
the same manner as if separate policies had been issued to each.
(e) Non-Recourse. All insurance shall provide that there will be no
recourse against the Additional Insureds for the payment of premiums or
commissions or (if such policies provide for the payment thereof) additional
premiums or assessments.
(f) Waiver of Subrogation. All insurance maintained by Operator and Owner
hereunder except for the insurance required pursuant to Section 10.l(b) and (c)
and Section 10.2(b) hereof shall provide for the waiver of any right of
subrogation by the insurers thereunder against Owner, Operator and Lender and
the officers, directors and employees, agents and representatives of each of
them, and any right of the insurers to any setoff or counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any liability of
any such person insured under such policy.
(g) Notice of Cancellation. All insurance shall provide that it may not be
canceled or materially changed without giving Owner,Operator, and Lender thirty
(30) days prior written notification thereof, except in cases of non-payment of
premium for which ten (10) days prior written notice shall be provided (unless a
longer notice period for non-payment is agreed to by the relevant insurer).
(h) Breach of Warranty. The interest of any Insured or Additional Insured
shall not be invalidated by any action or inaction of any of the other parties
so named.
10.4 Additional Requirements.
(a) Certificates; Proof of Loss. Prior to the performance of any Work by
Operator hereunder, each party shall furnish certificates of insurance to the
other party evidencing the insurance required of such party pursuant to this
Agreement. The party maintaining each policy hereunder shall make all proofs of
loss under each such policy, and shall take all other action reasonably
required to ensure collection from insurers for any loss under any such policy,
except that Owner may require Operator to provide such proof of loss and take
such other action on behalf of Owner in the case of the insurance by Owner
pursuant to Section 10.2(c), (d), (e) and (f). Operator shall provide Owner
with copies of insurance policies obtained by it promptly upon owner's request.
(b) Insurance Report. Concurrently with the furnishing of the
certification referred to in Section 10.4(a), Operator shall furnish Owner and
Leader with an opinion of each insurance broker stating that all premiums then
due have been paid and that, in the
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opinion of such broker, the insurance then carried and maintained with respect
to the Facility is in accordance with the terms of this Article. Furthermore,
Operator shall cause each insurer or such broker to advise Owner and Lender in
writing of any default in the payment of any premiums or any other act or
omission on the part of Operator which might invalidate or render unenforceable,
in whole or in part, any insurance provided hereunder Owner may at its sole
option obtain such insurance if not provided by Operator and, in such event,
Operator shall reimburse Owner upon demand for the cost thereof.
(c) Payment of Deductables and Self-Insured Retention Amounts. Owner shall
be responsible for deductibles or self-insured retention under all of the
insurance policies required to be carried by Owner pursuant to Section 10.2
hereof, except in the event of loss or damage due to the negligence or willful
misconduct of Operator, in which case Operator shall be liable proportionately
to the extent of Operator's negligence or willful misconduct, for the
deductibles and/or self-insured retention applicable to such insurance up to but
not exceeding Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) per
occurrence. In addition, Operator shall be responsible for all deductibles and
self insured retention under other policies maintained by Operator. Owner may,
in its sole discretion, change the deductibles or self-insured retention under
any of the insurance policies that it is required to carry pursuant to Section
10.2 hereof and shall promptly give Operator written notice of any such change;
provided, however, that Operator shall not be responsible for any deductibles or
self-insured retention in excess of Two Hundred Fifty Thousand and 00/100
Dollars ($250,000.00) per occurrence.
(d) Subcontractor Insurance. Operator shall require all subcontractors and
suppliers to obtain, maintain, and keep in force, prior to entry on the Site and
during the time in which they are engaged in performing services to be furnished
by Operator adequate coverage in accordance with Operator's normal practice and
shall provide Owner with current certificates of insurance evidencing such
coverage.
(e) Notification. Operator agrees to advise Owner as soon as practicable in
writing of any notice of claim to which insurance pursuant to this Article X
applies.
(f) Owner's and Lender's Rights. Should Operator fail to provide or
maintain any of the insurance policies required of it, Owner and/or Lender shall
have the right to provide and/or maintain such coverage at Operator's expense
once Operator has had a reasonable time to cure.
(g) Capitalized Terms. Capitalized terms used in this Article X and not
otherwise defined in this Agreement shall have the meanings generally ascribed
to them in the commercial insurance industry in the United States of America.
(h) Disclosure. Operator agrees to make full disclosure to insurers of all
material facts and circumstances as required by the term of any insurance
policy under which Operator is named as an Additional Insured.
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XI.
NOTIFICATIONS
Any notice to either party required or permitted hereunder shall be in
writing and shall be given by (i) personal delivery, (ii) commercial courier
(iii) registered or certified U.S. mail, return receipt requested, postage
prepaid, or (iv) telecopy if also given by personal delivery, commercial courier
or registered or certified U.S. mail, return receipt requested, postage prepaid
within three (3) days after the telecopied transmission, all such notices to be
addressed as follows:
If to Owner:
Cogen Technologies NJ Venture
c/o Cogen Technologies NJ, Inc.
1600 Smith Street, Suite 4300
Houston, Texas 77002
Telecopier Number: (713) 951-7747
Attention: Vice President and Chief Financial Officer
Cogen Technologies NJ Venture
c/o Cogen Technologies NJ, Inc.
1600 Smith Street, Suite 4300
Houston, Texas 77002
Telecopier Number: (713) 951-7747
Attention: Senior Vice President and Chief Operating
Officer
with copy to:
Cogen Technologies NJ Venture
10 Hook Road
Bayonne, New Jersey 07002
Telecopier Number: (201) 437-0593
Attention: Plant Manager
If to Operator:
GE Global O&M Services
One River Road, Building 36-2E
Schenectady, New York 12345
Telecopier Number: (518) 385-2280
Attention: Manager of Global O&M Services
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If to Lender:
Prudential Power Funding
Four Gateway Center
Newark, New Jersey 07102
Telecopier Number: (201) 624-2630
Attention: Mike Higgins
Notice by personal delivery shall be effective when made and notice by
commercial courier or by mail shall be deemed effective upon receipt. A copy of
each such notice shall, to the extent reasonably practicable, also be forwarded
by telecopier.
XII.
ASSIGNMENT; LENDER'S RIGHTS
12.1 Assignment. Neither Owner nor Operator may assign all or any part
of their interests in this Agreement without the prior written consent of the
other, which consent shall not be unreasonably withheld, delayed or conditioned;
provided, however, Owner may assign its rights under this Agreement as security
for the payment of any indebtedness payable or to become payable to Lender. Such
assignment shall be in a form substantially similar to Exhibit B attached hereto
and made a part hereof for all purposes. In connection therewith, if requested
by Lender, Operator will execute an appropriate consent to any such assignment
in a form substantially similar to Exhibit C attached hereto and made a part
hereof for all purposes.
12.2 Lender's Rights. (a) Operator agrees that so long as any such
assignment to Lender shall remain in effect or until written notice of
satisfaction is given to Operator by Lender, the following provisions will
apply:
(1) except for the natural expiration of the term of this Agreement
(after giving effect to any renewal terms), there shall be no modification
of this Agreement without the prior written consent of Lender which consent
shall not be unreasonably withheld;
(2) Operator will not terminate, cancel or surrender this Agreement by
reason of Owner's default without giving Leader the same notice and right
to cure such default as Owner may have (plus an additional thirty (30)
days); provided, that if the default is a non-monetary default and (i) is
of such nature that it cannot be cured without first taking possession of
the Facility or (ii) is of such nature that it is not susceptible of being
cured by Lender, then Operator shall have no right to terminate this
Agreement by reason of such default if and so long as Lender shall proceed
diligently to attempt to obtain possession of the Facility or exercise its
remedies pursuant to the financing agreements including possession by a
receiver and upon obtaining such possession, Lender shall proceed
diligently to cure such default if such default is susceptible of being
cured by Lender;
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(3) Operator will not terminate this Agreement by reason of Owner's
default under Section 9.3 if Lender has cured any monetary default and has
diligently commenced and is diligently continuing to exercise its remedies
under any of the financing agreements;
(4) Operator will deliver to Lender a copy of each notice of default
and notice of termination, extension or renewal at the same time that any
such notice is delivered to Owner;
(5) upon instructions from Lender, Operator will make any payments due
to Owner hereunder in accordance with such instructions; and
(6) if Lender or a Permitted Transferee shall acquire title to or
possession of the Facility or shall appoint a new managing venturer of
Owner, then Operator shall accept performance from Lender or such
Permitted Transferee so long as Lender or such Permitted Transferee shall
have paid to Operator all costs and fees herein provided for, and then due
and payable, and shall comply or cause Owner to comply with the other
provisions of this Agreement. Upon acquiring title to or possession of the
Facility, Lender shall have the same rights as Owner with respect to the
availability and review of books and records of the Facility.
(b) Lender, as such, shall not be deemed to assume the performance of
any of the terms, covenants or conditions on the part of Owner to be performed
hereunder, but the purchaser, assignee or transferee of this Agreement under any
instrument of sale, assignment or transfer pursuant to or in connection with any
proceedings for the foreclosure of any leasehold mortgage affecting the Facility
shall be deemed to be an assignee or transferee within the meaning of this
Agreement, and shall be deemed to have agreed to perform all of the terms,
covenants and conditions on the part of Owner to be performed hereunder from and
after the date of such purchase and assignment, but only for so long as such
purchaser or assignee is the owner of such leasehold estate.
(c) Notwithstanding any other provisions of this Agreement, any sale,
transfer, or assignment of this Agreement to Lender or a Permitted Transferee
pursuant to or in connection with (1) any proceedings for the foreclosure of any
leasehold mortgage affecting the Facility or (2) the exercise by Lender of any
other remedies under any of the financing agreements shall be deemed to be a
permitted sale, transfer or assignment of this Agreement.
(d) Any Lender or any Permitted Transferee may sell, assign or
transfer this Agreement to a Permitted Transferee; provided, however, that such
Lender or Permitted Transferee shall remain liable hereunder for the
obligations, if any, incurred by it prior to the sale, assignment or transfer.
12.3 Estoppel Certificates. Operator shall, without charge at any time
and from time to time hereafter, but not more frequently than twice in any one-
year period (or more frequently if such request is made in connection with any
sale or mortgaging of Owner's leasehold
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interest), within thirty (30) days after written request of Owner certify by
written instrument duly executed and acknowledged to any Lender or Permitted
Transferee or any other person, firm or corporation specified in such request:
(a) as to whether this Agreement has been supplemented or amended, and if so,
the substance of such supplement or amendment; (b) as to the validity and force
and effect of this Agreement; (c) as, to the existence of any Event of Default
hereunder; (d) as to the existence of any offsets, counterclaims or defenses
hereto on the part of Owner; and (e) as to any other matters as may be
reasonably so requested. Any such certificate may be relied upon by Owner and
any other person, firm or corporation to whom the same may be exhibited or
delivered, and the contents of such certificate shall be binding on Operator.
12.4 Legal Opinion. Incident to the execution of this Agreement, if
requested by Owner, Operator shall furnish to Owner and any Lender or Permitted
Transferee an opinion of counsel to Operator with respect to the enforceability
of this Agreement against Operator and covering such other matters as may be
reasonably requested by Owner.
XIII.
INDEMNIFICATION
13.1 Operator Indemnity. Operator shall indemnify, defend and hold
harmless Owner, Lender, IMTT-Bayonne, IMTT-BX and their respective Affiliates,
and partners, joint venturers, officers, agents, employees, successors and
assigns (collectively, the "Owner Indemnitees") from and against any and all
suits, actions, legal or administrative proceedings, claims, demands, penalties,
costs and expenses (Including attorneys' fees, court costs and all costs or
expenses related to environmental clean-up, containment, remediation or removal
of hazardous waste or pollution to property of third parties) of any nature for
personal injury or death or physical damage to property of any third party
(including employees of Operator and its subcontractors) arising out of or
resulting from the performance or non-performance of the Work or any other
activities on or about the Site or other locations where the Work is performed
to the extent that the same is caused by any negligent act or negligent omission
of, or willful misconduct or intentional act by, Operator or its subcontractors
or suppliers, or anyone employed by any of them or anyone for whose acts any of
them may be liable, unless solely caused by the negligence of any of the Owner
Indemnitees. In the event that such damage or injury is caused by the joint or
concurrent negligence of Owner, its employees, subcontractors (other than
subcontractors of operator) or agents, the loss shall be borne by Operator and
Owner proportionately to their degree of fault. In the event Operator shall be
liable for any loss, costs and expenses pursuant to this Section 13.1, the
proceeds of the insurance policies referred to in Section 10.2(c) and (d) shall
first apply, other than as stipulated therein, to the loss, costs and expenses.
If such proceeds are insufficient to cover all such loss, costs and expenses,
Operator shall be liable for and shall pay for all sums in excess of such
insurance proceeds; provided, however, in the event that such loss, costs and
expenses are caused by the joint or concurrent negligence of Owner, its
employees, subcontractors (other than subcontractors of Operator) or agents, the
loss, costs and expenses shall be borne by Operator and Owner proportionately to
their degree of fault. Notwithstanding anything herein to the contrary, in the
event of loss or damage due to the negligence or willful misconduct of Operator,
Operator shall be liable, proportionately to the extent of Operator's
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negligence or willful misconduct, for the deductibles, self-insured retention
and waiting period deductibles applicable to the insurance Policies required to
be carried by Owner pursuant Section 10.2 hereof.
13.2 Owner indemnity. Owner shall indemnify, defend and hold harmless
Operator and its Affiliates and partners, joint venturers, officers, agents,
employees, successors, and assigns (collectively, the "Operator Indemnitees")
from and against any and all suits, actions, legal or administrative
proceedings, claims, demands, penalties, costs, and expenses (including
attorneys' fees, court costs and all costs or expenses related to environmental
clean-up, containment, remediation or removal of hazardous waste or pollution to
property of third parties) of any nature for personal injury or death or
physical damage to property of any third party (including employees Of Owner and
its subcontractors) arising out of or resulting from the performance or non-
performance of Owner of its obligations hereunder or any of Owner's activities
on or about the Site or other location where Owner is to perform its obligations
hereunder to the extent that the same is caused by any negligent act or
negligent omission of, or willful misconduct or intentional act by, Owner, its
subcontractors (other than subcontractors of Operator) or suppliers (other than
suppliers of Operator), or anyone employed by any of them, or anyone for whose
acts any Of them may be liable, unless solely caused by the negligence of any of
the Operator Indemnitees. In the event that such damage or injury is caused by
the joint or concurrent negligence of Operator or its employees, contractors,
subcontractors or agents, the loss shall be borne by Operator and Owner
proportionately to their degree of fault.
13.3 No Limitation. In any and all claim against any of the Owner
Indemnitees by any employee of operator, any of Operator's subcontractors or
suppliers, or anyone directly or indirectly employed by any of them or anyone
for whose acts any of them may be liable, the indemnification obligation under
Section 13.1 shall not be limited in any way by any limitation on the amount or
type of damages, compensation or benefits payable by or for Operator or any of
its subcontractors or suppliers under workers' or workmen's compensation acts,
disability benefit acts or other employee benefits acts, nor by the provision by
Operator of any insurance required to be provided under this Agreement.
XIV.
REPRESENTATIONS AND WARRANTIES
14.1 Representations and Warranties of Owner. Owner hereby represents
and warrants to Operator as follows:
(a) Owner is a joint venture duty organized and existing in good
standing under the laws of the State of New Jersey.
(b) Owner possesses all requisite power and authority to enter into
and perform this Agreement and to carry out the transactions contemplated
herein.
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(c) Owner's execution, delivery, and performance of this Agreement
have been duly authorized, and this Agreement has been duly executed and
delivered and constitutes Owner's legal, valid, and binding obligation,
enforceable against Owner in accordance with its terms, except as may be limited
by bankruptcy, insolvency and other legal principles pertaining to creditor's
rights.
(d) No suit, action or arbitration, or legal, administrative or other
proceeding is pending or, to Owner's knowledge, threatened against Owner that
would affect the validity or enforceability of this Agreement or the ability of
Owner to fulfill its obligations and commitments hereunder.
14.2 Representations and Warranties of Operator. Operator hereby
represents and warrants to Owner as follows:
(a) Operator is a corporation duly organized and existing in good standing
under the laws of the State of New York and is qualified to do business in the
State of New Jersey.
(b) Operator possesses all requisite power and authority to enter into and
perform this Agreement and to carry out the transactions contemplated herein.
(c) Operator's execution, delivery, and performance of this Agreement have
been duly authorized, and this Agreement has been duly executed and delivered
and constitutes Operator's legal, valid, and binding obligation, enforceable
against Operator in accordance with its terms, except as may be limited by
bankruptcy, insolvency and other legal principles pertaining to creditors'
rights.
(d) No suit, action or arbitration, or legal, administrative or other
proceeding is pending or, to Operator's knowledge, threatened against Operator
that would affect the validity or enforceability of this Agreement or the
ability of Operator to fulfill its obligations and commitments hereunder.
(e) No material consents or approvals are required in connection with the
execution, delivery and performance by Operator of this Agreement.
(f) The execution, delivery and performance by Operator of this Agreement
will not (i) violate any law, rule or regulation applicable to Operator, (ii)
result in any breach of, or constitute any default under, any contractual
obligation of Operator, or (iii) result in, or require, the creation or
imposition of any lien or other encumbrance on any of the properties or revenues
of Owner.
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XV.
BOOKS, RECORDS AND REPORTS
15.1 Books and Records. Operator Shall Maintain books and records at
the site reflecting solely transactions arising from the operation and
maintenance of the Facility pursuant to the terms of this Agreement, including,
without limitation, accounting, bookkeeping and administrative reports relating
to Facility performance data, the accrual and payment of items constituting
operating expenses and Reimbursable Costs, and the payment of all O&M Fees and
other monies to Operator. Such books and records shall (a) reflect only
transactions in connection with the Facility, (b) be kept Physically apart from
any other books and records maintained by Operator for whatever purpose, and (c)
be available to Owner upon Owner's request for examination Or Copying during the
normal business hours of Operator. Operator shall cooperate with Owner's
accountant in the event Owner requests such accountant to conduct a financial
audit of the services provided by Operator hereunder. If such audit reveals
errors in the calculation of any amounts paid by Owner, operator shall promptly
reimburse Owner for any amounts improperly paid by Owner or Owner shall promptly
reimburse operator for any amounts not paid by Owner, as the case may be.
Furthermore, if such audit reveals errors of more than two percent (2%) in the
calculation of Reimbursable Costs during any given month, then Operator shall
pay to Owner the cost of the audit. At the termination of this Agreement,
Operator shall furnish to Owner one copy of each report previously delivered to
Owner pursuant to Section 15.2 hereof, and one copy of such other books and
records which (i) relate to the Facility, and (ii) Operator maintains at the
time of such termination in the normal course of its record keeping under this
Article XV.
15.2 Reports. In addition to any other report required to be made by
Operator pursuant to the terms of this Agreement, Operator shall furnish to
Owner all such reports concerning the operation and maintenance of the Facility,
including any reports which may be required under the Related Agreements and as
may be required by the Lender. Operator shall provide such reports in the manner
and at the times as may be required under the Related Agreements or by the
Lender.
XVI.
FORCE MAJEURE
16.1 Force Majeure. Neither party shall be responsible or liable for
or deemed in breach hereof because of any delay in the performance of their
respective obligations hereunder due to circumstances beyond the reasonable
control of the party experiencing such delay, including but not limited to acts
of God; unusually severe weather conditions; strikes or other labor difficulties
(except that Operator's performance shall not be excused by strikes by persons
employed directly by Operator at the Site or by strikes limited to the Site);
war; riots; requirements, actions or failures to act on the part of governmental
authorities preventing performance; inability despite due diligence to obtain
required licenses, permits or governmental approvals; accidents; fire; damage to
or breakdown of necessary facilities; transportation delays or accidents;
failure or refusal of and of the Power Purchasers to accept deliveries of
electricity
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under any of the Power Purchase Agreements; failure or refusal of any of the
Steam Purchasers to accept deliveries of steam under any of the Steam Purchase
Contracts; or unavailability of Fuel (such causes hereinafter called "Force
Majeure"); provided that the non-performing party is materially and adversely
affected by the event of Force Majeure and:
(a) The non-performing party gives the other party, as soon as reasonably
practicable but in any event within forty-eight (48) hours of such Force Majeure
occurrence, written notice describing the particulars of the occurrence;
(b) The suspension of performance is of no greater scope and of no longer
duration than is required by the Force Majeure;
(c) The non-performing party uses its best efforts to mitigate the effects
of the Force Majeure and remedy its inability to perform;
(d) When the non-performing party is able to resume performance of its
obligations under this, Agreement, that party shall give the other party written
notice to that effect; and
(e) The Force Majeure was not caused by or connected with any negligent or
intentional acts, errors, or omissions, or failure by the non-performing party
to comply with any law, rule, regulation, order, or ordinance or for any breach
or default of this Agreement.
The term Force Majeure does not include changes in market conditions or
governmental action that affect the cost of Owner's supply of Fuel or any
alternative supplies of Fuel or the demand for Owner's products.
16.2 Effect of Force Majeure. If after an event of Force Majeure that
has caused Operator to suspend or delay performance of the Work hereunder,
Operator has faded to take such action as Operator could lawfully and
reasonably initiate to remove or relieve either such event of Force Majeure or
its direct or, indirect effects, Owner may, in its sole discretion, at
Operator's expense, initiate such reasonable measures as will be designed to
remove or relieve such event of Force Majeure or its direct or indirect effects
and thereafter require Operator to resume full or partial performance of the
Work hereunder.
16.3 Extended Force Majeure. In the event an event of Force Majeure
hereunder or under any of the Related Agreements continues for thirty (30) days
or more, then Owner shall have the right, upon delivery of thirty (30) days
advance written notice to Operator, to cause Operator to de-mobilize, and
effective thirty (30) days after Operator's receipt of such notice, Owner shall
be permanently relieved of the obligation to make payment of the O&M Fee to
Operator for those months during such extended event of Force Majeure that
Operator is de-mobilized. Owner shall pay all costs and expenses incurred in
connection with de-mobilization and re-mobilization to the extent such costs
and expenses are approved in writing by Owner. In
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addition, if such de-mobilization continues for a period of one hundred eighty
(180) or more consecutive days, then Owner may terminate this Agreement by
delivering written notice of termination to Operator, such termination to be
effective no earlier than thirty (30) days after Operator's receipt of such
notice.
16.4 Payments to Operator During an Event of Force Majeure. During
the continuance of an event of Force Majeure, Owner's obligation to make
payments to Operator for the O&M Fee and the AFAA shall be limited to the net
income (including insurance proceeds) derived from the Facility; provided,
however, (i) after the event of Force Majeure terminates, Owner shall bring
current the payment of all O&M Fees and AFAA (which are unpaid and accrued
during the event of Force Majeure) to Operator at such time as there is
sufficient net income from the Facility to make such payments and (ii) any such
delayed payments of the O&M Fee and the AFAA shall accrue interest at the rate
of interest announced by The Chase Manhattan Bank, N.A., from time to time, at
its principal office located at 1 Chase Manhattan Plaza, New York, New York
10081 (or any successor financial institution), as its prime commercial lending
rate; provided, however, Operator shall not be entitled to any O&M Fees for
those periods in which Operator was de-mobilized pursuant to Section 16.3
hereof. Owner's obligations under this Section 16.4 shall survive the
termination or expiration of this Agreement.
XVII.
LIMITATION OF LIABILITY
17.1 Operator. In no event, whether in tort, negligence, strict
liability, breach of contract, warranty or otherwise, shall, Operator's total
liability hereunder to Owner exceed (a) in any project year, Two Million and
00/100 Dollars ($2,000,000.00) and (b) over the term of this Agreement, a total
aggregate amount of Six Million and 00/100 Dollars ($6,000,000-00) provided,
however, that the foregoing limitation on liability shall not apply to any
liability of Operator to Owner (i) resulting from willful misconduct or
intentional acts by Operator or (ii) otherwise covered by the insurance policies
required to be maintained by Operator pursuant to Section 10.1 hereof up to the
minimum amounts therein stated. Notwithstanding anything contained herein to the
contrary, in no event, whether in tort, negligence, strict liability, breach of
contract, warranty, indemnity or otherwise, shall. Operator be liable to Owner
for special, incidental, exemplary or consequential damages, including but not
limited to, loss of profits or revenues.
17.2 Owner. In no event, whether in tort, negligence, strict liability,
breach of contract, warrant or otherwise, shall Owner's total liability
hereunder to Operator exceed (a) in any project Year, Two Million and 00/100
Dollars ($2,000,000.00) and (b) over the term of this Agreement, a total
aggregate amount of Six Million and 00/100 Dollars ($6,000,000.00); provided,
however, that the foregoing limitation on liability shall not apply to any
liability of Owner to Operator (i) resulting from willful misconduct or
intentional acts by Owner, or (ii) otherwise covered by the insurance policies
required to be maintained by owner pursuant to Section 10.2 hereof up to the
minimum amounts therein stated. Notwithstanding anything contained herein to
the contrary, in no event, whether in tort negligence, strict liability, breach
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of contract, warranty, indemnity or otherwise, shall Owner be liable to Operator
for special incidental, exemplary or consequential damages, including but not
limited to, loss of profits or revenues, except Owner shall indemnify Operator
against claims from Owner's customers for special, incidental, exemplary or
consequential damages up to, but not in excess of, a total aggregate amount of
Three Million and 00/100 Dollars ($3,000,000.00) over the term of this
Agreement.
XVIII.
RESOLUTION OF DISPUTES
18.1 Resolution by Parties.
(a) In the event that a dispute arises hereunder between the parties,
the parties shall attempt in good faith to settle such dispute by mutual
discussions within thirty (30) days after the date that a party gives written
notice of the dispute to the other party; provided, however, that if the dispute
involves the amount of an invoice and after ten (10) days of mutual discussion
either party believes in good faith that further discussion will not resolve the
dispute to its satisfaction, such party may immediately refer the matter to the
expert for consideration pursuant to Section 18.2 hereof.
(b) In the event that the dispute is not resolved in accordance with
Section 18.l(a) hereof, either party may refer the dispute to the chief
executive officers or chief operating officers of the respective parties for
further consideration. In the event that such individuals are unable to reach
agreement within fifteen (15) days, or such longer period as they may agree,
then either party may refer the matter to an expert in accordance with Section
18.2 hereof.
18.2 Mediation by Expert.
(a) In the event that the parties are unable to resolve a dispute in
accordance with Section 18.1 hereof, then either party, in accordance with this
Section 18.2, may refer the dispute to an expert for consideration of the
dispute and to obtain a recommendation from the expert as to the resolution of
the dispute; provided, that with respect to disputes that involve the amount of
an invoice, either party may before any such dispute arises require that an
expert be appointed in accordance with the provisions of Section 18.2(b) hereof
and shall nominate a person it proposes to be the expert. Such an expert shall
have responsibility for considering all disputes that involve the amount of
invoices until replaced in accordance with the provisions of Section 18.2(b)
hereof.
(b) The party initiating submission of the dispute to the expert shall
provide the other party with a notice stating that it is submitting the dispute
to an expert and nominating the person it proposes to be the expert. The other
party shall, within fifteen (15) days of receiving such notice, notify the
initiating party whether such person is acceptable. If the party receiving such
notice fails to respond or notifies the initiating party that the person is not
acceptable, the parties shall meet and discuss in good faith for a period of ten
(10) days to agree upon a person
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to be the expert. If the parties are unable to agree, the responding party shall
by the end of such ten (10) day period nominate a person to be an expert,
Whereupon the two nominated experts shall meet and agree upon a third person who
shall be the expert. Should an expert die, resign, refuse to act or become
incapable of performing his or her functions, the vacancy shall be filled by the
method by which the expert was originally appointed.
(c) (i) Consideration of the dispute by an expert shall be initiated
by the party who is seeking consideration of the dispute by the expert
submitting to both the expert and the other party written materials setting
forth:
(A) a description of the dispute;
(B) a statement of the party's position; and
(C) copies of records supporting the party's position.
(ii) Within ten (10) days of the date that a party has submitted the
materials described in Section 18.2(c)(i) hereof, the other party may submit to
the expert:
(A) a description of the dispute;
(B) a statement of the party's position; and
(C) copies of any records supporting the party's position.
The expert shall consider any such information submitted by the
responding party within the period provided in Section 18.2(c)(ii) hereof and,
in the expert's discretion, may consider any additional information submitted by
either party at a later date.
(d) The parties shall not be entitled to apply for discovery of
documents, but shall be entitled to have access to the other party's relevant
records and to receive copies of the records submitted by the other party.
(e) Each party shall designate one person knowledgeable about the
issues in dispute who shall be available to the expert to answer questions and
provide any additional information requested by the expert. Except for such
person, a party shall not be required to, but may, provide oral statements or
presentations to the expert or make any particular individuals available to the
expert.
(f) Except as provided in Section 18.2(h) hereof with respect to the
payment of costs, the proceedings shall be without prejudice to any party and
any evidence given or statements made in the course of this process may not be
used against a party in any other proceedings. The process shall not be regarded
as an arbitration and the laws relating to commercial arbitration shall not
apply. Unless the parties agree in writing signed by both parties
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at the time the expert is selected that the decision of the expert will be
binding, the determination of the expert shall not be binding.
(g) When consideration of the dispute by an expert is initiated, the
expert shall be requested to provide a recommendation within fifteen (15) days
after the ten (10) day response period provided in Section 18.2(c)(ii) above has
run. If the expert's recommendation is given within such fifteen (15) day
Period, or if the expert's recommendation is given at a later time and neither
party has at such time initiated any other proceeding concerning the dispute,
the parties shall review and discuss the recommendation with each other in good
faith for a period of ten (10) days following delivery of the recommendation
before proceeding with any other actions.
(h) If a party does not accept the recommendation of the expert with
respect to the dispute, it may initiate arbitration proceedings in accordance
with Section 18.3 hereof, provided, however that prior to initiating the
arbitration proceedings it shall have paid all costs of the expert (including
the reimbursement of any costs paid to the expert by the other party) and all
out-of-pocket costs of the other party. Similarly if the expert has not
submitted its recommendation within the time period provided in Section 18.2(g)
hereof, a party may initiate arbitration proceedings in accordance with Section
18.3 hereof, provided that prior to initiating the arbitration proceedings it
shall have paid all costs of the expert (including the reimbursement of any
costs paid to the expert by the other party).
(i) Except as provided in Section 18.2(h) hereof, the costs of
engaging an expert shall be borne equally by the parties and each party shall
bear its own costs in preparing materials for, and making presentations to, the
expert.
(j) Without prejudice to the parties' rights to initiate arbitration
proceedings following the recommendation of the expert in accordance with
Section 18.2(h), the parties shall act in accordance with the recommendation of
the expert until resolution of the dispute by arbitration.
18.3 Arbitration. In the event a dispute arises between Owner and
Operator which is not resolved pursuant to Section 18.1 or 18.2 hereof, as
applicable, each party, as its sole remedy, other than mediation pursuant to the
terms of Section 18.2 hereof, for resolution of such dispute, shall have the
right to pursue arbitration pursuant to the terms hereof. All claims, disputes,
and other matters in question arising out of or relating to this Agreement or
the breach thereof and which are resolved by arbitration shall be decided by
arbitrators selected as hereinafter provided and shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then obtaining, unless the parties mutually agree otherwise. The
resolution of such disputes shall not delay Operator's performance of its
undisputed obligations under the term of this Agreement nor Owner's payment to
Operator for such Work. The arbitration shall be held in New York, New York, and
any arbitration demand must be filed with the American Arbitration Association
office located closest to New York, New York. If the claim or defense of either
party was without merit, the arbitrators may require that the party at fault pay
or reimburse the other party for (i) fees and expenses, including, attorneys and
expert fees and
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expenses, and (ii) reasonable out of pocket expenses incurred by the other party
in connection with. the arbitration proceedings.
18.4 Selection of Arbitrators. Each dispute shall be submitted to
three (3) arbitrators, one (1) arbitrator being selected by Owner, one (1)
arbitrator being selected by Operator, and the third arbitrator being selected
by the two (2) so selected. The party initiating the arbitration shall include
in its notification under Section 18.5 below the designation of its selected
arbitrator and the party receiving such notification shall designate its
arbitrator within fifteen (15) days thereafter and notify the initiating party
and its arbitrator of the selection. If the arbitrators selected by Owner and
Operator cannot agree on a dud arbitrator within fifteen (15) days after the
second arbitrator is selected, the third arbitrator shall be selected by the
American Arbitration Association. In the event the party receiving notification
of a demand for arbitration shall not have selected its arbitrator and given
notice thereof to the other party and its arbitrator within fifteen (15) days
after receiving such notification, such arbitrator shall be selected by the
American Arbitration Association. Should a vacancy arise because any arbitrator
dies, resigns, refuses to act or in the opinion of his fellow arbitrators
becomes incapable of performing his or her functions, the vacancy shall be
filled by the method by which that arbitrator was originally appointed.
18.5 Notice. Notice of demand for arbitration shall be filed in
writing with the other party to this Agreement and with the American Arbitration
Association. The demand shall be made within a reasonable time after the claim,
dispute or other matter in question has arisen. In no event shall the demand for
arbitration be made after the date when the applicable statute of limitations
would bar institution of a legal or equitable proceeding based on such claim,
dispute, or other matter in question; provided, however, any claims asserted by
Owner with respect to a breach of the warranty set forth in Section 7.1 hereof
shall be made within one (1) year after the termination of this Agreement.
18.6 Award. This agreement to arbitrate shall be specifically
enforceable under the prevailing arbitration law. The award rendered by the
arbitrators shall be final and judgment may be entered upon it in accordance
with applicable law in any court having jurisdiction thereof.
18.7 This, Article XVIII shall survive termination of this Agreement.
XIX.
CONFIDENTIALITY AND INTELLECTUAL PROPERTY
19.1 Confidential Information. Operator agrees to keep confidential
and not to disclose to any person for use for any purpose other than the
performance of the Work any written or other tangible information which is
marked or designated by Owner as confidential or proprietary (including
documents, computer records, specifications, formulae, evaluations, methods,
processes, technical descriptions, reports and other data, records and
information) provided to or created or acquired by Operator solely in the course
of the performance of the Work (collectively, "Owner Confidential Information").
Owner agrees to keep confidential and
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not to disclose to any person for use for any purpose other than in connection
with owner's ownership of the Facility any written or other tangible information
which is marked or designated by Operator as confidential or proprietary
(including documents, computer records, specifications, formulae, evaluations,
methods, processes, technical descriptions, reports and other data, records and
information) provided to it by Operator, but not provided to or created or
acquired by Operator solely in the course of the performance of the Work
(collectively, "Operator Confidential Information", and together with the Owner
Confidential information, the "Confidential Information"). Notwithstanding the
foregoing, Operator and Owner shall be entitled to disclose Owner Confidential
Information or Operator Confidential Information, as the case may be:
(i) to its respective directors, officers, employees, subcontractors,
agents or professional advisors to the extent necessary for
performance of its obligations under this Agreement or to its
auditors for the purposes of any audit of its accounts, provided
that it first obtains from any such person or entity to whom the
disclosure is to be made an agreement of confidentiality in favor
of the other party with respect to the Confidential Information
in question substantially on the terms of this Article XIX;
provided, however, in the case of employees, the party desiring
to disclose Confidential Information need not obtain a
confidentiality agreement from such employees, but shall make
such employees aware of, and require that such employees comply
with, the confidentiality obligations contained herein;
(ii) when required to do so by law or by or pursuant to the rules of
any order having the force of law of any court, association or
agency of competent jurisdiction or any governmental agency,
provided that the party seeking to disclose Confidential
Information fast informs the other party of its intent to
disclose such Confidential Information so that such other party
can seek a protective order or other equitable relief to prevent
disclosure of such Confidential Information;
(iii) to the extent that the Confidential Information has, except as a
result of breach of confidentiality by a party, become publicly
available or generally known to the public at the time of such
disclosure;
(iv) to the extent that a party has acquired the Confidential
Information from a third party who is not in breach of any
obligation as to confidentiality;
(v) to the extent that the Confidential Information has been
independently developed by employees who have not had access to
the Confidential Information of the other party; or
(vi) to any person with the prior written consent of the other party.
19.2 Return of Confidential Information. Upon termination of this
Agreement, Operator shall return to Owner the Owner Confidential Information
(including all copies thereof)
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within its possession or control and Owner Information (including all copies
thereof) within its possession or control.
19.3 Continuation of Confidentiality. The obligations under this
Article XIX shall continue for a period of three (3) years following the
termination of this
Agreement.
19.4 Ownership of Confidentiality Information. All owner Confidential
Information shall be and shall remain the property of Owner and all Operator
Confidential Information shall be and shall remain the property of Operator.
19.5 Intellectual Property.
(a) All of Owner's intellectual property rights shall remain the
property of Owner, but owner hereby grants to Operator an irrevocable, non-
exclusive, royalty-free, non-transferable license to use such intellectual
property to the extent that Operator requires use of such intellectual property
in connection with the performance of the Work during the term of this
Agreement.
(b) Operator hereby grants to Owner an irrevocable, non-exclusive,
royalty-free license to use any intellectual property rights owned by Operator
and required in connection with the Facility. Such license shall be non-
transferrable and limited for the use and benefit of the Facility, except that
Owner may assign the benefit of such license to Lender.
(c) Before entering into an agreement with a third party relating to
the supply of materials specifically created by such third party for the
Facility, Operator shall request that such third party grant licenses to
Operator and Owner (with rights to Owner to assign or sub-license to any person
appointed operator of the Facility) to use all intellectual property rights
which arise in connection with such materials. In addition, Operator shall use
reasonable efforts to procure that intellectual property rights owned or
developed by and parties and used by Operator in connection with the Facility be
licensed either (i) to both Operator and Owner or (ii) to Operator solely, but
with rights to sub-license such intellectual property rights to Owner.
(d) Owner shall have the right either to 01 assign all sub-licenses of
intellectual property rights granted to it or (ii) grant sub-licenses to any new
operator of the Facility in respect of intellectual property in respect of which
a sub-license has been granted to Owner; provided, however, any such sub-
licenses shall limit the use of intellectual property for the benefit of the
Facility
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XX.
MISCELLANEOUS
20.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey, without giving effect to
the conflict of laws principles thereof.
20.2 Severability. Every provision of this Agreement is intended to be
severable such that if any term or provision hereof is illegal or invalid for
any reason, such provision shall be severed from this Agreement and shall not
affect the validity of the remainder of this Agreement.
20.3 Entire Agreement. This Agreement constitutes the entire agreement
between Owner and Operator relating to the subject matter hereof and Supersedes
and replaces all prior and contemporaneous agreements and understandings not
incorporated herein by reference thereto, whether written or oral, and sets
forth all the representations, covenants and warranties upon which Owner and
Operator rely in entering into this Agreement.
20.4 Amendments. No amendment or modification hereof shall be valid or
binding upon the parties hereto unless evidenced in writing and signed by a duly
authorized representative of Owner and Operator and consented to by Lender.
20.5 Waiver. No failure by Owner to insist upon the strict performance
of any term, covenant or condition of this Agreement, or to exercise any right
or remedy upon breach of any provision, and no acceptance of payment or
performance during the continuation of any such breach, shall constitute a
waiver of any term, covenant or condition herein or a waiver of any subsequent
breach or default in the performance of any term, covenant or condition herein.
20.6 Original and Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original for all
purposes, but all of which shall constitute one and the same instrument.
20.7 Independent Contractor Operator. Shall perform its duties and
obligations hereunder as an independent contractor, and nothing contained herein
shall be deemed to create a relationship of employer/employee, master/servant,
agency (except as otherwise expressly set forth herein), partnership or joint
venture.
20.8 Limited Recourse. Any claim against Owner that may arise under
this Agreement shall be made only against, and shall be limited to the assets
of Owner, and no judgment, order or execution entered in any suit, action or
proceeding thereon shall be obtained or enforced against any partner or joint
venturer of Owner or the assets of such partner or joint venturer or any
incorporator, shareholder or other equity holder, employee, officer or director
thereof, whether acting individually or in a representative capacity hereunder
or in connection with the ownership, operation or Maintenance of the Facility
(or, in the case of such partners or joint
-60-
<PAGE>
venturers that are partnerships, of any partner thereof), or against any direct
or indirect parent, corporation or affiliate or any incorporator, shareholder or
other equity holder, employee, officer or director of any thereof, whether
acting individually or in a representative capacity hereunder or in connection
with the ownership, operation or maintenance of the Facility, for the purpose of
obtaining satisfaction of any payment of any amount owing under this Agreement.
20.9 Captions. The captions contained in this Agreement are for
convenience and reference only and in no way define, describe, extend or limit
the scope or intent of this Agreement or the intent of any provision contained
herein.
20.10 Exhibits. All Exhibits referenced in this Agreement shall be
incorporated into this Agreement by such reference and shall be deemed to be an
integral part of this Agreement.
20.11 Effectiveness of Agreement. This Agreement shall only become
effective upon the termination of the Existing O&M Agreement by Owner pursuant
to the terms of the Termination Agreement. If Owner does not elect to terminate
the Existing O&M Agreement pursuant to the Termination Agreement, then this
Agreement shall be null and void and of no force or effect.
-61-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed as of the date and year first above written.
OPERATOR:
GENERAL ELECTRIC COMPANY
By: /s/ A.C. White
---------------------------
Name: A.C. White
-------------------------
Title: Gen. Mgr-Global O&M
Services
------------------------
OWNER:
COGEN TECHNOLOGIES NJ VENTURE
BY: COGEN TECHNOLOGIES NJ.INC.,
its Managing Venturer
By: /s/ J.M. Bollinger
---------------------------
Name: J.M. Bollinger
-------------------------
Title: Sr. VP/COO
------------------------
By: ENRON COGENERATION FIVE
COMPANY
By: /s/ Tony Belcher
---------------------------
Name: Tony Belcher
-------------------------
Title: Manger - Operations
------------------------
-62-
<PAGE>
By: CEA BAYONNE, INC.
By: /s/ R. Dauria
---------------------------
Name: R. Dauria
-------------------------
Title: Vice President
------------------------
By: TEVCO/MISSION BAYONNE
PARTNERSHIP
By: TM Bayonne, Inc.
By: /s/ William James Murray
---------------------------
Name: William James Murray
-------------------------
Title: Senior Vice President
------------------------
-63-
<PAGE>
REVISED
TRANSMISSION
SERVICE
AND
INTERCONNECTION AGREEMENT
BETWEEN
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
AND
COGEN TECHNOLOGIES NJ VENTURE
Dated: April 27, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
----
RECITALS....................................................... 1
ARTICLE I DEFINITIONS.................................................... 6
ARTICLE II BASIC SERVICE.................................................. 13
ARTICLE III EXCESS SERVICE................................................. 14
ARTICLE IV PHASE-IN PERIOD................................................ 16
ARTICLE V INTERRUPTION, CURTAILMENT OR
REDUCTION OF SERVICE.......................................... 17
Section A Public Service System Conditions.................... 17
Section B Project Conditions.................................. 19
Section C Service Conditions.................................. 22
ARTICLE VI OPERATIONS COORDINATION........................................ 23
ARTICLE VII NET ELECTRICAL POWER OUTPUT SPECIFICATIONS..................... 26
ARTICLE VIII TERM........................................................... 27
ARTICLE IX EFFECTIVENESS AND ENFORCEABILITY............................... 28
ARTICLE X TRANSMISSION SERVICE CHARGES................................... 29
Section A...................................................... 29
Section B...................................................... 32
ARTICLE XI BILLING AND PAYMENT............................................ 33
ARTICLE XII METERING/RECORDS............................................... 35
ARTICLE XIII INTERCONNECTION FACILITY....................................... 41
Section A Design, Construction and Installation of
Interconnection Facility............................ 41
Section B Interconnection Facility Costs...................... 43
i
<PAGE>
TABLE OF CONTENTS
PAGE
----
Section C Letter of Credit for
Interconnection Facility Costs.................... 47
Section D Cancellation Costs.................................. 48
Section E Suspension by Venture............................... 50
Section F Decommission Costs.................................. 51
Section G Energization of Interconnection Facility............ 53
Section H Ownership, Operation and Maintenance
of Interconnection Facility....................... 53
Section I Use of Interconnection Facility..................... 54
Section J Repair/Replacement of Interconnection Facility...... 55
Section K Decommission of Interconnection Facility............ 56
Section L Easement(s) for Interconnection Facility............ 58
Section M Permits/Approvals for Interconnection Facility...... 60
ARTICLE XIV DEDICATION OF FACILITIES....................................... 62
ARTICLE XV REARRANGEMENT.................................................. 62
ARTICLE XVI COGENERATION FACILITY/SUBSTATION FACILITY...................... 63
ARTICLE XVII LIABILITY...................................................... 69
ARTICLE XVIII FORCE MAJEURE.................................................. 69
ARTICLE XIX MITIGATION OF DAMAGES.......................................... 70
ARTICLE XX INDEMNIFICATION................................................ 71
ARTICLE XXI INSURANCE...................................................... 73
ARTICLE XXII WARRANTIES..................................................... 74
ARTICLE XXIII EVENTS OF TERMINATION.......................................... 74
ARTICLE XXIV BREACH OF CONTRACT............................................. 76
ii
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE XXV ARBITRATION.................................................. 78
ARTICLE XXVI SPECIFIC PERFORMANCE......................................... 80
ARTICLE XXVII MODIFICATIONS................................................ 81
ARTICLE XXVIII ASSIGNMENT/TRANSFER.......................................... 82
ARTICLE XXIX CURE BY FINANCIER............................................ 83
ARTICLE XXX FINANCIER SECURITY AGREEMENTS................................ 86
ARTICLE XXXI DETERMINATION OF PSE&G COSTS................................. 86
ARTICLE XXXII STANDARD FOR PERFORMANCE..................................... 87
ARTICLE XXXIII STANDBY ELECTRIC SERVICE..................................... 87
ARTICLE XXXIV ENTIRE AGREEMENT............................................. 87
ARTICLE XXXV SUCCESSORS AND ASSIGNS....................................... 88
ARTICLE XXXVI CHOICE OF LAW................................................ 88
ARTICLE XXXVII CAPTIONS..................................................... 88
ARTICLE XXXVIII COUNTERPARTS................................................. 89
ARTICLE XXXIX MISCELLANEOUS................................................ 89
ARTICLE XL NOTICE OF AMENDMENTS TO PJM OR
MID-ATLANTIC AGREEMENTS.................................... 90
ARTICLE XLI RESERVATIONS................................................. 90
ARTICLE XLII NOTICES...................................................... 91
iii
<PAGE>
REVISED
TRANSMISSION SERVICE
AND
INTERCONNECTION AGREEMENT
This AGREEMENT, made and entered into as of this 27 day of April, 1987 by and
between PUBLIC SERVICE ELECTRIC AND GAS COMPANY, a New Jersey corporation
(hereinafter referred to as PSE&G), and COGEN TECHNOLOGIES NJ VENTURE
(hereinafter referred to as VENTURE), a joint venture by and among COGEN
TECHNOLOGIES NJ, INC., a Delaware corporation (hereinafter referred to as
COGEN), ENRON COGENERATION FIVE COMPANY, a Delaware corporation, CEA BAYONNE,
INC., a New Jersey corporation, PSVO BAYONNE, INC., a Delaware corporation and
TRANSCO COGENERATION COMPANY, a Delaware corporation (collectively referred to
herein as the VENTURERS).
RECITALS
WHEREAS, the VENTURERS have formed VENTURE, pursuant to the Partnership Act
of the State of New Jersey, for the purpose of constructing, owning and
operating the COGENERATION FACILITY at the property of Bayonne Industries, Inc.
and IMTT-Bayonne in Bayonne, New Jersey;
WHEREAS, VENTURE's application for certification of qualifying status
pursuant to 18 C.F.R. 292.207 was granted by the Federal Energy Regulatory
Commission (hereinafter referred to as the Commission or FERC) on October 29,
1986;
WHEREAS, VENTURE shall maintain the qualifying status of the COGENERATION
FACILITY during any term of this AGREEMENT;
<PAGE>
2
WHEREAS, VENTURE has advised PSE&G that it anticipates that the WINTER
SEASON electric rating of the COGENERATION FACILITY will be approximately
170,000 kilowatts;
WHEREAS, VENTURE has advised PSE&G that it anticipates that the SPRING/FALL
SEASON electric rating of the COGENERATION FACILITY will be approximately
161,000 kilowatts;
WHEREAS, VENTURE has advised PSE&G that it anticipates that the SUMMER
SEASON electric rating of the COGENERATION FACILITY will be approximately
156,000 kilowatts;
WHEREAS, VENTURE estimates that it will commence testing of PROJECT
equipment and facilities on or about April 12, 1988;
WHEREAS, VENTURE anticipates that the DATE OF COMMERCIAL OPERATION will be
on or about July 12, 1988;
WHEREAS, VENTURE anticipates that the DATE OF FULL COMMERCIAL OPERATION
will be on or about October 12, 1988;
WHEREAS, COGEN has an agreement with Jersey Central Power and Light Company
(JCP&L) entitled Agreement for Purchase of Electric Power dated October 29, 1985
wherein COGEN is obligated to sell to JCP&L and JCP&L is obligated to
<PAGE>
3
purchase from COGEN the NET ELECTRICAL POWER OUTPUT and associated NET
ELECTRICAL ENERGY produced by the COGENERATION FACILITY, originally stated as
approximately 125,000 kilowatts;
WHEREAS, COGEN has assigned to VENTURE all of COGEN'S rights, titles and
interests in and to the Agreement for Purchase of Electric Power;
WHEREAS, VENTURE advises that it is and has been negotiating an agreement
with JCP&L whereby VENTURE will be obligated to sell to JCP&L and JCP&L will be
obligated to purchase from VENTURE any NET ELECTRICAL POWER OUTPUT and
associated NET ELECTRICAL ENERGY produced by the COGENERATION FACILITY in excess
of the kilowatts of NET ELECTRICAL POWER OUTPUT which COGEN/VENTURE is otherwise
obligated to sell to JCP&L and JCP&L is otherwise obligated to purchase pursuant
to the Agreement for Purchase of Electric Power between COGEN and JCP&L dated
October 29, 1985;
WHEREAS, PSE&G is a public utility as defined in N.J.S.A. 48:2-13 and, as
such, is required by applicable statutes and regulations to furnish safe,
adequate and proper service to its retail and sale-for-resale customers and
further, to have and maintain its property, plant and equipment in such
condition as to enable it to do so;
WHEREAS, PSE&G owns and operates electric power transmission facilities
and, while VENTURE's planned PROJECT is neither connected thereto nor located in
the immediate vicinity thereof, the PROJECT will be located in an area which is
in proximity to PSE&G's electric power transmission facilities;
<PAGE>
4
WHEREAS, VENTURE has requested PSE&G to design, construct, install, operate
and maintain a single 138,000-volt underground transmission cable circuit and
associated terminal facilities (INTERCONNECTION FACILITY) so as to interconnect
the PROJECT with the electric power transmission facilities of PSE&G at PSE&G's
Bayonne Switching Station. In addition, VENTURE has requested PSE&G to receive
NET ELECTRICAL POWER OUTPUT and associated NET ELECTRICAL ENERGY produced by the
COGENERATION FACILITY and supplied to the RECEIPT POINT for DELIVERY TO JCP&L;
WHEREAS, JCP&L, owns and operates electric power transmission facilities
which are interconnected with the electric power transmission facilities of
PSE&G;
WHEREAS, PSE&G and JCP&L are members of the Pennsylvania-New Jersey-
Maryland Interconnection (PJM);
WHEREAS, PJM is a fully coordinated power pool which, pursuant to an
agreement executed by and among its members, affords to the member utilities,
for the benefit of their customers, reliable electric service at the lowest
possible cost;
WHEREAS, PSE&G has conducted engineering studies to ascertain the
feasibility of complying with VENTURE'S requests to design, construct, install,
operate and maintain the INTERCONNECTION FACILITY and to receive NET ELECTRICAL
POWER OUTPUT and associated NET ELECTRICAL ENERGY produced by the COGENERATION
FACILITY and supplied to the RECEIPT POINT for DELIVERY TO JCP&L;
<PAGE>
5
WHEREAS, PSE&G, as a result of the aforesaid engineering studies, has
determined that it is feasible to design, construct, install, operate and
maintain the INTERCONNECTION FACILITY and to receive NET ELECTRICAL POWER OUTPUT
and associated NET ELECTRICAL ENERGY produced by the COGENERATION FACILITY and
supplied to the RECEIPT POINT for DELIVERY TO JCP&L, over the term of this
AGREEMENT;
WHEREAS, PSE&G and JCP&L have or will have an operating agreement whereby
PSE&G and JCP&L have agreed or will agree that the DELIVERY TO JCP&L of NET
ELECTRICAL ENERGY received by PSE&G from the COGENERATION FACILITY at the
RECEIPT POINT for JCP&L's account pursuant to this AGREEMENT will be effected
through an adjustment by and between JCP&L and PSE&G of their hourly measured
interconnection energy interchange in an amount equal to the NET ELECTRICAL
ENERGY received by PSE&G at the RECEIPT POINT;
WHEREAS, PSE&G and VENTURE executed an agreement entitled Service and
Interconnection Agreement dated October 10, 1986;
WHEREAS, since October 10, 1986, PSE&G and VENTURE have continued
discussions with a view toward the adoption and execution of a revised agreement
incorporating changes to the October 10, 1986 Service and Interconnection
Agreement mutually agreeable to the parties;
NOW, THEREFORE, in consideration of the recitals and mutual covenants
contained herein, the parties hereto agree as follows:
<PAGE>
6
ARTICLE I
DEFINITIONS
The following term when used herein with capitalization shall have the
following meanings, unless a different meaning shall be expressly stated:
AGREEMENT means this Revised Transmission Service and Interconnection
Agreement between VENTURE and PSE&G.
BASIC SERVICE means the receipt by PSE&G at the RECEIPT POINT of a level of
kilowatts of NET ELECTRICAL POWER OUTPUT and associated NET ELECTRICAL ENERGY
for DELIVERY TO JCP&L in accordance with the Seasonal Schedule contained in
Article II of this AGREEMENT, as may be modified in accordance with Article II
of this AGREEMENT.
BILLING STATEMENT means the monthly statement of charges PSE&G submits to
VENTURE for payment, as determined in accordance with Article X of this
AGREEMENT.
CANCELLATION COSTS means the costs and/or liabilities PSE&G incurs in the
event that the supplier and/or contractor orders/agreements, made to install and
construct the INTERCONNECTION FACILITY, are cancelled or terminated.
CANCELLATION COST STATEMENT means the statement of costs and/or liabilities
which PSE&G estimates it will incur, at designated monthly intervals, in the
event that supplier and/or contractor orders/agreements, made to install and
construct the INTERCONNECTION FACILITY, are cancelled or terminated.
<PAGE>
7
COGENERATION FACILITY means the three gas turbines and waste heat boilers,
one steam turbine, synchronous generators and all appurtenant structures and
equipment to be constructed, installed, owned, operated and maintained by
VENTURE at the property of Bayonne Industries, Inc. and IMTT-Bayonne, Bayonne,
New Jersey, for the purpose of generating steam and electricity and other forms
of useful thermal output and having a seasonal electrical rating of 156,000
kilowatts in the SUMMER SEASON, 161,000 kilowatts in the SPRING/FALL SEASON and
170,000 kilowatts in the WINTER SEASON.
COMMERCIAL OPERATION means the production of electric power and energy by
any electric generation unit at the COGENERATION FACILITY and the supply of such
electric power and energy to PSE&G at the RECEIPT POINT for DELIVERY TO JCP&L.
COST EXPENDITURE STATEMENT means the statement reflecting the amount of
money PSE&G estimates it will expend each month during construction to pay the
costs associated with the design, construction and installation of the
INTERCONNECTION FACILITY and other interconnection tasks, the costs for which
are denominated in this AGREEMENT as costs associated with the design,
construction and installation of the INTERCONNECTION FACILITY.
CREDIT means an irrevocable Letter of Credit to be established by VENTURE
with ISSUER and issued to PSE&G, as beneficiary, pursuant to and in accordance
with the provisions of Article XIII of this AGREEMENT.
<PAGE>
8
DATE OF COMMERCIAL OPERATION means the date on which VENTURE synchronizes,
for the first time, any electric generation unit at the COGENERATION FACILITY
with the PUBLIC SERVICE SYSTEM.
DATE OF FULL COMMERCIAL OPERATION means the date the parties hereto
designate by mutual agreement as the date on which all electric generation units
at the COGENERATION FACILITY and the SUBSTATION FACILITY have been completed,
satisfactorily tested and inspected and are available for and capable of: (i)
production of electrical power and energy; and (ii) the supply thereof to PSE&G
at the RECEIPT POINT for DELIVERY TO JCP&L. Any agreement by PSE&G necessary to
initiate the DATE OF FULL COMMERCIAL OPERATION shall be given pursuant to and in
accordance with the provisions of Article XVI of this AGREEMENT.
DATE OF INITIAL OPERATION means the date on which PSE&G energizes the
INTERCONNECTION FACILITY pursuant to and in accordance with the provisions of
Article XIII, Section G of this AGREEMENT.
DECOMMISSION COSTS means the costs and/or liabilities PSE&G incurs in
connection with the removal or dismantlement of the INTERCONNECTION FACILITY
and/or associated facilities and/or equipment.
DELIVERY TO JCP&L means: (i) the hourly communication by PSE&G to JCP&L of
the amount of NET ELECTRICAL ENERGY produced by the COGENERATION FACILITY which
was received at the RECEIPT POINT by PSE&G for the account of JCP&L during the
previous hour; (ii) the simultaneous adjustment by PSE&G of its hourly measured
interconnection energy interchange in an amount equal to the NET ELECTRICAL
ENERGY so received; (iii) the simultaneous adjustment by
<PAGE>
9
JCP&L of its hourly measured interconnection energy interchange in an amount
equal to the NET ELECTRICAL ENERGY so reported to JCP&L by PSE&G.
EXCESS SERVICE means the receipt by PSE&G at the RECEIPT POINT of a level
of kilowatts of NET ELECTRICAL POWER OUTPUT and associated NET ELECTRICAL ENERGY
for DELIVERY TO JCP&L in excess of the maximum level of kilowatts of BASIC
SERVICE applicable for the season in which such excess level of kilowatts is
supplied to the RECEIPT POINT. The maximum level of kilowatts of BASIC SERVICE
applicable for any season will be determined in accordance with Article II.
FINANCIER means any individual(s) or entity(ies) lending money to VENTURE
for: (i) the construction of the PROJECT; (ii) the establishment and/or
maintenance of working capital requirements; and/or (iii) the refinance or take-
out of any such loan(s).
FULL COMMERCIAL OPERATION means the production of electric power and energy
by all the electric generation units at the COGENERATION FACILITY and the supply
of such electric power and energy to PSE&G at the RECEIPT POINT for DELIVERY TO
JCP&L.
INTERCONNECTION FACILITY means a single 138,000-volt underground
transmission cable circuit and associated terminal facilities to be designed,
constructed, installed, owned, operated and maintained by PSE&G to connect the
PROJECT with and to the PUBLIC SERVICE SYSTEM at PSE&G's Bayonne Switching
Station for the purpose of enabling PSE&G to receive NET ELECTRICAL POWER OUTPUT
and associated NET ELECTRICAL ENERGY from the COGENERATION
<PAGE>
10
FACILITY pursuant to the terms and conditions of this AGREEMENT. The Preliminary
Plan for the INTERCONNECTION FACILITY is set forth in Exhibit 1.
ISSUER means the commercial bank issuing the CREDIT.
LOAN AGREEMENT means the Construction Loan Agreement between Cogen
Technologies NJ Venture and General Electric Power Funding Corporation dated
September 8, 1986.
MONTH means calendar month commencing at 12:00.01 am. Eastern Time on the
first day of the calendar month and concluding at midnight Eastern Time on the
final day of the same calendar month.
NET ELECTRICAL ENERGY means the aggregate gross amount of electrical energy
in kilowatthours produced by any electric generation unit(s) at the COGENERATION
FACILITY less: (i) the electrical energy consumed for use by such facility; and
(ii) the electrical energy consumed in the transformation and transmission of
the electrical energy produced, if any, prior to the receipt of such electrical
energy by PSE&G at the RECEIPT POINT.
NET ELECTRICAL POWER OUTPUT means the aggregate gross amount of electrical
power in kilowatts produced by any electric generation unit(s) at the
COGENERATION FACILITY less: (i) the electrical power consumed for use by the
COGENERATION FACILITY; and (ii) the electrical power consumed in the
transformation and transmission of the electrical power produced, if any, prior
to the receipt of such electrical power by PSE&G at the RECEIPT POINT.
<PAGE>
11
OPERATIONAL EMERGENCY means the existence of a physical or operational
condition and/or the occurrence of an event on the PUBLIC SERVICE SYSTEM and/or
the INTERCONNECTION FACILITY which is imminently likely to endanger life or
property and/or impairs and/or imminently will impair: (i) PSE&G's ability to
discharge its statutory obligation(s) to provide safe, adequate and proper
service to its retail and sale-for-resale customers; and/or (ii) the safety
and/or reliability of the PUBLIC SERVICE SYSTEM and/or the INTERCONNECTION
FACILITY.
PHASE-IN SERVICE means the receipt by PSE&G at the RECEIPT POINT of a level
of kilowatts of NET ELECTRICAL POWER OUTPUT and associated NET ELECTRICAL ENERGY
for DELIVERY TO JCP&L during the Phase-In Period pursuant to and in accordance
with the provisions of Article IV of this AGREEMENT.
PROJECT means the COGENERATION FACILITY, SUBSTATION FACILITY and associated
facilities and equipment to be constructed, owned, operated and maintained by
VENTURE at the property of Bayonne Industries, Inc. and IMTTT-Bayonne, Bayonne,
New Jersey, for the purpose of generating, among other things, electric power
and energy.
PUBLIC SERVICE SYSTEM means the electric power generation, transmission,
subtransmission and distribution facilities owned and operated by PSE&G.
exclusive of the INTERCONNECTION FACILITY.
RECEIPT POINT, also referred to as POINT OF INTERCONNECTION, is the point
of physical connection of the PROJECT to the INTERCONNECTION FACILITY located at
the point at which the INTERCONNECTION FACILITY meets with and
<PAGE>
12
connects to the SUBSTATION FACULTY. The RECEIPT P0INT is identified on the
Preliminary Plan for the INTERCONNECTION FACILITY.
REQUIRED PERMIT means any permit, license or approval from any regulatory
or governmental body which is, in the reasonable judgment of PSE&G, required to
install, construct, own, operate and/or maintain the INTERCONNECTION FACILITY.
SERVICE means the rendition by PSE&G to VENTURE of PHASE-IN SERVICE only,
BASIC SERVICE only or BASIC SERVICE and EXCESS SERVICE pursuant to and in
accordance with this AGREEMENT.
SPRING/FALL SEASON means the months of March, April, May, October and
November.
SUBSTATION FACILITY means the facilities to be constructed, installed,
owned, operated and maintained by VENTURE at the property of Bayonne Industries,
Inc. and IMTT-Bayonne, Bayonne, New Jersey to connect the COGENERATION FACILITY
to the INTERCONNECTION FACILITY for the purpose of enabling VENTURE to supply to
PSE&G at the RECEIPT POINT, in a safe and reliable manner, NET ELECTRICAL POWER
OUTPUT and associated NET ELECTRICAL ENERGY produced by the COGENERATION
FACILITY.
SUMMER SEASON means the months of June, July, August and September.
WINTER SEASON means the months of December, January and February.
<PAGE>
13
ARTICLE II
BASIC SERVICE
PSE&G shall be obligated, as hereinafter defined, effective with the DATE
OF FULL COMMERCIAL OPERATION, to provide to VENTURE a maximum level of BASIC
SERVICE in accordance with the maximum level of BASIC SERVICE specified in the
following Seasonal Schedule:
SEASONAL SCHEDULE
-----------------
Season Maximum Level of BASIC SERVICE
------ ------------------------------
SUMMER SEASON 156,000 kilowatts
WINTER SEASON 170,000 kilowatts
SPRING/FALL SEASON 161,000 kilowatts
BASIC SERVICE shall be subject to interruption, curtailment or reduction only as
specified in Article V.
VENTURE shall have the right, upon notice to PSE&G consistent with the
provisions of this paragraph, to renominate a maximum level of BASIC SERVICE for
any season(s) at intervals hereinafter designated. VENTURE may renominate a
maximum level of BASIC SERVICE for any season, at such designated intervals,
within a range of ninety percent (90%) to one hundred and ten percent (110%) of
the maximum level of BASIC SERVICE specified in the Seasonal Schedule set forth
above (hereinafter referred to as the Renomination Band) for that season,
provided however, VENTURE shall not be permitted, at any time, to renominate a
maximum level of BASIC SERVICE for the WINTER SEASON in excess of 180,000
kilowatts. The Renomination Band within which VENTURE may renominate a maximum
level of BASIC SERVICE will be as follows: the Renomination Band for the SUMMER
SEASON will be 140,000 kilowatts to 172,000 kilowatts; the Renomination Band for
the WINTER SEASON will be 153,000 kilowatts to 180,000 kilowatts; the
Renomination Band for the SPRING/FALL SEASON will be 145,000 kilowatts to
177,000 kilowatts. VENTURE may make the initial
<PAGE>
14
renomination to be effective not later than eighteen (18) months from the DATE
OF FULL COMMERCIAL OPERATION (Initial Renomination). Subsequent renominations
may be made to be effective every third year thereafter (Successive
Renomination). At the time of any renomination VENTURE may renominate a maximum
level of BASIC SERVICE for any or all of the seasons. The maximum level of BASIC
SERVICE renominated for any season shall remain in effect as the maximum level
of BASIC SERVICE for such season unless and until a new maximum level of BASIC
SERVICE for that season is made effective pursuant to a renomination made in
accordance with the provisions of this Article.
In the event VENTURE elects to make a renomination, VENTURE shall provide
PSE&G with notice as follows: in the case of the Initial Renomination, VENTURE
shall notify PSE&G in writing of the renominated maximum level of BASIC SERVICE
for any season six (6) months prior to the effective date of the Initial
Renomination. In the case of any Successive Renomination, VENTURE shall notify
PSE&G in writing of the renominated maximum level of BASIC SERVICE for any
season one (1) year prior to the effective date of such Successive Renomination.
PSE&G shall not be obligated to provide BASIC SERVICE to VENTURE pursuant
to any renominated maximum level of BASIC SERVICE other than when and as
provided in this Article.
ARTICLE III
EXCESS SERVICE
Effective with the DATE OF FULL COMMERCIAL OPERATION, VENTURE may request
EXCESS SERVICE from PSE&G, and, if EXCESS SERVICE is requested, PSE&G shall use
best efforts, as hereinafter defined, to accommodate VENTURE's request. However,
PSE&G shall not be obligated in any way, at any time, to receive at the RECEIPT
POINT NET ELECTRICAL POWER OUTPUT in excess of 190,000
<PAGE>
15
kilowatts. EXCESS SERVICE shall be subject to interruption, curtailment or
reduction only as specified in Article V.
PSE&G's commitment, if any, to provide EXCESS SERVICE, pursuant to
VENTURE's request therefor, shall be limited to a commitment to provide such
EXCESS SERVICE for a period of one (1) MONTH in duration. For any MONTH in which
VENTURE requires EXCESS SERVICE, VENTURE shall make a request for same to PSE&G
by the first (1st) day of the preceding MONTH. PSE&G shall notify VENTURE by the
fifteenth (15th) day of the preceding MONTH of the amount, if any, of EXCESS
SERVICE PSE&G is able to provide to VENTURE for the succeeding MONTH. In the
event PSE&G is able to provide EXCESS SERVICE, PSE&G's commitment to provide
EXCESS SERVICE shall be limited to an obligation to provide EXCESS SERVICE, as
agreed to by PSE&G, solely for the succeeding MONTH. At the conclusion of such
succeeding MONTH, PSE&G's commitment and associated obligation for such
succeeding MONTH shall expire. In the event VENTURE desires to renew or resume
EXCESS SERVICE for any additional or other monthly period, VENTURE shall make a
request therefor as provided in this Article. PSE&G's ability to renew or resume
EXCESS SERVICE for any additional or other monthly period, the making of any
commitment by PSE&G and the nature and extent of any such commitment, will be
determined by PSE&G at that time, in accordance with the provisions of this
Article. Any request by VENTURE for EXCESS SERVICE and any decision by PSE&G
relative to such request shall be confirmed in writing by the other party within
ten (10) days of any request and decision, respectively.
PSE&G's best efforts to provide EXCESS SERVICE shall be contingent upon
PSE&G's ability to provide EXCESS SERVICE and such best efforts shall be
subordinate and subject to and must abide a determination by PSE&G that: (i) the
PUBLIC SERVICE SYSTEM is capable of receiving from the COGENERATION FACILITY NET
ELECTRICAL POWER OUTPUT in excess of the maximum level of BASIC SERVICE
<PAGE>
16
applicable for the MONTH for which the request is made; and/or (ii) the
rendition of EXCESS SERVICE is compatible to and does not interfere with or
impair PSE&G's ability to operate the PUBLIC SERVICE SYSTEM in a manner so as to
render safe, reliable, adequate, proper and economic service to its retail and
sale-for-resale customers. Except as otherwise provided in this AGREEMENT, PSE&G
shall not be obligated to: (i) construct, reinforce, replace or enlarge any
electric power generation, transmission, subtransmission or distribution
facilities; and/or (ii) adopt or engage in any extraordinary operating
practice(s), such as off-economic operation of generating units, in order to
meet or satisfy its best efforts commitment to accommodate VENTURE's requests
for EXCESS SERVICE.
ARTICLE IV
PHASE-IN SERVICE
VENTURE plans to implement a staged phase-in of the three gas turbine
generation units and the steam turbine generation unit at the COGENERATION
FACILITY. VENTURE anticipates that the staged phase-in will take approximately
six (6) months (hereinafter referred to as the Phase-In Period). The Phase-In
Period shall commence on the DATE OF COMMERCIAL OPERATION.
VENTURE further anticipates that during the Phase-In Period electric power
and energy will be produced at the COGENERATION FACILITY and supplied to PSE&G
at the RECEIPT POINT for DELIVERY TO JCP&L. PSE&G shall be obligated during the
Phase-In Period to receive at the RECEIPT POINT for DELIVERY TO JCP&L the
electric power and energy produced at the COGENERATION FACILITY and supplied to
the RECEIPT POINT; provided however, PSE&G shall not be obligated to receive at
the RECEIPT POINT for and during any MONTH prior to the DATE OF FULL COMMERCIAL
OPERATION a level of kilowatts in excess of the maximum level of
<PAGE>
17
kilowatts applicable for that MONTH in accordance with the Seasonal Schedule
contained in Article II.
The Phase-In Period shall expire not later than nine (9) months from the
DATE OF INITIAL OPERATION. Thereafter, and regardless of the status of the
staged phase-in process or the operational status of the electric generation
units at the COGENERATION FACILITY, the DATE OF FULL COMMERCIAL OPERATION shall
be deemed to have occurred for the purpose of: (i) calculating the monthly
charges VENTURE shall be obligated to pay to PSE&G in accordance with Article X
of this AGREEMENT; and, (ii) triggering the Primary Term of this AGREEMENT.
ARTICLE V
INTERRUPTION, CURTAILMENT OR REDUCTION OF SERVICE
SECTION A
PUBLIC SERVICE SYSTEM CONDITIONS
PHASE-IN SERVICE, BASIC SERVICE or BASIC SERVICE and EXCESS SERVICE, when a
commitment is made to provide EXCESS SERVICE, are intended by PSE&G to be
provided to VENTURE without interruption, curtailment or reduction. PSE&G shall
use best efforts to provide same without interruption, curtailment or reduction.
PSE&G shall use best efforts to provide same without interruption, curtailment
or reduction. However, PSE&G cannot and does not guarantee that PHASE-IN
SERVICE, BASIC SERVICE or BASIC SERVICE and EXCESS SERVICE, when a commitment is
made to provide EXCESS SERVICE, will be free from interruption, curtailment or
reduction. PHASE-IN SERVICE, BASIC SERVICE or BASIC SERVICE and EXCESS SERVICE,
when a commitment is made to provide EXCESS SERVICE, shall be subject to
interruption, curtailment or reduction as a consequence of any of the following
actions, operational conditions and/or events: (i) action(s) PSE&G must
institute to enable PSE&G to operate the PUBLIC SERVICE SYSTEM so as to
discharge its statutory
<PAGE>
18
obligations to provide safe, adequate and proper service to its retail and sale-
for-resale customers; (ii) action(s) PSE&G must institute to enable PSE&G to
discharge its obligations under the PJM Agreement; (iii) action(s) PSE&G must
institute to enable PSE&G to discharge its obligations under its Agreement with
the Mid-Atlantic Area Coordination Group; (iv) action(s) instituted on the
PUBLIC SERVICE SYSTEM by automatic control or actions PSE&G must institute by
manual control for the purpose of maintaining the overall safety and reliability
of or otherwise protecting the PUBLIC SERVICE SYSTEM and/or the INTERCONNECTION
FACILITY; (v) action(s) PSE&G must institute for the purpose of maintenance,
repair, improvement, reinforcement, relocation, rearrangement, replacement
and/or installation of any equipment or facilities on the PUBLIC SERVICE SYSTEM
and/or the INTERCONNECTION FACILITY or action(s) PSE&G must institute for the
purpose of the investigation and/or inspection of any such equipment or
facilities on the PUBLIC SERVICE SYSTEM and/or the INTERCONNECTION FACILITY; or
(vi) PSE&G experiencing an event of Force Majeure, as defined in Article XVIII;
provided however, PSE&G may interrupt, curtail or reduce SERVICE to VENTURE only
where, to the extent and for as long as such event(s), operational condition(s)
and/or action(s) requires or necessitates an interruption, curtailment or
reduction of SERVICE to VENTURE. Nothing contained in this Section A shall
permit PSE&G to interrupt, curtail or reduce SERVICE to VENTURE solely for
reasons of economic dispatch.
Where practicable, PSE&G shall give VENTURE advance notice of any
interruption, curtailment or reduction effected pursuant to this Section A, the
circumstances requiring or necessitating the interruption, curtailment or
reduction of SERVICE and, if able, the reasons therefor, and the extent and
duration thereof. In the event PSE&G is unable, for any reason, to give VENTURE
advance notice of such an interruption, curtailment or reduction of SERVICE,
PSE&G shall, as soon thereafter as practicable, contact VENTURE to confirm such
interruption, curtailment or reduction,
<PAGE>
19
explaining the circumstances requiring or necessitating the interruption,
curtailment or reduction, and, if able, furnish the reasons therefor and the
extent and duration thereof. At VENTURE's request, PSE&G shall provide written
notice to VENTURE explaining the circumstances requiring or necessitating any
interruption, curtailment or reduction of SERVICE effected pursuant to this
Section A.
In the event SERVICE is interrupted, curtailed or reduced by PSE&G for any
reason specified in this Section A, PSE&G shall use best efforts to resume
SERVICE to VENTURE as soon as practicable.
SECTION B
PROJECT CONDITIONS
PSE&G may interrupt, curtail or reduce SERVICE to VENTURE in the event
VENTURE fails to meet, satisfy or discharge its obligations under Articles VI,
VII, XI, or XVI, as such obligations are defined therein, provided however, any
such interruption, curtailment or reduction of SERVICE for or on account of
VENTURE's failure to meet, satisfy or discharge such obligations may only be
effected by PSE&G pursuant to and in accordance with the provisions of this
Section B.
In the event VENTURE fails to meet, satisfy or discharge its obligations
under the Articles specified in the preceding paragraph and, as a consequence, a
condition arises, a practice exists or an event occurs at the PROJECT which
creates an OPERATIONAL EMERGENCY, PSE&G shall have the right to interrupt,
curtail or reduce SERVICE to VENTURE without being obligated to provide to
VENTURE notice thereof and without being obligated to afford to VENTURE, prior
to any such interruption, curtailment or reduction of SERVICE, a right to cure
the precipitating cause of or the event, condition or practice which exists or
occurs (Cause); provided however, where practicable, PSE&G shall provide VENTURE
with advance notice of the interruption, curtailment or reduction, the
circumstances requiring or necessitating the
<PAGE>
20
interruption, curtailment or reduction and, if known, the reasons therefor. In
the event PSE&G is unable, for any reason, to give VENTURE advance notice of
such an interruption, curtailment or reduction of SERVICE, PSE&G shall, as soon
thereafter as practicable, contact VENTURE to confirm such interruption,
curtailment or reduction, and inform VENTURE of the circumstances requiring or
necessitating the interruption, curtailment or reduction of SERVICE and, if
able, furnish the reasons therefor and the extent and duration thereof. In the
event of such an interruption, curtailment or reduction, PSE&G shall be
obligated to resume SERVICE to VENTURE if, but only if, VENTURE has corrected or
remedied the Cause which necessitated the interruption, curtailment or
reduction.
In the event VENTURE fails to meet, satisfy or discharge its obligations
under the Articles specified in the first paragraph of this Section B and, as a
consequence, a condition arises, a practice exists or an event occurs at the
PROJECT which, although it does not create an OPERATIONAL EMERGENCY, if
permitted to continue or reoccur, may, in the reasonable judgment of PSE&G,
result in the creation of an OPERATIONAL EMERGENCY, PSE&G shall have the right
to interrupt, curtail or reduce SERVICE to VENTURE, provided however, prior to
effecting any interruption, curtailment or reduction of SERVICE, PSE&G shall
notify VENTURE of the occurrence or existence thereof and afford to VENTURE a
right to correct or remedy the Cause. VENTURE shall have thirty (30) days from
receipt of PSE&G's notice: (i) to correct or remedy the Cause; or (ii) in the
event such Cause cannot be identified and/or remedied and/or corrected within
such thirty (30) days, to submit to PSE&G, for its approval, a plan, and
timetable for implementation thereof, setting forth specific actions VENTURE
will take to correct or remedy the Cause. In the event the Cause cannot be
identified and/or remedied and/or corrected within such thirty (30) days; and,
(i) VENTURE fails to submit a plan within such period to correct or remedy the
Cause; or, (ii) a plan is submitted within such period, and VENTURE fails to
exercise best efforts
<PAGE>
21
thereafter to implement such plan, PSE&G shall have the right thereafter,
on reasonable notice to VENTURE, to interrupt, curtail or reduce SERVICE to
VENTURE. However, if, during the pendency of any cure period afforded to VENTURE
pursuant to this Section B, the Cause creates an OPERATIONAL EMERGENCY, PSE&G
may thereafter interrupt, curtail or reduce SERVICE to VENTURE.
Any notice PSE&G is obligated to provide to VENTURE pursuant to the
provisions of the preceding paragraph of this Section 8 shall be in writing.
Likewise, any plan VENTURE is obligated to submit to PSE&G pursuant to the
provisions of the preceding paragraph of this Section B shall also be in
writing.
Regardless of the existence or potential for creation of an OPERATIONAL
EMERGENCY on the PUBLIC SERVICE SYSTEM and/or the INTERCONNECTION FACILITY,
PSE&G may interrupt, curtail or reduce SERVICE to VENTURE for and/or on account
of VENTURE's failure to meet or discharge its obligations under Article XI to
pay any BILLING STATEMENT when due. In the event such a right to interrupt,
curtail or reduce SERVICE to VENTURE arises, PSE&G shall provide written notice
to VENTURE of its intention to interrupt, curtail or reduce SERVICE, stating the
reasons therefor, prior to effecting any interruption, curtailment or reduction.
VENTURE shall have thirty (30) days from the date of the notice to cure the
precipitating cause. In the event VENTURE fails to cure the precipitating cause
within such thirty (30) day period, PSE&G may thereafter interrupt SERVICE to
VENTURE.
Except as otherwise provided in this Section B, in the event PSE&G
interrupts SERVICE to VENTURE for any reason specified in paragraphs three and
five of this Section B, PSE&G shall be obligated to resume SERVICE to VENTURE
if, but only if, VENTURE has, as applicable, either corrected or remedied the
precipitating cause of or the event, practice or condition which necessitated
the interruption, curtailment or reduction of SERVICE or demonstrates to PSE&G
that VENTURE has identified the precipitating cause of the event, practice or
condition which necessitated
<PAGE>
22
the interruption, curtailment or reduction of SERVICE and immediately thereafter
commences a bona fide effort, pursuant to a plan, to remedy or correct same;
provided however, if the interruption was triggered as a consequence of
VENTURE's failure to meet or discharge its obligation under Article X1, PSE&G
shall have no obligation to resume SERVICE to VENTURE unless and until such
obligation is met or discharged.
SECTION C
SERVICE CONDITIONS
PSE&G shall not be obligated at any time to receive at the RECEIPT POINT a
level of NET ELECTRICAL POWER OUTPUT in excess of the maximum level of SERVICE
applicable for the MONTH in which same is received pursuant to and in accordance
with the term and conditions of this AGREEMENT. In the event VENTURE supplies to
the RECEIPT POINT, at any time, a level of NET ELECTRICAL POWER OUTPUT in excess
of the level of SERVICE PSE&G is then obligated to provide under this AGREEMENT,
PSE&G shall have the right to request VENTURE, and if so requested, VENTURE
shall have the obligation to reduce, as soon as practicable after any such
request, the supply of NET ELECTRICAL POWER OUTPUT to PSE&G at the RECEIPT
POINT to a level consistent with the level of SERVICE PSE&G is then obligated
to provide to VENTURE under this AGREEMENT. In the event VENTURE is supplying to
PSE&G at the RECEIPT POINT a level of NET ELECTRICAL POWER OUTPUT in excess of
the level of SERVICE PSE&G is then obligated to provide to VENTURE pursuant to
this AGREEMENT and VENTURE fails to reduce the supply of NET ELECTRICAL POWER
OUTPUT to the level of SERVICE PSE&G is then obligated or then willing to
provide on some limited basis and/or for some limited period, defined or
otherwise, whichever level is greater, pursuant to PSE&G's direction, PSE&G
shall have the right to interrupt, curtail or reduce SERVICE to VENTURE. In the
event
<PAGE>
23
PSE&G interrupts, curtails or reduces SERVICE to VENTURE pursuant to the
provisions of this Section C, PSE&G shall be obligated to resume SERVICE to
VENTURE if, but only if, VENTURE commits to use best efforts thereafter to
control its supply to the RECEIPT POINT consistent with the level of SERVICE
PSE&G is then obligated or then willing, whichever is greater, to provide to
VENTURE.
ARTICLE VI
OPERATIONS COORDINATION
Effective with the DATE OF INITIAL OPERATION and during any term of this
AGREEMENT, VENTURE shall use best efforts to coordinate the operation of the
PROJECT with the operation of the PUBLIC SERVICE SYSTEM and the INTERCONNECTION
FACILITY. To discharge its best efforts obligation to coordinate operation of
the PROJECT with the PUBLIC SERVICE SYSTEM and the INTERCONNECTION FACILITY,
VENTURE shall: (i) use SERVICE with due regard for the safety, security and
reliability of the PUBLIC SERVICE SYSTEM and/or the INTERCONNECTION FACILITY;
(ii) maintain a power factor at or as near unity as practicable at the POINT OF
INTERCONNECTION unless requested otherwise by PSE&G; (iii) control its voltage
and speed to values acceptable to PSE&G consistent with sound utility practice;
(iv) coordinate its relaying and fusing so as to conform with PSE&G's system
protection practices, in effect from time to time; (v) maintain the PROJECT in a
safe and reliable operating condition; (vi) coordinate maintenance and/or repair
activities for the PROJECT with PSE&G, where such maintenance and/or repair
activities may affect or impair operation of the PUBLIC SERVICE SYSTEM and/or
the INTERCONNECTION FACILITY; (vii) submit to PSE&G the monthly schedules and
estimates required by this Article; and, (viii) perform such other actions, as
may be reasonably requested by PSE&G, to enable PSE&G to (a) operate the PUBLIC
SERVICE
<PAGE>
24
SYSTEM and INTERCONNECTION FACILITY in a safe and reliable manner; and, (o)
operate the PUBLIC SERVICE SYSTEM so as to discharge PSE&G's statutory
obligations to provide safe, adequate and proper service to its retail and sale-
for-resale customers.
As of the DATE OF FULL COMMERCIAL OPERATION, VENTURE shall provide to PSE&G
by the first (1st) day of each MONTH the following:
(i) an hourly schedule of the estimated NET ELECTRICAL POWER OUTPUT
VENTURE plans to supply to the RECEIPT POINT for receipt by PSE&G in
the succeeding MONTH;
(ii) an estimate of the generation of NET ELECTRICAL ENERGY which VENTURE
plans to supply to the RECEIPT POINT for receipt by PSE&G in the
succeeding MONTH;
(iii) an estimate of the generation of NET ELECTRICAL ENERGY which VENTURE
plans to supply to the RECEIPT POINT for receipt by PSE&G for the
succeeding twelve (12) MONTHs;
(iv) a schedule of planned maintenance and/or repair activities for the
succeeding twelve (12) MONTHs; and
(v) the names and telephone numbers of responsible management level
employees for contact by PSE&G personnel at any time during the
succeeding MONTH relative to any matter arising out of, relating to,
or resulting from PSE&G's obligation to provide SERVICE to VENTURE
under this AGREEMENT.
VENTURE shall use best efforts to conduct its operations in accordance with
the data and information submitted to PSE&G as required in the preceding
<PAGE>
25
paragraph, provided however, any deviation(s) in the COGENERATION FACILITY's
operations necessitated by and as a consequence of unanticipated occurrences,
conditions or events will not constitute a breach of this AGREEMENT; provided
further however, VENTURE will provide to PSE&G, where and when able, advance
notice, in a timely manner, of any such deviation(s), of a material nature, in
the COGENERATION FACILITY's operations, and if requested, the reasons therefor.
Pursuant to and consistent with VENTURE's obligation to coordinate
operation of the PROJECT with the operation of the PUBLIC SERVICE SYSTEM and the
INTERCONNECTION FACILITY, VENTURE shall install and maintain, at its expense,
during any term of this AGREEMENT, a telephone line reserved for communication
by and between PSE&G's operating personnel and VENTURE's operating personnel.
PSE&G may request, and, when requested, VENTURE shall use best efforts to
provide reactive power, leading or lagging, from the COGENERATION FACILITY up to
the operating limits of the COGENERATION FACILITY to the extent that it does not
require a reduction in NET ELECTRICAL POWER OUTPUT and further, in the event of
an OPERATIONAL EMERGENCY, PSE&G may request and, if PSE&G makes such a request,
VENTURE shall use best efforts to provide same up to the operating limits of the
COGENERATION FACILITY, whether or not same requires a reduction in NET
ELECTRICAL POWER OUTPUT.
PSE&G shall provide to VENTURE, on or before December 31 of each year, a
schedule of planned maintenance and/or repair activities for the PUBLIC SERVICE
SYSTEM and/or the INTERCONNECTION FACILITY for the succeeding twelve (12)
months (hereinafter referred to as M/R Schedule) which, in the judgment of
PSE&G, might interfere with or impair the operation of the COGENERATION
FACILITY. PSE&G shall use best efforts to schedule any such planned maintenance
and/or repair activities for the SPRING/FALL SEASON. PSE&G shall use best
efforts to adhere to
<PAGE>
26
any M/R Schedule furnished or, in the event it is unable to adhere to such M/R
Schedule, use best efforts to coordinate with VENTURE any charges to such M/R
Schedule and/or to communicate any changes in such M/R Schedule to VENTURE in a
timely manner. However, in view of PSE&G's statutory obligations to render safe,
adequate and proper service to its retail and sale-for-resale customers, any M/R
Schedule provided to VENTURE pursuant to this paragraph shall not obligate PSE&G
in any way in connection with the scheduling and/or implementation of PSE&G's
maintenance and/or repair activities for the succeeding twelve (12) months. The
scheduling and actual implementation of maintenance and/or repair activities
for any such facility/equipment during any such twelve (12) month period shall
remain within the sole discretion of PSE&G.
ARTICLE VII
NET ELECTRICAL POWER OUTPUT SPECIFICATIONS
The NET ELECTRICAL POWER OUTPUT supplied by VENTURE to the RECEIPT POINT
for receipt by PSE&G during the term of this AGREEMENT shall be at a nominal
voltage of 138,000-volts, 60 hertz, balanced three-phase alternating current
produced by a synchronous generator(s) equipped with automatic voltage
regulation and automatic speed control. The NET ELECTRICAL POWER OUTPUT shall be
free from harmonics which would interfere with PSE&G's metering accuracy, the
PUBLIC SERVICE SYSTEM, or the quality of PSE&G's service to its retail and sale-
for-resale customer loads. In no event shall the operation of the COGENERATION
FACILITY result in total harmonic distortion, as defined by the IEEE Standard
519-1981, as revised, greater than five percent (5%) of the fundamental
component measured at the POINT OF INTERCONNECTION.
<PAGE>
27
ARTICLE VIII
TERM
PSE&G shall provide SERVICE to VENTURE for an initial term of twenty (20)
years (hereinafter referred to as the Primary Term). Except as otherwise
provided in this AGREEMENT, the Primary Term shall commence on the DATE OF FULL
COMMERCIAL OPERATION. The Primary Term shall expire on the earlier of twenty
(20) years to the day of the DATE OF FULL COMMERCIAL OPERATION or the date the
DATE OF FULL COMMERCIAL OPERATION was deemed to have occurred, if applicable.
Upon the expiration of the Primary Term, this AGREEMENT shall automatically
be extended for a succeeding term of ten (10) years (hereinafter referred to as
the Subsequent Term), unless either party elects to terminate this AGREEMENT
effective with and at the time the Primary Term expires. Such termination shall
be valid only if the party electing to terminate this AGREEMENT provides written
notice to the other party of that party's intent to terminate not later than
three (3) years prior to the date of expiration of the Primary Term. The
Subsequent Term, if any, shall commence immediately upon expiration of the
Primary Term, as defined in the preceding paragraph, and shall expire thirty
(30) years to the day of the DATE OF FULL COMMERCIAL OPERATION.
In the event a party elects, consistent with the provisions of the
preceding paragraph, to terminate this AGREEMENT at the expiration of the
Primary Term, this AGREEMENT and each party's obligation(s) hereunder shall
automatically terminate as of the effective date of expiration of the Primary
Term. In the event the AGREEMENT is extended for a Subsequent Term, this
AGREEMENT and each party's obligation(s) hereunder shall automatically terminate
as of the date of expiration of the Subsequent Term.
<PAGE>
28
ARTICLE IX
EFFECTIVENESS AND ENFORCEABILITY
This AGREEMENT represents a negotiated agreement between the parties, and
the charges and term and conditions contained herein are acceptable to each. It
is understood by the parties that this AGREEMENT must be filed at and accepted
for filing by the FERC. Notwithstanding the requirement for FERC review and
acceptance for filing, this AGREEMENT shall become effective and enforceable, as
between the parties, upon execution and pending a filing at and review by the
FERC, provided however, that the provisions relative to transmission service
shall become effective and enforceable only after FERC acceptance for filing
without condition or modification thereof. In the event the FERC accepts this
AGREEMENT for filing subject to refund, such FERC acceptance shall not be deemed
as a condition or modification for the purposes of effectiveness of this
AGREEMENT under this Article.
In connection with any FERC review of this AGREEMENT as initially filed, in
the event the FERC modifies any term or condition, alters any charge(s)
contained in this AGREEMENT or in any way conditions its approval of this
AGREEMENT, and any party determines that it is adversely affected by such FERC
action and/or decision the parties hereby agree to promptly resume negotiations
in good faith, in an effort to reach agreement on a charge for SERVICE or on
terms and conditions mutually agreeable to the parties relative to the subject
matter of this AGREEMENT. If no agreement is reached within thirty (30) days of
such FERC action and/or decision any party shall have the right to terminate
or cancel this AGREEMENT by filing written notice of cancellation or termination
(hereinafter referred to as Notice of Cancellation) with the FERC and serving a
copy thereof on the other party. Any such Notice of Cancellation may be filed
after such thirty (30) day period but no later than forty-five (45) days after
such FERC decision is final and not subject to any further administrative or
judicial review; provided however, neither party shall be obligated to seek
rehearing
<PAGE>
29
and/or judicial review of any FERC decision. In the event any party files a
Notice of Cancellation, the parties hereto agree that the cancellation or
termination shall become effective and the parties' obligations under this
AGREEMENT shall terminate sixty (60) days after the filing of the Notice of
Cancellation or at such earlier date as otherwise ordered by the FERC.
PSE&G shall use best efforts to file this AGREEMENT with the FERC within
ninety (90) days of execution of this AGREEMENT and after filing same the
parties hereto agree to take such action, as may be appropriate, to expedite
FERC approval thereof.
ARTICLE X
TRANSMISSION SERVICE CHARGES
SECTION A
Except as otherwise specifically provided in this AGREEMENT, effective with
the DATE OF FULL COMMERCIAL OPERATION, VENTURE shall be obligated to pay to
PSE&G the sum of the charges contained in Subparagraphs A, B and C below, in
accordance with the billing and payment procedures set forth in Article XI:
A. a monthly demand charge equal to seventy-three cents ($.73) per
kilowatt times the level of kilowatts of BASIC SERVICE PSE&G was
obligated to provide to VENTURE during the MONTH for which the billing
is being made in accordance with the Seasonal Schedule set forth in
Article II (as adjusted for any renomination of BASIC SERVICE effected
consistent with Article II). In accordance with such Seasonal Schedule
the demand charge VENTURE shall be obligated to pay to PSE&G for any
MONTH is as set
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30
forth in the Demand Charge Payment Schedule set forth below:
DEMAND CHARGE PAYMENT SCHEDULE
------------------------------
Month Demand Charge*
----- --------------
January $124,100
February 124,100
March 117,530
April 117,530
May 117,530
June 113,880
July 113,880
August 113,880
September 113,880
October 117,530
November 117,530
December 124,100
*The demand charge for any month will be
adjusted to reflect any renomination of
BASIC SERVICE effected consistent with
Article II.
B. a monthly demand charge equal to seventy-three cents ($.73) per kilowatt
times the greater of the following number of kilowatts:
(i) the number of kilowatts of EXCESS SERVICE, if any, which PSE&G
committed to provide to VENTURE during the MONTH for which the
billing is being made pursuant to and consistent with Article III;
(ii) the greatest average number of kilowatts of NET ELECTRICAL POWER
OUTPUT, if any, in excess of the level of kilowatts of BASIC
SERVICE PSE&G was obligated to provide to VENTURE during the MONTH
for which the billing is being made in accordance with the Seasonal
Schedule set forth in Article II,
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31
received by PSE&G at the RECEIPT POINT during any fifteen (15)
minute interval in such preceding MONTH;
C. point two eight mills ($.00028) per kilowatthour times the number of
kilowatthours of NET ELECTRICAL ENERGY received by PSE&G at the RECEIPT
POINT during the MONTH for which the billing is being made.
If, as a result of an event of Force Majeure as defined in Article XVIII,
an electric generation unit at the PROJECT is out of operation for at least
thirty (30) consecutive days (hereinafter referred to as Qualifying Outage),
VENTURE's demand charge payment for any MONTH which includes any portion of such
Qualifying Outage shall be adjusted, if necessary, and the amount of such
payment shall be the sum of the amounts determined as follows: (i) during the
period of any MONTH when no Qualifying Outage exists, the demand charge payment
for such period shall be determined by multiplying the sum of the charges
contained in subparagraphs A and B of this Article X, as applicable, by a
fraction, the numerator of which is the number of hours during which there was
no Qualifying Outage and the denominator of which is the number of hours in the
MONTH; (ii) during the period of any MONTH when a Qualifying Outage exists, the
demand charge payment for such period shall be determined by multiplying the
demand charge specified in this Article X by the greatest average number of
kilowatts of NET ELECTRICAL POWER OUTPUT during any fifteen (15) minute interval
registered on PSE&G's electricity recording meter during such Qualifying Outage,
and multiplying that result by a fraction, the numerator of which is the number
of hours during which the Qualifying Outage exists and the denominator is the
number of hours in the MONTH. PSE&G shall make any demand charge adjustment due
VENTURE for a Qualifying Outage required by application of the provisions of
this
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32
paragraph in the BILLING STATEMENT for the MONTH(s) following the MONTH in which
the entitlement to such adjustment matures.
In the event SERVICE is interrupted, curtailed or reduced by PSE&G during
any MONTH for any reason, other than for any of the reasons specified in
Sections B and C of Article V, the demand charge VENTURE was obligated to pay
for such MONTH pursuant to this Section A will be abated by multiplying the
demand charge by the quantity one (1) minus a fraction, the numerator of which
is the number of kilowatts by which the level of SERVICE was reduced, times the
number of hours during which SERVICE was reduced and the denominator of which is
the level of SERVICE committed to by PSE&G, times the number of hours in the
MONTH.
The charges specified in Subparagraphs A, B and C of this Section A shall
be subject to change as specified in Article XXVII.
SECTION B
Effective with the DATE OF COMMERCIAL OPERATION and solely during the
Phase-In Period, VENTURE shall pay to PSE&G one point two eight mills ($.00128)
times the number of kilowatthours of NET ELECTRICAL ENERGY of PHASE-IN SERVICE
received by PSE&G at the RECEIPT POINT during any MONTH in the Phase-In Period.
The charge methodology set forth in this Section shall have applicability solely
during the Phase-In Period.
In the event that the DATE OF FULL COMMERCIAL OPERATION shall be deemed to
have occurred, as specified in Article IV, VENTURE shall be obligated to pay to
PSE&G monthly, until the actual DATE OF FULL COMMERCIAL OPERATION, the sum of
the charges in Subparagraphs (i) and (ii) below:
(i) a monthly demand charge for the MONTH in which the billing is made
determined in accordance with the Demand Charge Payment Schedule set
forth in Section A;
<PAGE>
33
(ii) point two eight mills ($.00028) times the number of kilowatthours of
NET ELECTRICAL ENERGY received by PSE&G at the RECEIPT POINT during
the MONTH for which the billing is made.
ARTICLE XI
BILLING AND PAYMENT
After the DATE OF COMMERCIAL OPERATION, PSE&G snail read its electricity
recording meter(s) at the SUBSTATION FACILITY monthly in connection with making
its determination of the charges to be billed to VENTURE for any MONTH in
accordance with the provisions of Article X and shall thereafter prepare and
present to VENTURE, on or before the tenth (10th) day of the MONTH, a BILLING
STATEMENT for payment. VENTURE shall pay each BILLING STATEMENT within thirty
(30) days from the date of receipt but not later than the tenth (10th) day of
the succeeding MONTH. If presentation of a BILLING STATEMENT is delayed by
PSE&G and/or is received by VENTURE after the tenth (10th) day of the MONTH,
then the time for payment shall be extended for a period of time equivalent to
the delay, provided however, VENTURE shall be obligated to establish any delay
in the receipt of any BILLING STATEMENT by appropriate documentation. The
BILLING STATEMENT shall contain a breakdown of the applicable charge components
billed to VENTURE in accordance with the provisions of Article X. VENTURE shall
remit payment to PSE&G for any BILLING STATEMENT to the department designated on
the BILLING STATEMENT.
In the event VENTURE fails to pay the entire amount of any BILLING
STATEMENT or other billing submitted by PSE&G under this AGREEMENT, when such
amount is due, interest shall accrue on the unpaid portion of such BILLING
<PAGE>
34
STATEMENT or other billing, from the due date to the date of payment, which
interest shall accrue at a rate per annum equal to three percent (3%) above
the prime rate of the Chase Manhattan Bank, N.A. or its successor in effect as
of the payment due date. VENTURE shall pay the interest charge on any such
unpaid BILLING STATEMENT or other billing or unpaid portion thereof when and as
billed by PSE&G.
PSE&G shall provide to VENTURE, upon a timely request therefor,
documentation and/or data available to PSE&G to enable VENTURE to verify the
accuracy of any BILLING STATEMENT or other billing. However, any such request by
VENTURE shall not extend the due date of or extend, postpone or otherwise affect
VENTURE's obligation to pay the associated BILLING STATEMENT or other billing.
In the event VENTURE disputes any BILLING STATEMENT or other billing,
VENTURE shall pay to PSE&G the entire amount thereof, when due, and shall
together with the payment thereof identify and present the dispute in writing
and submit documentation substantiating any claim made relative to the dispute
identified. Upon receipt of notice of the dispute and the supporting
documentation, PSE&G shall have thirty (30) days (Period) from receipt of such
notice to resolve the dispute with VENTURE. In the event the dispute is not
resolved within the Period, either party may submit the matter to arbitration
for resolution in accordance with Article XXV. The amount of a BILLING STATEMENT
or other billing disputed by VENTURE, in accordance with the provisions of this
paragraph, which is ultimately determined to be due and owing by PSE&G to
VENTURE and which is not refunded to VENTURE on or prior to expiration of the
Period shall, until payment, accrue interest, as of the last day of such Period,
at a rate per annum equal to three percent (3%) above the prime rate of the
Chase Manhattan Bank, N.A., or its successor in effect as of that date.
<PAGE>
35
ARTICLE XII
METERING/RECORDS
PSE&G shall install, own, operate and maintain an electricity recording
meter at the SUBSTATION FACILITY which, in the judgment of PSE&G, is required or
necessary to enable PSE&G to make an accurate measurement of the quantity of NET
ELECTRICAL POWER OUTPUT and associated NET ELECTRICAL ENERGY received at the
RECEIPT POINT from the COGENERATION FACILITY. The electricity recording meter
shall be of a type suitable for interconnection billing purposes. The
electricity recording meter, as installed, shall have full load and light load
"as left" accuracies that do not deviate more than (plus or minus) 0.3% from
100%. The lag load "as left" accuracy shall be within 0.5% of the full load
accuracy. PSE&G shall operate and maintain such electricity recording meter so
as to assure, to the maximum extent practicable, that such meter provides an
accurate record of the quantities supplied to and received by PSE&G at the
RECEIPT POINT from the COGENERATION FACILITY.
PSE&G shall designate, select and specify all associated electricity
recording equipment (Associated Equipment) required by PSE&G to make measurement
of the NET ELECTRICAL POWER OUTPUT and associated NET ELECTRICAL ENERGY supplied
by VENTURE to the RECEIPT POINT, including but not limited to current
transformers, potential transformers, conduits, cables and accessories. PSE&G
shall purchase and arrange for the delivery of such Associated Equipment to
VENTURE at the PROJECT for installation by VENTURE at VENTURE's expense. PSE&G
shall own, operate and maintain such Associated Equipment.
The costs of the electricity recording meter and Associated Equipment
described in the preceding two paragraphs shall be paid by VENTURE as a cost
associated with the design, construction and installation of the INTERCONNECTION
FACILITY as provided in and in accordance with Article XIII.
<PAGE>
36
PSE&G shall have the right to secure and safeguard the electricity
recording meter and Associated Equipment installed and maintained at the
SUBSTATION FACILITY. Neither VENTURE nor any person other than PSE&G, shall be
permitted to operate, maintain repair, alter, remove, replace, rearrange,
reconstruct, relocate, tamper or interfere in any way with said meter or
Associated Equipment.
Unless otherwise agreed to by PSE&G and/or except as otherwise provided in
this AGREEMENT, PSE&G's electricity recording meter shall be utilized for the
determination of the monthly charges reflected in any BILLING STATEMENT
submitted to VENTURE for payment under this AGREEMENT.
VENTURE and/or JCP&L may install, own, operate and maintain, at their own
expense, an electricity recording meter and Associated Equipment at the
SUBSTATION FACILITY for measuring and recording the quantity of NET ELECTRICAL
POWER OUTPUT and associated NET ELECTRICAL ENERGY received by PSE&G at the
RECEIPT POINT from the COGENERATION FACILITY; provided that the installation,
operation and/or maintenance of such equipment does not utilize or connect to
PSE&G's electricity recording meter or Associated Equipment and does not
interfere, in any way, with the operation of such meter or equipment.
Unless otherwise agreed to by PSE&G and/or except as otherwise provided in
this AGREEMENT, the electricity recording meter installed and maintained by
VENTURE and/or JCP&L at the SUBSTATION FACILITY shall not be utilized for any
determination of the charges to be included in any BILLING STATEMENT submitted
by PSE&G to VENTURE for payment under this AGREEMENT.
The accuracy of PSE&G's electricity recording meter shall be verified by
PSE&G by testing once each year. Such accuracy test shall be conducted in
accordance with the standards set forth in the American National Standard Code
for Electricity Metering. Notice of such accuracy test(s) shall be given by
PSE&G to VENTURE. VENTURE and/or JCP&L representatives may attend any such
accuracy test. In the
<PAGE>
37
event VENTURE and/or JCP&L representatives elect to be present at any accuracy
test, the test and any necessary adjustment to the electricity recording meter
shall be made in the presence of and observed by VENTURE and/or JCP&L
representatives. VENTURE and/or JCP&L may, for good cause, request PSE&G to
conduct an accuracy test of PSE&G's electricity recording meter. In the event
good cause is shown, PSE&G shall conduct an accuracy test at VENTURE's and/or
JCP&L's request. Any cost or expense associated with any accuracy test performed
by PSE&G on PSE&G's electricity recording meter shall be billed to and paid by
VENTURE; provided however, in the event an accuracy test is conducted in
connection with a billing dispute and PSE&G's electricity recording meter is
determined as a result of such test to be registering inaccurately in excess of
one percent (1%), PSE&G shall pay the costs of such accuracy test.
The accuracy of any electricity recording meter maintained by VENTURE
and/or JCP&L at the SUBSTATION FACILITY shall be verified by test at least once
each year. Such accuracy test shall be conducted in accordance with the
standards set forth in the American National Standard Code for Electricity
Metering. VENTURE and/or JCP&L shall establish, at the time of installation, and
maintain the accuracy of such electricity recording meter in accordance with the
standard of accuracy set forth in the American National Standard Code for
Electricity Metering. Notice of such accuracy test(s) shall be given by VENTURE
to PSE&G. PSE&G may attend any such accuracy test(s). PSE&G may, for good cause,
request VENTURE to conduct or have conducted an accuracy test(s) of VENTURE
and/or JCP&L's electricity recording meter. In the event good cause is shown,
VENTURE shall conduct or have conducted an accuracy test of VENTURE and/or
JCP&L's electricity recording meter. Any cost or expense associated with any
accuracy test(s) shall be paid by VENTURE and/or JCP&L, except where such
test(s) was conducted at PSE&G's request.
<PAGE>
38
In the event PSE&G's electricity recording meter is out of service or is
registering inaccurately, the amount of inaccuracy shall be determined and such
meter shall be repaired, replaced and/or adjusted so as to accurately measure
the NET ELECTRICAL POWER OUTPUT and ASSOCIATED NET ELECTRICAL ENERGY supplied by
VENTURE to the RECEIPT POINT. Any meter reading(s) and BILLING STATEMENT(s) for
the period of the inaccuracy shall be adjusted so as to reflect any correction
of such inaccuracy as far as such inaccuracy can be reasonably ascertained;
provided however, no adjustment shall be made in any meter reading(s) nor shall
any BILLING STATEMENT be adjusted for or on account of a registration inaccuracy
of one percent (1%) or less.
In the event a registration inaccuracy of greater than one percent (1%) is
found on PSE&G's electricity recording meter, a billing adjustment shall be
made. The billing adjustment shall be made for the period of inaccuracy, if
ascertainable, or in the event the period of the inaccuracy cannot be reasonably
ascertained, the period of inaccuracy shall be deemed to have encompassed one-
half (1/2) of the time period since the last accuracy test of the meter
(hereinafter referred to as the Surrogate Period). The quantities delivered for
the period of inaccuracy, if ascertainable, or, if not ascertainable, the
Surrogate Period shall be determined and adjustments made for billing purposes
by determining or estimating the quantity of electricity received by PSE&G
during the relevant period from the best available source/data, which
source/data may include but not be limited to: (i) registration data obtained
from the electricity recording meter maintained by VENTURE at the SUBSTATION
FACILITY; and/or (ii) receipts by PSE&G during an equivalent ox similar period
when such meter was registering accurately; and/or (iii) correction of the
error, if the percentage of error is ascertainable, by calibration, test or
mathematical calculation; provided however, in the event VENTURE's metering
equipment meets applicable PSE&G standards and PSE&G determines that such
equipment has been installed, operated and
<PAGE>
39
maintained in accordance with applicable PSE&G standards/practices/procedures,
the period of inaccuracy and the quantities delivered for such period shall be
determined and the adjustment(s) made for billing purposes solely by reference
to VENTURE's electricity recording equipment.
PSE&G and VENTURE shall retain the records each prepares and maintains in
the ordinary course of business relative to the amount of NET ELECTRICAL POWER
OUTPUT and associated NET ELECTRICAL ENERGY produced by the COGENERATION
FACILITY and supplied to and received by PSE&G at the RECEIPT POINT and any
records each prepares and maintains relative to any maintenance, repair or
testing of any electricity measuring meter maintained at the SUBSTATION
FACILITY. The records possessed by one party shall be made available for
inspection by the other party upon reasonable notice of request therefor. All
such records shall be maintained for a period of six (6) years.
VENTURE shall install equipment at the SUBSTATION FACILITY to enable a
measurement of the following electrical quantities: (i) gross active electrical
power output of each COGENERATION FACILITY generator; (ii) gross reactive
electrical power output of each COGENERATION FACILITY generator; (iii) terminal
voltage of each COGENERATION FACILITY generator; (iv) voltage at the POINT OF
INTERCONNECTION; (v) active power flow on the INTERCONNECTION FACILITY at the
POINT OF INTERCONNECTION; (vi) reactive power flow on the INTERCONNECTION
FACILITY at the POINT OF INTERCONNECTION; and (vii) kilowatthours of NET
ELECTRICAL ENERGY received by PSE&G at the POINT OF INTERCONNECTION. PSE&G
shall designate, select and specify the equipment to be installed at the
SUBSTATION FACILITY to enable a measurement of the aforementioned electrical
quantities. PSE&G shall purchase and arrange for the delivery of such equipment
to VENTURE at the PROJECT for installation by VENTURE at VENTURE's expense. The
costs of such equipment shall be paid by VENTURE as a
<PAGE>
40
cost associated with the design, construction and installation of the
INTERCONNECTION FACILITY as provided in and in accordance with Article XIII of
this AGREEMENT. PSE&G shall own, operate and maintain the equipment installed to
measure the electrical quantities specified in this paragraph. VENTURE shall pay
PSE&G for any costs associated with the operation and maintenance and/or repair
of such equipment. VENTURE shall pay any billing for operation and maintenance
of such equipment within thirty (30) days of the date of the billing.
PSE&G shall not be obligated to energize the INTERCONNECTION FACILITY until
the equipment PSE&G has directed VENTURE to install, pursuant to the preceding
paragraph, has been installed, has been inspected by PSE&G, and pursuant to such
inspection, such installation is determined by PSE&G to meet applicable
standards for operation. PSE&G shall conduct and complete the inspection of
such installation within fifteen (15) working days of receipt of notice from
VENTURE that the installation of the equipment has been completed and is
available for inspection. In the event PSE&G determines, as a result of its
inspection of the installation, that such installation does not meet applicable
standards for operation, PSE&G shall, as soon thereafter as is practicable,
furnish written notice to VENTURE of such fact setting forth the basis for the
determination and any corrective actions VENTURE will be required to take to
make the installation acceptable to PSE&G.
Additionally, VENTURE shall: (i) lease, at its expense, a telephone circuit
or otherwise establish a telecommunications link(s) to permit telemetering by
means of both digital data links and analog signals, of the measurements of the
electric quantities specified on page 39 of this AGREEMENT at PSE&G's Electric
System Operations Center in Newark, New Jersey; (ii) pay the costs associated
with the installation by PSE&G of equipment required (a) to provide an
indication at PSE&G's Electric System Operations Center of the status of circuit
breakers at the COGENERATION FACILITY and SUBSTATION FACILITY; (b) to provide an
alarm
<PAGE>
41
indication of hard lockout relays; (c) to enable PSE&G to open and close circuit
breaker or other switching equipment at the SUBSTATION FACILITY via supervisory
control from PSE&G's Electric System Operations Center to permit the rapid
separation of the PROJECT from the PUBLIC SERVICE SYSTEM and/or the
INTERCONNECTION FACILITY; and (iii) pay the costs associated with integrating
any telemetered information into PSE&G's Electric System Operations Center,
including the cost of equipment necessary to receive, display, record and
process such telemetered information.
The costs described in clauses (ii) and (iii) in the preceding paragraph
shall be paid by VENTURE as a cost associated with the design, construction and
installation of the INTERCONNECTION FACILITY as provided in and in accordance
with Article XIII of this AGREEMENT. Such equipment shall be owned, operated and
maintained by PSE&G.
ARTICLE XIII
INTERCONNECTION FACILITY
SECTION A
DESIGN, CONSTRUCTION AND INSTALLATION OF INTERCONNECTION FACILITY
PSE&G shall design, construct and install the INTERCONNECTION FACILITY for
the purpose of enabling PSE&G to provide SERVICE to VENTURE pursuant to and
consistent with the terms and conditions of this AGREEMENT. PSE&G estimates
that, under conditions most favorable to completion of the INTERCONNECTION
FACILITY, the INTERCONNECTION FACILITY can be completed and, subject to the
provisions of Section G of this Article, energized on or about April 12, 1988.
However, VENTURE has been advised and acknowledges and agrees that certain of
the activities necessary to construct the INTERCONNECTION FACILITY
<PAGE>
42
will be affected and/or influenced by conditions, events and/or factors which
are not within the direct control of PSE&G. PSE&G shall use best efforts to: (i)
obtain any REQUIRED PERMIT or easement(s), license(s), rental(s) or right(s)-of-
way, for the construction and installation of the INTERCONNECTION FACILITY; (ii)
complete the design, construction and installation of the INTERCONNECTION
FACILITY; and, (iii) subject to the provisions of Section G of this Article
energize the INTERCONNECTION FACILITY, in a timely manner. Best efforts as
herein provided, means the commencement and pursuit, in good faith, of a program
of design, construction, installation, review and examination so as to complete
and place in service the INTERCONNECTION FACILITY in a timely manner; provided
however, it is expressly understood and agreed that PSE&G's best efforts shall
be subordinate and subject to and construed in light of and consistent with any
suspension effected pursuant to and in accordance with Sections B and E of this
Article XIII and PSE&G's primary obligation to provide and maintain safe,
adequate and proper service to its retail and sale-or-resale customers and to
operate and maintain its plant, property and equipment in such condition as to
enable it to do so.
PSE&G shall not be liable to VENTURE for any direct or indirect cost(s),
expense(s), loss(es), liability(ies) or damage(s) which VENTURE may incur or
sustain, which cost, expense, loss, liability or damage arises out of, relates
to or results from any delay in the completion of the INTERCONNECTION FACILITY,
except where the delay in the completion of the INTERCONNECTION FACILITY results
from PSE&G's failure to use best efforts, as defined herein.
VENTURE shall indemnify and hold harmless PSE&G and each and every of its
officers, agents, servants and employees, its successors and assigns of, from
and against, any and all claims, demands, suits, actions and/or liabilities,
damages, and/or
<PAGE>
43
judgments, as well as against any fees, costs, charges or expenses which PSE&G,
its officers, agents, servants and employees, its successors and assigns incur
in the defense of any such claims, suits, actions or similar such demands, made
or filed by any third-party, which in any manner arise out of, relate to, or
result from PSE&G's failure to complete the INTERCONNECTION FACILITY on or about
April 12, 1988, except where such failure results from PSE&G's failure to use
best efforts, as defined in this Section A, to complete the INTERCONNECTION
FACILITY.
The INTERCONNECTION FACILITY shall be constructed and installed reasonably
in accordance with the Preliminary Plan for the INTERCONNECTION FACILITY. It is
understood that charge(s) in the Preliminary Plan may be necessary from time to
time prior to and/or during construction. PSE&G shall have the right and the
authority to make any change(s) in the Preliminary Plan where PSE&G, in its
reasonable judgment, determines such change(s) is necessary or appropriate,
provided however, in the event any charge in the Preliminary Plan or the route
for the INTERCONNECTION FACILITY, which PSE&G determines is necessary or
appropriate, is material in nature and will result in a substantial increase in
the estimated cost for same, PSE&G shall give notice to VENTURE of the change
prior to making the change. Any change made by PSE&G in the Preliminary Plan
shall neither alter the nature of the INTERCONNECTION FACILITY described in the
Preliminary Plan nor the character of SERVICE PSE&G has agreed to provide to
VENTURE. Changes in the Preliminary Plan shall not require any amendment to this
AGREEMENT.
SECTION B
INTERCONNECTION FACILITY COSTS
VENTURE shall be liable for and shall pay to PSE&G all costs PSE&G incurs
in designing, constructing and installing the INTERCONNECTION FACILITY as well
as
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44
all other costs which PSE&G incurs in effecting such interconnection with the
PROJECT, which costs are denominated in this AGREEMENT as costs associated
with the design, construction and installation of the INTERCONNECTION FACILITY
(herein collectively referred to as costs associated with the design,
construction and installation of the INTERCONNECTION FACILITY).
PSE&G estimates that the total cost associated with the design,
construction and installation of the INTERCONNECTION FACILITY will be
$8,706,000. This estimate shall not diminish, change or affect in any way
VENTURE's liability for and obligation to pay PSE&G for all costs which PSE&G
incurs in connection with the design, construction and installation of the
INTERCONNECTION FACILITY. PSE&G's anticipated expenditure pattern, during
construction, to make payment for the costs associated with the design,
construction and installation of the INTERCONNECTION FACILITY is contained in
the COST EXPENDITURE STATEMENT, a copy of which has been furnished to VENTURE.
VENTURE's responsibility for and obligation to PSE&G to pay for the costs
associated with the design, construction and installation of the INTERCONNECTION
FACILITY shall be discharged as follows: commencing on or prior to the 31st day
of October, 1986 and thereafter on or prior to the last day of each successive
month through and including the 30th day of April, 1988, VENTURE shall remit to
PSE&G the estimated expenditure specified in the COST EXPENDITURE STATEMENT for
the succeeding month. In accordance with the COST EXPENDITURE STATEMENT,
VENTURE's monthly payment obligation to PSE&G to make payment for the costs
associated with the design, construction and installation of the INTERCONNECTION
FACILITY is specified in the Payment Schedule which follows:
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45
PAYMENT SCHEDULE
Estimated Expenditure Amount of
Payment Due Date For the MONTH of Payment Obligation
---------------- ---------------------- ------------------
October 31, 1986 November 1986 $ 66,000
November 30, 1986 December 1986 25,000
December 31, 1986 January 1987 75,500
January 31, 1987 February 1987 75,500
February 28, 1987 March 1987 75,500
March 31, 1987 April 1987 75,500
April 30, 1987 May 1987 71,900
May 31, 1987 June 1987 398,800
June 30, 1987 July 1987 310,300
July 31, 1987 August 1987 642,100
August 31, 1987 September 1987 634,300
September 30, 1987 October 1987 642,700
October 31, 1987 November 1987 786,400
November 30, 1987 December 1987 900,500
December 31, 1987 January 1988 665,600
January 31, 1988 February 1988 458,000
February 29, 1988 March 1988 1,659,000
March 31, 1988 April 1988 653,000
April 30, 1988 May 1988 490,400
----------
TOTAL OF PAYMENTS FOR ESTIMATED COSTS $8,706,000
==========
It is expressly acknowledged that VENTURE has satisfied its obligations under
this Section B for payments through March 31, 1987 pursuant to the Service and
Interconnection Agreement between PSE&G and VENTURE dated October 10, 1986.
In the event VENTURE fails to remit any payment specified in the Payment
Schedule above, on or by the Payment Due Date, PSE&G may, in addition to any
other remedy or right PSE&G may have under this AGREEMENT, immediately suspend
performance of its obligations under Section A of this Article. PSE&G shall
provide VENTURE with written notice of any such suspension (hereinafter referred
to as Notice of Suspension). In such event, and in addition to any other right
or remedy it may have under this AGREEMENT, PSE&G shall have the right to make
demand for and receive payment from ISSUER under the CREDIT for: (i) any costs
associated with the design, construction and installation of the INTERCONNECTION
FACILITY which PSE&G has
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46
incurred, as of the date of suspension, and for which VENTURE has failed to
make payment therefor on or by such date; and/or (ii) any costs associated with
the design, construction and installation of the INTERCONNECTION FACILITY which
PSE&G incurs thereafter as a consequence of a commitment made or liability
incurred by PSE&G prior to the date of suspension in connection with performance
of its obligations under Section A of this Article.
Upon completion of the construction, installation and testing of the
INTERCONNECTION FACILITY, PSE&G shall, within ninety (90) days thereof, furnish
to VENTURE a Final Reconciliation. The Final Reconciliation shall contain a
statement setting forth the nature and amount of costs actually incurred by
PSE&G in connection with the design, construction and installation of the
INTERCONNECTION FACILITY, as well as a reconciliation between the total payments
made by VENTURE, in accordance with the provisions of this Article, and the
amount of costs actually incurred in connection with the design, construction
and installation of the INTERCONNECTION FACILITY.
In the event that the total cost actually associated with the design,
construction and installation of the INTERCONNECTION FACILITY exceeds the total
payments made by VENTURE, in accordance with the provisions of this Article,
VENTURE shall be liable for and shall make payment to PSE&G of any differential
resulting from such reconciliation. VENTURE shall make payment for any such
differential within thirty (30) days of the date of the Final Reconciliation. In
such event the Final Reconciliation shall constitute a bill for such costs. In
the event the total of the payments made by VENTURE to PSE&G, in accordance with
the provisions of this Article, exceeds the costs actually associated with the
design, construction and installation of the INTERCONNECTION FACILITY, PSE&G
shall remit to VENTURE, with the Final Reconciliation, a payment to reimburse
VENTURE for such overpayment.
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47
In connection with effecting the Final Reconciliation, VENTURE shall have
the right to review, after a timely request therefor, any documentation or data
available to PSE&G to enable VENTURE to verify the accuracy of the Final
Reconciliation. However, such review shall not extend the due date of, or extend
or postpone or otherwise affect VENTURE's obligation to pay in a timely manner
any payment due, as specified in the Final Reconciliation.
SECTION C
LETTER OF CREDIT FOR INTERCONNECTION FACILITY COSTS
In connection with, and for the purposes of securing the performance by
VENTURE of its obligation to pay to PSE&G all costs which PSE&G incurs in
connection with the design, construction and installation of the
INTERCONNECTION0N FACILITY, VENTURE shall establish for, and have issued to
PSE&G, as beneficiary, an irrevocable Letter of Credit (CREDIT). The CREDIT
shall be established at and payable by a commercial bank (ISSUER) acceptable to
PSE&G, on terms and conditions acceptable to PSE&G. The CREDIT shall be
established for and structured so as to permit PSE&G to make a demand(s) for and
receive payment from ISSUER, and shall require the ISSUER to honor on sight, any
written demand(s) for payment under the CREDIT as specified in and in accordance
with the provisions of Sections B and D of this Article. The CREDIT shall be
established to be effective not later than thirty (30) days of the date of
execution of this AGREEMENT, and have an Expiry Date on the earlier of the date
the last payment required by the Payment Schedule set forth in Section B of this
Article is received by PSE&G or June 1, 1988 (hereinafter referred to as the
Effective Period). The aggregate amount of the CREDIT shall be established and
maintained for any month during the Effective Period in accordance with the
timetable specified in the LETTER OF CREDIT SCHEDULE which follows:
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48
LETTER OF CREDIT SCHEDULE
INTERCONNECTION FACILITY COSTS
November 14, 1986 $ 560,000
December 1, 1986 660,000
January 1, 1987 1,318,500
February 1, 1987 1,311,500
March 1, 1987 1,374,500
April 1, 1987 1,359,500
May 1, 1987 1,588,900
June 1, 1987 3,257,000
July 1, 1987 3,376,100
August 1, 1987 3,313,600
September 1, 1987 3,285,700
October 1, 1987 3,091,200
November 1, 1987 2,962,100
December 1, 1987 2,737,400
January 1, 1988 2,487,700
February 1, 1988 2,229,600
March 1, 1988 1,048,500
April 1, 1988 444,400
May 1, 1988 444,400
It is expressly acknowledged that VENTURE has established the CREDIT in
compliance with this Section C and has maintained the aggregate amount through
the effective date of this AGREEMENT as required by the Service and
Interconnection Agreement between PSE&G and VENTURE dated October 10, 1986.
In the event VENTURE fails to have maintained for and have issued to
PSE&G, as beneficiary, the CREDIT, on terms and conditions acceptable to PSE&G
and in accordance with the provisions of this Article XIII, PSE&G may, in
addition to any other remedy it may have under this AGREEMENT, suspend
performance of its obligations under Section A of this Article.
SECTION D
CANCELLATION COSTS
Upon execution of this AGREEMENT, PSE&G shall be under an obligation to
initiate the tasks required to complete the design, construction and
installation of the
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49
INTERCONNECTION FACILITY on or about April 12, 1988. In order to accomplish
same, PSE&G shall be obligated to enter into contractual agreements with, inter
alia, equipment/material suppliers and third-party contractors. The timing
associated with the incurrence of these liabilities is reflected in the
CANCELLATION COST STATEMENT, a copy of which has been furnished to VENTURE. In
the event PSE&G exercises any right under this AGREEMENT to cancel or terminate
any supplier and/or contractor agreements/orders, PSE&G may incur CANCELLATION
COSTS. In such event, VENTURE shall be liable for and make payment to PSE&G for
all CANCELLATION COSTS which PSE&G incurs. The CANCELLATION COST STATEMENT
contains, and therefore constitutes, an estimate by PSE&G of CANCELLATION
COSTS. This estimate shall not diminish, change or affect in any way VENTURE's
liability for and obligation to pay PSE&G all CANCELLATION COSTS in the event
PSE&G incurs any such costs.
PSE&G shall have the right to cancel or terminate any supplier and/or
contractor agreements entered into in connection with discharging its
obligations to design, construct and install the INTERCONNECTION FACILITY upon
occurrence of any Event of Termination specified in Article XXIII. In the event
PSE&G incurs any CANCELLATION COSTS, PSE&G shall have the right to demand
payment for and receive payment from ISSUER under the CREDIT for all such costs,
provided however, in the event the CREDIT is insufficient, PSE&G retains the
right to demand from VENTURE, and in such event, VENTURE shall be obligated to
make payment, for any CANCELLATION COSTS not paid under the CREDIT.
In the event PSE&G terminates or cancels any supplier and/or contractor
orders/agreements, as permitted in this Section D, PSE&G shall have complete
discretion relative to the manner of resolving any claim and/or demand by any
contractor and/or supplier in connection therewith and further, PSE&G shall be
the sole judge of the acceptability of any compromise in settlement or
resolution of any such claim or demand.
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SECTION E
SUSPENSION BY VENTURE
VENTURE shall have the right to direct PSE&G to suspend activities
associated with and incident to the design, construction and installation of the
INTERCONNECTION FACILITY for reasons beyond VENTURE's control, which reasons may
include the occurrence of an Imminent Suspension Event, a Suspension Event or a
Matured Suspension Event as such events are defined in the LOAN AGREEMENT. In
such event, PSE&G shall suspend such activities unless and until directed to
resume such activities by VENTURE. In connection with implementing any
resumption of activities associated with and incident to the design,
construction and installation of the INTERCONNECTION FACILITY pursuant to
VENTURE's request, PSE&G shall have the right to amend the Payment Schedule
contained in Section B of this Article. In addition, PSE&G shall have the right
to adjust the DATE OF INITIAL OPERATION specified in this AGREEMENT to reflect
any delay arising out of, relating to or resulting from the suspension. Any
request by VENTURE to PSE&G to suspend and/or to resume such activities shall be
in writing and shall be effective upon receipt by PSE&G. In the exercise of such
right, VENTURE may direct PSE&G to stop further construction activity and
withhold taking further actions associated with ordering additional equipment
and/or materials for the INTERCONNECTION FACILITY. PSE&G shall not be permitted
to cancel or terminate any existing supplier purchase orders/agreements unless
specifically requested to do so by VENTURE.
In the event VENTURE exercises its right under this Section E, PSE&G shall
have the right to make demand for and receive payment from ISSUER under the
CREDIT for: (i) any costs associated with the design, construction and
installation of the INTERCONNECTION FACILITY which PSE&G has incurred, as of the
date of suspension, and for which VENTURE has failed to make payment therefor on
or by such date; (ii) any costs which PSE&G incurs in connection with activities
associated with
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and incident to implementing VENTURE's request to suspend; and/or (iii) any
costs associated with the design, construction and installation of the
INTERCONNECTION FACILITY which PSE&G incurs thereafter as a consequence of a
commitment made or liability incurred by PSE&G prior to the date of suspension
in connection with performance of its obligations under Section A of this
Article.
SECTION F
DECOMMISSION COSTS
Upon occurrence of any Event of Termination specified in Article XXIII,
PSE&G may incur DECOMMISSION C0STS. VENTURE shall be liable for and make payment
to PSE&G for any DECOMMISSION COSTS which PSE&G may incur. The level of
DECOMMISSION COSTS which PSE&G may incur, prior to the DATE OF COMMERCIAL
OPERATION, tracks the progress of construction of the INTERCONNECTION FACILITY
and are currently estimated upon completion of the INTERCONNECTION FACILITY to
be $3,050,000. This estimate shall not diminish, change or affect in any way
VENTURE's responsibility for and obligation to pay PSE&G any DECOMMISSION COSTS
which PSE&G may incur.
In the event VENTURE fails to obtain all Critical Path Permits, as defined
in the LOAN AGREEMENT, on or by September 1, 1987, or, at any time thereafter,
in the event a program of continuous construction at the PROJECT is interrupted
for more than fourteen (14) calendar days and, after a request by PSE&G, VENTURE
fails, within seven (7) calendar days, to demonstrate to the reasonable
satisfaction of PSE&G that the interruption in the program of continuous
construction will not materially affect the viability or feasibility of
completion of the PROJECT, PSE&G shall have the right, within fifteen (15) days
thereof, to require VENTURE to establish for PSE&G, as beneficiary, a CREDIT for
the purpose of securing the performance by VENTURE of its obligation to PSE&G to
pay for any DECOMMISSION COSTS PSE&G might incur. The
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52
CREDIT shall be established at and payable by a commercial bank (ISSUER)
acceptable to PSE&G on terms and conditions acceptable to PSE&G. The CREDIT
shall require the ISSUER to honor, on sight, written demand for payment made by
PSE&G for any DECOMMISSION COSTS provided that, with any demand PSE&G submits to
ISSUER appropriate documentation evidencing payment by PSE&G of any DECOMMISSION
COSTS.
The CREDIT shall be established on a date specified by PSE&G and shall have
an Expiry Date on the DATE OF COMMERCIAL OPERATION (hereinafter referred to as
the Effective Period). The aggregate amount of the CREDIT shall be established
and maintained for any month during the Effective Period in accordance with the
timetable specified in the LETTER OF CREDIT SCHEDULE which follows:
LETTER OF CREDIT SCHEDULE
-------------------------
DECOMMISSION COSTS
Aggregate Amount
Effective Date of Credit
-------------- ----------------
September 1, 1987 $ 800,000
October 1, 1987 1,200,000
November 1, 1987 1,600,000
December 1, 1987 2,000,000
January 1, 1988 2,400,000
February 1, 1988 2,800,000
March 1, 1988 3,000,000
April 1988 3,050,000
| "
| "
| "
DATE OF COMMERCIAL OPERATION
In the event VENTURE fails to have established for PSE&G, as beneficiary,
the CREDIT, on term and conditions acceptable to, and on the date specified by,
PSE&G, PSE&G may, in addition to any other remedy it may have under this
AGREEMENT, suspend performance of its obligations under Section A of this
Article.
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53
SECTION G
ENERGIZATION OF INTERCONNECTION FACILITY
PSE&G shall be obligated to energize the INTERCONNECTION FACILITY only if:
(i) PSE&G has determined that the INTERCONNECTION FACILITY is complete and is
capable of the receipt of NET ELECTRICAL POWER OUTPUT and associated NET
ELECTRICAL ENERGY; (ii) PSE&G has determined, after inspection, that the
SUBSTATION FACILITY has been completed and the construction and installation
thereof have been effected consistent with the provisions set forth in Article
XVI; (iii) PSE&G has inspected and found acceptable the equipment VENTURE is
obligated to install at the SUBSTATION FACILITY pursuant to Article XII; and
(iv) the SUBSTATION FACILITY has been inspected and approved by an electrical
inspection authority approved by the New Jersey Board of Public Utilities
(NJBPU).
Upon completion of the construction, installation and testing of the
INTERCONNECTION FACILITY, PSE&G shall notify VENTURE that such facility has been
completed and is capable of the receipt of NET ELECTRICAL POWER OUTPUT and
associated NET ELECTRICAL ENERGY from the COGENERATION FACILITY.
SECTION H
OWNERSHIP, OPERATION AND MAINTENANCE OF INTERCONNECTION FACILITY
PSE&G shall own, operate and maintain the INTERCONNECTION FACILITY. VENTURE
shall be liable for and pay to PSE&G all costs associated with the operation
and maintenance by PSE&G of the INTERCONNECTION FACILITY. The costs billed to
VENTURE for operation and maintenance will be determined by PSE&G pursuant to
PSE&G's "Procedures for Work Done at the Expense of Others." Costs associated
with the operation and maintenance of the INTERCONNECTION FACILITY shall be
accumulated for any calendar year during any Term of this AGREEMENT and
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54
shall be billed by PSE&U to VENTURE during the first quarter of the succeeding
calendar year.
SECTION I
USE OF INTERCONNECTION FACILITY
The nature and extent of and terms and conditions relating to VENTURE's use
of the INTERCONNECTION FACILITY are set forth in their entirety in this
AGREEMENT. PSE&G shall not be obligated to use the INTERCONNECTION FACILITY to
provide any service to or for VENTURE, other than as provided for in this
AGREEMENT. Any use of the INTERCONNECTION FACILITY by PSE&G to render any
additional or other service to VENTURE shall be within the sole discretion of
PSE&G and such other use shall be subject and/or subordinate to: (i) PSE&G's
obligations to operate the PUBLIC SERVICE SYSTEM so as to render safe, reliable,
adequate, proper and economic service to its retail and sale-for-resale
customers; (ii) PSE&G's obligations under the PJM Agreement; (iii) PSE&G's
obligations under the Mid-Atlantic Area Coordination Group Agreement; and (iv)
the terms and conditions of an agreement between PSE&G and VENTURE relative to
such other service.
Without the express consent of VENTURE, PSE&G shall not be permitted during
any term of this AGREEMENT, to use the INTERCONNECTION FACILITY other than to
provide SERVICE to VENTURE, nor shall PSE&G permit the use of the
INTERCONNECTION FACILITY by any third-party, where such use(s) would impair
SERVICE to VENTURE. However, PSE&G may use the INTERCONNECTION FACILITY, or
permit the use of same by a third-party, where such use(s) does not impair
PSE&G's ability to render SERVICE to VENTURE under this AGREEMENT, with the
express written consent of VENTURE, which consent shall not be unreasonably
delayed or unreasonably withheld. In the event PSE&G uses the INTERCONNECTION
FACILITY for any reason other than to render SERVICE to VENTURE under this
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55
AGREEMENT, or permits the use of the INTERCONNECTION FACILITY by a third-party,
PSE&G shall pay to VENTURE compensation for such other use(s) for the remaining
years of any Term of this AGREEMENT. In connection with any such use(s) of the
INTERCONNECTION FACILITY, PSE&G and VENTURE agree, prior to the commencement of
such other use(s), to meet to devise and adopt a methodology to determine the
amount of compensation to be paid by PSE&G to VENTURE for such other use(s). The
compensation to be paid by PSE&G to VENTURE for such other use(s) shall reflect
the extent of use of the INTERCONNECTION FACILITY by PSE&G or such third-party.
Any right to or interest in the INTERCONNECTION FACILITY which VENTURE has
or may claim as a result of this AGREEMENT shall cease or expire upon
termination of this AGREEMENT. Upon termination of this AGREEMENT, PSE&G may, in
its sole discretion, elect to remove or maintain the INTERCONNECTION FACILITY.
In the event PSE&G elects to maintain the INTERCONNECTION FACILITY upon
termination of this AGREEMENT, PSE&G may utilize the INTERCONNECTION FACILITY
thereafter without consulting with, obtaining the approval of, and without
providing compensation therefor to VENTURE.
SECTION J
REPAIR/REPLACEMENT OF INTERCONNECTION FACILITY
PSE&G intends and shall be obligated to maintain the INTERCONNECTION
FACILITY in a proper state of repair. The requirement for and/or necessity of
any repair, reconstruction, relocation and/or replacement of the
INTERCONNECTION FACILITY shall be within the sole discretion of PSE&G. Costs
associated with conducting any repair, reconstruction, relocation and/or
replacement of the INTERCONNECTION FACILITY shall be billed to and paid by
VENTURE. The costs
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56
billed to VENTURE will be determined by PSE&G pursuant to PSE&G's "Procedures
For Billing Work Done At The Expense Of Others."
SECTION K
DECOMMISSION OF INTERCONNECTION FACILITY
Upon termination of this AGREEMENT, PSE&G may take any step(s), which
PSE&G, at its sole discretion, deems necessary or appropriate relative to the
connection of the INTERCONNECTION FACILITY with the SUBSTATION FACILITY. VENTURE
shall be responsible to make payment to PSE&G for any costs associated with a
disconnection of the INTERCONNECTION FACILITY from the SUBSTATION FACILITY.
Upon termination of this AGREEMENT for any reason, PSE&G may remove or
maintain and utilize or take any other action which PSE&G, in its sole
discretion, deems necessary or appropriate relative to the INTERCONNECTION
FACILITY (hereinafter referred to as the Status). Except as otherwise provided
for in this AGREEMENT, upon termination of this AGREEMENT PSE&G shall be
obligated to make any decision relative to the Status of the INTERCONNECTION
FACILITY within one (1) year after the effective date of termination.
In the event PSE&G elects to remove or dismantle the INTERCONNECTION
FACILITY, VENTURE shall be responsible for and make payment to PSE&G of the
costs associated with such removal or dismantlement provided however, VENTURE
shall receive a credit toward the amount owed therefor for salvage, if any.
In the event the Primary Term is not automatically extended, as provided in
Article VIII, and PSE&G decides that it will remove or dismantle the
INTERCONNECTION FACILITY upon the expiration of the Primary Term, PSE&G shall
prepare and submit to VENTURE for payment an estimate of the costs associated
with the removal or dismantlement of the INTERCONNECTION FACILITY not later than
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57
thirty (30) months prior to the expiration of the Primary Term. VENTURE shall
make payment for such estimated costs in twenty-four (24) equal monthly
installments on the first (1st) day of each of the final twenty-four (24) months
of the Primary Term. Any payments made by VENTURE to PSE&G pursuant to the
provisions of this paragraph shall be held in escrow by PSE&G, in an interest
bearing account, until required to be expended by PSE&G. VENTURE shall receive
benefit of the interest accrued on such payments in effecting the reconciliation
comtemplated by this Article. PSE&G shall be obligated to make any decision
relative the Status of the INTERCONNECTION FACILITY and furnish written notice
to VENTURE of such decision not later than thirty (30) months prior to the
expiration of the Primary Term.
In the event the Primary Term is automatically extended consistent with
Article VIII, and PSE&G decides that it will remove or dismantle the
INTERCONNECTION FACILITY upon the expiration of the Subsequent Term, PSE&G shall
prepare and submit to VENTURE for payment an estimate of the costs which will be
associated with the removal or dismantlement of the INTERCONNECTION FACILITY not
later than thirty (30) months prior to the expiration of the Subsequent Term.
VENTURE shall make payment for such estimated costs in twenty-four (24) equal
monthly installments on the first (1st) day of each of the final twenty-four
(24) months of the Subsequent Term. Any payments made by VENTURE to PSE&G
pursuant to the provisions of this paragraph shall be held in escrow by PSE&G,
in an interest bearing account, until required to be expended by PSE&G. VENTURE
shall receive benefit of the interest accrued on such payments in effecting the
reconciliation comtemplated by this Article. PSE&G shall be required to make any
decision relative the Status of the INTERC0NNECTION FACILITY and provide written
notice to VENTURE of such decision not later than thirty (30) months prior to
the expiration of the Subsequent Term.
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PSE&G is required oy the provisions of this Section K to make any decision
relative to the Status of the INTERCONNECTION FACILITY within specific time
periods set forth in this Section K. In the event PSE&G fails to make a
decision relative to the Status of the INTERCONNECTION FACILITY on or before
the expiration of any applicable time period specified, VENTURE shall be
relieved of any responsibility to pay to PSE&G the costs associated with any
removal of the INTERCONNECTION FACILITY.
Upon completion of the removal or dismantlement of the INTERCONNECTION
FACILITY, as provided for in this Section K, PSE&G shall furnish to VENTURE a
final statement setting forth the costs actually associated with the removal or
dismantlement of the INTERCONNECTION FACILITY. The final statement shall
contain a reconciliation consistent with the methodology employed in effecting
the Final Reconciliation pursuant to Section B of this Article. In effecting the
reconciliation, the parties agree to abide and be bound by the procedures
established therein. In the event VENTURE makes payment to PSE&G for costs
associated with removal of the INTERCONNECTION FACILITY and thereafter PSE&G
elects not to remove the INTERCONNECTION FACILITY PSE&G shall refund any monies
received with accrued interest to VENTURE.
SECTION L
EASEMENT(S) FOR INTERCONNECTION FACILITY
The Preliminary Plan for the INTERCONNECTION FACILITY contemplates that the
INTERCONNECTION FACILITY will occupy property owned and/or controlled by, inter
alia, Consolidated Rail Corporation, the New Jersey Department of
Transportation, New Jersey Transit and/or Central Railroad of New Jersey, the
City of Bayonne and certain as yet unidentified private property owners. As such
it will be necessary, in order to construct, install, operate and maintain the
INTERCONNECTION
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59
FACILITY, to acquire an easement(s), license(s), permit(s), rental(s) or
right(s)-of-way to such properties from these parties. PSE&G shall acquire any
such easement(s), license(s), permit(s), rental(s) or right(s)-of-way. Any cost
associated with the acquisition of any such easement(s), license(s), permit(s),
referal(s) or right(s)-of-way shall be billed to and paid by VENTURE. Any cost
associated with the acquisition of any easement(s), license(s), permit(s),
rental(s) or right(s)-of-way of a non-recurring nature shall be billed to and
paid by VENTURE as a cost associated with the design, construction and
installation of the INTERCONNECTION FACILITY. Any costs associated with the
operation of any easement(s), license(s), permit(s), rental(s) or right(s)-of-
way of a recurring nature shall be billed to and paid by VENTURE as a cost
associated with the operation and maintenance of the INTERCONNECTION FACILITY.
The Preliminary Plan for the INTERCONNECTION FACILITY contemplates that a
portion of the INTERCONNECTION FACILITY will occupy property owned by Bayonne
Industries, Inc. and/or IMTT-Bayonne. VENTURE shall obtain from Bayonne
Industries, Inc. and/or IMTT-Bayonne, at its own expense, an easement to the
property of Bayonne Industries, Inc. and/or IMTT-Bayanne for conveyance to PSE&G
for the INTERCONNECTION FACILITY for a term, i.e., duration, and in a form and
on terms and conditions acceptable to and approved by PSE&G. The easement, inter
alia, shall permit PSE&G, its agents, servants and employees, at reasonable
times and upon reasonable notice, to have access to the property of Bayonne
Industries, Inc. and/or IMTT-Bayonne so as to permit PSE&G, its agents, servants
and/or employees to perform any tasks associated with and incident to the
design, construction, installation, operation, maintenance, repair,
reinforcement or relocation of the, INTERCONNECTION FACILITY.
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SECTION M
PERMITS/APPROVALS FOR INTERCONNECTION FACILITY
PSE&G shall obtain from appropriate governmental bodies any REQUIRED
PERMIT. PSE&G shall proceed with and use best efforts to obtain any REQUIRED
PERMIT. In the event a third-party files any pleading with any regulatory or
other governmental body or institutes a suit at law or in equity challenging the
right of PSE&G to receive or, in the event any such body issues any REQUIRED
PERMIT to PSE&G, challenges the propriety of the issuance to PSE&G of any
REQUIRED PERMIT, PSE&G shall not be obligated to commence or, in the event
construction has commenced, to complete construction of the INTERCONNECTION
FACILITY until PSE&G obtains a final and non-appealable order/judgment relative
to the issuance of such REQUIRED PERMIT or, in the event of a challenge to the
issuance thereof, a final and non-appealable order/judgment upholding the
issuance of any REQUIRED PERMIT. VENTURE agrees to cooperate fully with PSE&G
to the extent PSE&G deems such cooperation necessary to secure any REQUIRED
PERMIT and/or, in the event same is secured, to defend the issuance of any
REQUIRED PERMIT.
However, in the event the issuance to PSE&G of any REQUIRED PERMIT is
challenged by a third-party and a final and non-appealable order/judgment has
not been issued in connection with such challenge, PSE&G shall be obligated to
commence or complete construction of the INTERCONNECTION FACILITY, despite the
absence of a final and non-appealable order/judgment relative to such
challenge, if, but only if:
(i) VENTURE submits a request in writing to PSE&G requesting PSE&G
to,commence or complete construction of the INTERCONNECTION
FACILITY; and
(ii) VENTURE agrees in such writing to indemnify and hold harmless PSE&G
and each and every of its officers, agents, servants and employees,
its successors and assigns, from
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and against any and all claims, demands, suits, actions and the
liabilities, losses, damages, and/or judgments, which may arise
therefrom, as well as against any fees, costs, charges or expenses
which PSE&G, its officers, agents, servants and employees, its
successors and assigns incur in the defense of any such claims,
suits, actions or similar such demands made or filed by any third-
party which in any manner arise out of, relate to, or result from
PSE&G's actions in commencing or completing the construction or
installation of the INTERCONNECTION FACILITY, pursuant to VENTURE's
request in Subparagraph (i) herein.
PSE&G shall not be obligated to commence or complete construction of the
INTERCONNECTION FACILITY in the event issuance of any REQUIRED PERMIT is denied
to PSE&G. Further, PSE&G shall not be obligated to commence or complete
construction in the event that any decision of any governmental body to issue
any REQUIRED PERMIT is overturned by any court or regulatory body or any court
or regulatory body has issued a stay, pending a final adjudication of a
challenge, prohibiting construction activity under any REQUIRED PERMIT issued
to PSE&G.
Any cost(s) and/or expense(s) associated with obtaining such REQUIRED
PERMIT and/or any cost(s) and/or expense(s) associated with defending the
issuance of any such REQUIRED PERMIT shall be paid by VENTURE to PSE&G as a
cost/expense associated with the design, construction and installation of the
INTERCONNECTION FACILITY as provided in and in accordance with Article XIII of
this AGREEMENT.
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ARTICLE XIV
DEDICATION OF FACILITIES
No undertaking by PSE&G under any provision of this AGREEMENT shall
constitute the dedication to VENTURE or to the public of the PUBLIC SERVICE
SYSTEM, or any portion thereof, and/or of the INTERCONNECTION FACILITY.
ARTICLE XV
REARRANGEMENT
PSE&G represents to VENTURE that it has no present plans or intention to
convert its system in the area to a higher voltage or to abandon, relocate, or
rearrange its facilities that will be used to accommodate the output of the
COGENERATION FACILITY. However, in the event PSE&G should decide, for cause, at
any time or from time to time either to convert the PUBLIC SERVICE SYSTEM at the
point of connection of the INTERCONNECTION FACILITY to the PUBLIC SERVICE
SYSTEM, or in the vicinity thereof, to a different voltage or to abandon,
relocate, or rearrange the portion of the PUBLIC SERVICE SYSTEM that will be
used to accommodate the output of VENTURE, PSE&G shall advise VENTURE in writing
as soon as PSE&G shall make such decision, but at least three (3) years in
advance of making any such conversion, abandonment, relocation or rearrangement.
VENTURE shall be responsible to pay all costs for any facilities, wherever
situated, necessary to continue the interconnected operation of the PUBLIC
SERVICE SYSTEM and the COGENERATION FACILITY above those that would have been
associated with such conversion, abandonment, relocation or rearrangement by
PSE&G in the absence of such interconnected operation of the PUBLIC SERVICE
SYSTEM and the COGENERATION FACILITY. Unless other payment arrangements are
mutually agreed upon by PSE&G and VENTURE, VENTURE shall pay any billing(s) for
such costs within thirty (30) days of the date of any such bill(s). Cause, as
specified in this Article, shall include but not
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be limited to obsolescence, changing patterns of demand and usage of electric
power and energy by PSE&G's retail and sale-for-resale customers or physical
destruction of plant, whether the result of deterioration or casualty.
ARTICLE XVI
COGENERATION FACILITY/SUBSTATION FACILITY
In view of PSE&G's statutory obligations to its retail and sale-for-resale
customers, PSE&G has adopted general requirements relative to the construction
of generation and substation facilities by others. These requirements have been
adopted by PSE&G, to ensure that any facilities a party plans to construct for
connection to the PUBLIC SERVICE SYSTEM are designed, constructed and installed
so as to be compatible with the PUBLIC SERVICE SYSTEM and to ensure that
operation of these facilities does not adversely affect the integrity,
reliability and/or safe operation of any interconnection facility and/or the
PUBLIC SERVICE SYSTEM. In connection with the construction of such facilities,
PSE&G requires that the plans and specifications for such generation and
substation facilities be submitted to PSE&G for review and found acceptable to
PSE&G prior to the design, construction and installation of these facilities,
solely to enable PSE&G to determine, and thus ensure, that the contemplated
design, construction and installation for such facilities comport with the
aforementioned requirements.
VENTURE shall, at its own expense, design, construct, install, own, operate
and maintain the COGENERATION FACILITY and SUBSTATION FACILITY. VENTURE shall,
upon execution of this AGREEMENT use best efforts to obtain Material Permits, as
defined in the LOAN AGREEMENT.
Prior to or in connection with execution of this AGREEMENT, a copy of
"Interconnection Protection and Safety Requirements and Standards for
Customer Owned Generating Facilities" (Exhibit 2) has been furnished to VENTURE.
VENTURE
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shall design, construct and install the COGENERATION FACILITY consistent with
the requirements set forth in Exhibit 2. Deviations from the requirements set
forth in Exhibit 2, relative to the design, construction and installation of the
COGENERATION FACILITY, may be permitted, provided however, any deviation
therefrom must be submitted to and accepted by PSE&G.
As soon as practicable after execution of this AGREEMENT, VENTURE shall
furnish to PSE&G the following:
A. Plans and Specifications of the proposed installation.
B. Single line diagram and details of the proposed protection schemes.
C. Instruction manuals for all protective components.
D. Component specifications and internal wiring diagrams of protection
components if not provided in instruction manuals.
E. All protective equipment ratings if not provided in instruction manuals.
F. Generator data required to analyze fault contributions and load flows,
including, but not limited to, equivalent impedances and time constants.
Subsequent to submission to and review by PSE&G of Items A through F
enumerated above, PSE&G shall prepare and submit to VENTURE "Recommendations and
Specifications for a 138,000-Volt Customer Substation" (hereinafter referred to
as Recommendations). VENTURE shall design the SUBSTATION FACILITY consistent
with the requirements set forth in Recommendations. After preparation of the
Plans and Specifications for the SUBSTATION FACILITY, VENTURE shall submit same
to PSE&G for its review and acceptance. The Plans and Specifications of the
SUBSTATION FACILITY may deviate from the requirements set forth in
Recommendations provided however, any deviation therefrom must be submitted and
be acceptable to PSE&G. The final Plans and Specifications relating to the
design of the SUBSTATION FACILITY must be submitted and be acceptable to PSE&G.
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VENTURE shall construct and install the SUBSTATION FACILITY pursuant to and
consistent with the final Plans and Specifications for the SUBSTATION FACILITY
submitted to and accepted by PSE&G.
PSE&G shall use best efforts to complete any review of any submissions made
to PSE&G by VENTURE pursuant to and in accordance with the provisions of this
Article XVI in a timely manner.
Prior to the DATE OF INITIAL OPERATION, PSE&G will perform the functional
tests on the relays located in the SUBSTATION FACILITY. PSE&G will specify and
effect the settings of the relays. During the Term of this AGREEMENT, PSE&G
shall have access to and the right to inspect and perform scheduled maintenance
on such relays as well as the right to readjust the settings of such relays as
required.
VENTURE shall require the supply of electric energy to the PROJECT to test
Project equipment and facilities prior to placing any electric generation unit
into COMMERCIAL OPERATION. As previously indicated, PSE&G shall notify VENTURE
upon completion of the INTERCONNECTION FACILITY. Thereafter, at VENTURE's
request, PSE&G shall energize the INTERCONNECTION FACILITY, subject to the
requirements specified in Article XIII, Section G, and shall supply electric
energy to the PROJECT for testing through the INTERCONNECTION FACILITY. PSE&G
shall supply same as stand-by service under applicable provisions of PSE&G's
Tariff for Electric Service.
VENTURE plans to implement a staged phase-in of the three gas turbine
generation units and the steam turbine generation unit. VENTURE shall notify
PSE&G when VENTURE decides to place any electric generation unit into
COMMERCIAL OPERATION. At that time, VENTURE shall permit PSE&G to examine such
electric generation unit(s) to enable PSE&G to determine whether the electric
generation unit(s) satisfies the requirements contained in Exhibit 2. PSE&G
shall not be obligated to receive electric power and energy at the RECEIPT POINT
from any electric generation
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unit at the PROJECT unless and until: (i) PSE&G has examined and pursuant to
such examination determined that any completed electric generation unit(s) being
placed into COMMERCIAL OPERATION satisfies the requirements contained in Exhibit
2; and (ii) VENTURE has the installation inspected and approved by an electrical
inspection authority approved by the NJBPU and receives and furnishes
satisfactory evidence to PSE&G of issuance of a Certificate of Approval relative
to the inspection. Thereafter, and subject to the requirements specified in
Article XIII, Section G, PSE&G shall permit synchronization of such completed
generation unit(s) with the PUBLIC SERVICE SYSTEM and shall be obligated, at
VENTURE's request, to commence receipt of electric power and energy supplied to
the RECEIPT POINT from any such electric generation unit(s).
As VENTURE intends to place successive electric generation unit(s) into
COMMERCIAL OPERATION, VENTURE shall notify PSE&G and permit PSE&G to conduct an
examination thereof to determine whether same satisfies the requirements set
forth in Exhibit 2. VENTURE shall not be permitted to synchronize any such
successively completed electric generation unit(s) with the PUBLIC SERVICE
SYSTEM nor shall PSE&G be obligated to receive electrical power and energy
supplied to the RECEIPT POINT from any such successively completed electric
generation unit(s) unless and until: (i) PSE&G has examined, and pursuant to
such examination, determines that such successively completed electric
generation unit(s) satisfies the requirements set forth in Exhibit 2; and (ii)
VENTURE has the installation inspected and approved by an electrical inspection
authority approved by the NJBPU and receives and furnishes satisfactory evidence
to PSE&G of issuance of a Certificate of Approval. Thereafter, PSE&G shall
permit VENTURE to synchronize such successively completed electric generation
unit(s) with the PSE&G system and PSE&G shall be obligated to receive electrical
power and energy supplied to the RECEIPT POINT from such electric generation
unit(s).
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VENTURE shall not synchronize any electric generation unit(s) with the
PUBLIC SERVICE SYSTEM, at any time, without notification to and without
obtaining the consent of PSE&G, which consent shall not be withheld except
where such consent may be withheld by PSE&G pursuant to the provisions of this
Article XVI and Article V.
Upon appropriate notification by VENTURE, PSE&G shall use best efforts to
conduct and complete any examination of the COGENERATION FACILITY and/or
SUBSTATION FACILITY required under the provisions of this Article. PSE&G shall
not unreasonably delay any such examination nor unreasonably withhold any
acceptance require trigger the DATE OF INITIAL OPERATION, the DATE OF COMMERCIAL
OPERATION or the DATE OF FULL COMMERCIAL OPERATION. PSE&G's acceptance of the
COGENERATION FACILITY and SUBSTATION FACILITY, consistent to and in accordance
with the provisions of this Article, shall constitute the agreement required by
PSE&G to trigger the DATE OF FULL COMMERCIAL OPERATION.
After the DATE OF FULL COMMERCIAL OPERATION, VENTURE shall not rearrange,
reconfigure, modify, alter or change in a material way: (i) the SUBSTATION
FACILITY without notice to and the acceptance by PSE&G of such rearrangement,
reconfiguration, modification, alteration or charge, which acceptance by PSE&G
shall not be unreasonably delayed or withheld; (ii) any electric generation
unit(s) without notice to and acceptance by PSE&G of such rearrangement,
reconfiguration, modification, alteration or charge, which acceptance by PSE&G
shall not be unreasonably delayed or withheld and shall be governed by the
requirements specified in Exhibit 2.
Any review made by PSE&G of the Plans and Specifications of the
COGENERATION FACILITY or SUBSTATION FACILITY, any examination made by PSE&G of
the actual design, construction and/or installation of the COGENERATION FACILITY
or SUBSTATION FACILITY and/or any determination made by PSE&G in connection with
any such review or examination will be solely for the purpose of
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permitting PSE&G, consistent with its statutory obligations to its retail and
sale-for-resale customers, to: (i) determine whether the design, construction
and installation of such facilities are compatible with the INTERCONNECTION
FACILITY and the PUBLIC SERVICE SYSTEM; and (ii) ensure that operation of the
COGENERATION FACILITY and SUBSTATION FACILITY will not adversely affect the
integrity, reliability or safe operation of the INTERCONNECTION FACILITY and/or
the PUBLIC SERVICE SYSTEM.
PSE&G`s review or examination, and any determination made in connection
therewith, is not intended to be, nor will same be made by PSE&G for the purpose
of, nor should same be interpreted, construed and/or relied upon by VENTURE, or
any other person or entity, as an endorsement, approval, confirmation and/or
warranty of or by PSE&G relative to any aspect of the design, construction or
installation of VENTURE`s facilities, their safety, reliability, economic and/or
technical feasibility, performance and/or operational capability and/or the
suitability of same for their intended purpose(s). VENTURE shall not represent
to any third-party that PSE&G's review was undertaken for any reason other than
the reasons expressly stated in this Article.
VENTURE shall permit PSE&G, its officers, agents, servants and employees,
it successors and assigns, when and as requested, access to, egress and ingress,
from and over VENTURE's plant site and associated facilities, at any time, as
same may be necessary or required by PSE&G, in PSE&G's sole discretion, to
permit PSE&G, its officers, agents, servants and employees, its successors and
assigns, to take any action necessary to discharge its obligations or to
exercise its rights under this AGREEMENT, including but not limited to access to
VENTURE's plant site and associated facilities to: (i) permit PSE&G to examine,
inspect, test, operate, maintain, repair and replace its electricity recording
equipment and associated electricity measuring equipment; and, (ii) permit PSE&G
to perform switching operations on switch gear located in the SUBSTATION
FACILITY as may be necessary in connection with the operation,
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maintenance or repair of the INTERCONNECTION FACILITY. VENTURE shall not deny,
refuse or delay PSE&G's access to, egress and ingress in, from and over
VENTURE's plant site and associated facilities.
ARTICLE XVII
LIABILITY
Neither party nor its officers, directors, partners, agents, servants,
employees, affiliates, parent, subsidiaries or respective successors or assigns
shall be liable to the other party for claims for incidental, special, direct,
indirect or consequential damages (Damages) whether such Damages claim is based
on a cause of action based in warranty, negligence, strict liability, contract,
operation of law or otherwise except where such claim for Damages arises out of,
relates to or results from the gross negligence of such party or the willful
disregard by a party of its obligations under this AGREEMENT, provided however,
each party shall have the right to seek to recover from the other party direct
damages upon the occurrence of a breach of this AGREEMENT as defined in and
which has been established pursuant to and in accordance with Article XXIV of
this AGREEMENT.
ARTICLE XVIII
FORCE MAJEURE
An event of "Force Majeure" as used herein means an event beyond the
reasonable control of and which occurs without the fault or negligence of the
party claiming Force Majeure, which events may include but are not limited to:
acts of God; strikes, lockouts or other similar such industrial disturbances;
acts of the public enemy, wars, civil disturbances, blockades, military actions,
insurrections or riots; landslides, floods, washouts, lightning, earthquakes,
tornadoes, hurricanes, blizzards or other storms or storm warnings; explosions,
fires, sabotage or vandalism; mandates,
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directives, orders or restraints of any governmental, regulatory or judicial
body or agency; breakage, defects, malfunctioning, or accident to machinery,
equipment, materials, cables or wires; freezing of machinery, equipment,
materials, cables or wires; inability or delay in the obtaining of materials or
equipment; inability to obtain or utilize any permit, approval, easement,
license or right-of-way. The settlement of strikes, lockouts or other similar
such industrial disturbances shall be entirely within the discretion of the
party directly affected. The requirement herein that any event of Forme Majeure
shall be remedied with all reasonable dispatch shall not require the settlement
of strikes, lockouts or other similar such industrial disturbances by acceding
to any demands when such course of action is, in the opinion of the party
directly affected, inadvisable.
In the event PSE&G is rendered unable, wholly or in part, by an event of
Force Majeure, to perform any obligation it has under this AGREEMENT, it is
agreed that, on PSE&G giving notice and full particulars of such event of Force
Majeure to VENTURE, as soon thereafter as practicable, the obligations of PSE&G,
so far as they are affected by such event of Force Majeure, shall be suspended
during the continuance of any inability or incapacity so caused, but for no
longer period. PSE&G shall use best efforts to remedy the cause of such
inability or incapacity with all reasonable dispatch.
PSE&G shall not be liable to VENTURE for any claim(s), loss(es), damage(s),
liability(ies) or expense(s) sustained or incurred by VENTURE, arising out of,
relating to, or resulting from PSE&G's inability or incapacity to perform its
obligations under this AGREEMENT due to any event of Force Majeure, as herein
defined.
ARTICLE XIX
MITIGATION OF DAMAGES
VENTURE has been advised and acknowledges that conditions, events and/or
factors on the PUBLIC SERVICE SYSTEM and/or the INTERCONNECTION FACILITY
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may affect and/or impair PSE&G's ability to provide continuous or uninterrupted
SERVICE to VENTURE. As such, VENTURE agrees to use best efforts, consistent
with the exercise of prudent business judgment, to mitigate any and all damages
to its steam and/or electric customers resulting from any failure by PSE&G to
provide continuous or uninterrupted SERVICE to VENTURE.
ARTICLE XX
INDEMNIFICATION
VENTURE shall indemnify and hold harmless PSE&G and each and every of its
officers, agents, servants and employees, its successors and assigns of, from
and against any and all claims, demands, suits and actions and liabilities,
losses, damages, and/or judgments, which may arise therefrom, as well as against
any fees, costs, charges or expenses which PSE&G, its officers, agents,
servants and employees, its successors and assigns, incur in the defense of any
such claims, suits, actions or similar such demands made or filed by any third-
party, which in any manner arise out of, relate to, or result from PSE&G's
failure, for any reason, to provide SERVICE to VENTURE under this AGREEMENT,
except where such failure results from the gross negligence of PSE&G or the
willful disregard by PSE&G of its obligations under this AGREEMENT.
VENTURE shall indemnify and hold harmless PSE&G and each and every of its
officers, agents, servants and employees, its successors and assigns, from and
against any and all claims, demands, suits and actions and liabilities, losses,
damages, and/or judgments, which may arise therefrom, as well as against any
fees, costs, charges or expenses which PSE&G, it; officers, agents, servants and
employees, its successors and assigns incur in the defense of any such claims,
suits, actions or similar such demands made or filed by any third-party, to the
extent such claim, suit, action or similar demand arises out of, relates to, or
results from the design, construction, installation, operation, maintenance,
repair, replacement, supervision, inspection,
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testing, protection, reinforcement, reconstruction, decommissioning, removal,
use, control or ownership of the PROJECT, except to the extent such liability,
loss, damage and/or judgment results from the gross negligence of PSE&G or the
willful disregard by PSE&G of its obligations under this AGREEMENT.
In case a claim is asserted or action brought against PSE&G as to which
PSE&G believes it is entitled to indemnification under this Article XX, PSE&G
shall promptly notify VENTURE in writing of such claim or action. Prompt notice
as contemplated in the preceding sentence shall mean such notice as would be
required to enable VENTURE to assert and prosecute appropriate defenses
relative to such claim or such action. If PSE&G fails to give VENTURE prompt
notice of any claim or action as provided in this paragraph, VENTURE shall have
no obligation to indemnify PSE&G pursuant to this Article XX. Upon receipt of
such notice, VENTURE shall promptly make a determination of whether VENTURE
believes it is required to indemnify PSE&G and shall promptly notify PSE&G in
writing of that determination. If VENTURE determines that it is required to
indemnify PSE&G, pursuant to this Article XX, VENTURE shall assume the defense
thereof, including the employment of counsel, and shall thereafter assume the
payment of all costs and expenses relative to the defense of such claim or
action. PSE&G shall cooperate in all reasonable respects with VENTURE in the
defense of such claim or action. PSE&G shall have the right, at its own expense,
to employ separate counsel in any such action and to participate in the defense
thereof. VENTURE shall not be liable for any settlement of any such claim or
action effected without its consent. Before settling any claim or action,
VENTURE shall demonstrate to PSE&G that VENTURE has sufficient financial means
or has made adequate arrangements to make all payments under any such settlement
as and when due.
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ARTICLE XXI
INSURANCE
Upon. execution of this AGREEMENT, VENTURE shall obtain and maintain in
force and effect for the PROJECT:
1. A policy of comprehensive general liability insurance in a minimum
amount of five million dollars ($5,000,000) for each occurrence for
coverage for bodily injury or death and damage or property loss.
2. A workmen's compensation or employer's liability insurance policy in
accordance with applicable New Jersey statutory requirements.
The policy amounts stated above are minimum levels which VENTURE shall be
obligated to maintain in force and effect. However, and regardless of such
minimum level requirements, VENTURE shall be obligated to maintain in force and
effect insurance coverage in such amounts and against such risks as shall be
consistent with prudent practice in its industry. Satisfactory evidence of the
existence of insurance coverage consistent with the requirements of this Article
shall be furnished by VENTURE to PSE&G within sixty (60) days of execution of
this AGREEMENT and thereafter on or before January 1 of each year until this
AGREEMENT is terminated.
Any policy of insurance obtained by VENTURE, as required by this Article,
shall not be materially altered, cancelled or terminated, without furnishing
PSE&G notice thereof thirty (30) days prior to the effective date of such
alteration, cancellation, or termination.
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ARTICLE XXII
WARRANTIES
Except with respect to any lien possessed by FINANCIER, VENTURE warrants
and shall be obligated to supply to the RECEIPT POINT NET ELECTRICAL POWER
OUTPUT and associated NET ELECTRICAL ENERGY free and clear of any liens and/or
adverse claims which might attach to said electric power and energy prior to its
supply to and receipt by PSE&G. VENTURE agrees to indemnify and hold harmless
PSE&G against any and all claims, demands, suits, actions, costs and
liabilities, damages, losses and/or judgments arising out of, relating to or
resulting from any such adverse claim or lien, as well as against any fees,
costs, charges or expenses which PSE&G might incur in the defense of any such
claim, suit, action or similar such demand made or filed by such person, its
successors or assigns asserting such adverse claim or lien. In effecting the
right of or obligation to indemnify pursuant to and in accordance with the
provisions of this paragraph the procedural provisions set forth in Article XX
of this AGREEMENT shall be applicable.
ARTICLE XXIII
EVENTS OF TERMINATION
Either party may terminate this AGREEMENT upon the occurrence of any of the
following events (hereinafter referred to as Event(s) of Termination): (i)
VENTURE's failure to complete construction and installation of the COGENERATION
FACILITY and SUBSTATION FACILITY in accordance with the final Plans and
Specifications for such facilities and to have the PROJECT placed in FULL
COMMERCIAL OPERATION on or before May 1, 1990, provided however, in the event
the PROJECT has not been completed and placed in FULL COMMERCIAL OPERATION on or
before May 1, 1990, but the PROJECT has been, is at that time, and continues
thereafter, to be under a bona fide program of continuous construction, the
May 1, 1990
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date shall be extended until May 1, 1991; (ii) PSE&G's failure to obtain any
material easement, right-of-way, license, rental, or REQUIRED PERMIT necessary
to enable PSE&G to construct, install, own, operate and maintain the
INTERCONNECTION FACILITY, by December 31, 1987; (iii) VENTURE's failure to
obtain any Critical Path Permit as defined in the LOAN AGREEMENT by December 31,
1987; (iv) the occurrence of an Event of Default, as defined in the LOAN
AGREEMENT, which is not cured or waived within any time period specified in the
LOAN AGREEMENT; (v) the occurrence of a suspension, pursuant to and in
accordance with the provisions of Section E of Article XIII, which remains, in
effect for more than ninety (90) days and is in effect on or after December 31,
1987; (vi) an FERC determination that the COGENERATION FACILITY is no longer a
qualifying facility at any time during any term of this AGREEMENT; (vii)
termination, for any reason, of the Agreement for Purchase of Electric Power
between COGEN and JCP&L dated October 29, 1985, provided however, in the event
such termination is contested, termination of this AGREEMENT is subject to entry
of a final and non-appealable order/judgment terminating the Agreement for
Purchase; or (viii) VENTURE's failure, for a period of 365 consecutive days, to
supply to PSE&G at the RECEIPT POINT NET ELECTRICAL POWER OUTPUT and associated
NET ELECTRICAL ENERGY, except where such failure results from an event of Force
Majeure as defined in Article XVIII, provided however, that VENTURE has used
during such 365 day period and continues thereafter to use best efforts to
resume the supply of NET ELECTRICAL POWER OUTPUT and associated NET ELECTRICAL
ENERGY to PSE&G at the RECEIPT POINT.
If any Event of Termination occurs and either party elects to exercise its
right, as provided in the preceding paragraph, to terminate this AGREEMENT, such
party shall provide the other party with written notice of termination of this
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AGREEMENT (hereinafter referred to as Notice of Termination). The Notice of
Termination shall specify the basis for such termination. In such event, this
AGREEMENT and the parties obligations hereunder shall terminate effective
thirty (30) days after receipt of such Notice of Termination.
Termination of this AGREEMENT for and on account of any Event of
Termination specified in this Article XXIII shall not relieve VENTURE from any
obligation under this AGREEMENT to pay PSE&G for any unpaid costs associated
with the design, construction and installation of the INTERCONNECTION FACILITY,
CANCELLATION COSTS, DECOMMISSION COSTS or any other unpaid bill or BILLING
STATEMENT.
ARTICLE XXIV
BREACH OF CONTRACT
A breach of this AGREEMENT may occur upon the happening of any of the
following:
A. failure of a party to pay any amount due the other party pursuant to and
in accordance with this AGREEMENT, which failure continues for a period
of thirty (30) days after the due date for such payment as determined
pursuant to and in accordance with the provisions of this AGREEMENT;
B. failure of a party to perform any obligation under this AGREEMENT,
which failure continues for a period of fifteen (15) days after
written notice of such nonperformance is received by such party. Any
notice of
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nonperformance (hereinafter referred to as Notice of Nonperformance)
served pursuant to this Article shall: (i) be clearly identified as a
Notice of Nonperformance and make specific reference, as being served
pursuant to this Article XXIV; and (ii) state the basis for the alleged
claim of nonperformance.
In the event a party claims that a breach of this AGREEMENT has occurred,
such party shall provide the other party with written notice thereof
(hereinafter referred to as Notice of Breach). The Notice of Breach shall state
the basis for such claim and any remedy sought. The parties shall have thirty
(30) days within which to resolve the dispute via negotiation. If within such
thirty (30) day period after service of the Notice of Breach, the parties are
unable to resolve their differences by negotiation, the party alleging the
breach shall have the right to submit the dispute for resolution to arbitration
or to any regulatory body having jurisdiction.
The nature and extent of any damage incurred or sustained by the
non-breaching party, as a result of any breach, shall be determined and
calculated as of the date the breaching party's failure to perform commenced.
Except as otherwise provided in Articles V and XIII of this AGREEMENT,
neither party shall refuse to make, suspend or delay any payment(s) otherwise
required to be made under this AGREEMENT or refuse to carry out any of its
obligations under this AGREEMENT for or on account of or as a result of an
alleged breach of this AGREEMENT.
Any waiver by a party of any breach shall be deemed to extend only to the
particular breach waived and shall not limit or otherwise affect any right(s)
that such party may have with respect to any other or future breach, whether of
a similar or different nature.
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ARTICLE XXV
ARBITRATION
Any controversy, dispute or claim between the parties to this AGREEMENT,
which the parties are unable to resolve by negotiation, shall, if arbitration is
chosen by any party pursuant to its rights under this AGREEMENT, be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (AAA), then in effect, and the provisions of this
Article XXV. Nothing contained herein shall deprive either party of any right
to: (i) obtain injunctive or other equitable relief in any Court in the State of
New Jersey, on an interim basis in accordance with Article XXVI or otherwise,
pending disposition of the arbitration of any controversy, dispute or claim;
and/or (ii) institute a suit for specific performance; and/or (iii) assert any
crossclaim or third-party claim in any suit at law instituted by a third-party;
and/or (iv) file and prosecute any complaint at and with the FERC or make and
prosecute any claim or position in any filing made at the FERC by either party
or some third-party. Nothing herein shall prevent either party from seeking FERC
review of any proposed change of the charges set forth in Article X of this
AGREEMENT. No suit at law which seeks to resolve any controversy, dispute or
claim between the parties shall be instituted by either party hereto, except
where such suit is instituted to confirm an arbitration award received pursuant
to this Article.
Any controversy, dispute or claim submitted to arbitration shall be
settled by arbitration in New Jersey in accordance with the laws of the State of
New Jersey. Any award entered pursuant to such arbitration shall be binding on
both parties and judgment upon the award rendered or received may be entered in
any court of appropriate subject matter jurisdiction located in the State of New
Jersey pursuant to N.J.S.A. 2A:24-1 et seq.
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Exclusive jurisdiction relative to the entry of judgment on any arbitration
award relative to any controversy or claim between the parties shall be in any
court of appropriate subject matter jurisdiction located in the State of New
Jersey, and the parties to this AGREEMENT expressly subject themselves hereby to
the personal jurisdiction of said court for entry of any such judgment and for
the resolution of any dispute, action, or suit arising in connection with the
entry of such judgment.
The controversy or claim to be arbitrated shall be referred to three (3)
arbitrators, one to be selected by each party and the third to be selected by
the AAA. The selections to be made by the parties shall be made from the list of
the National Panel of Arbitrators maintained by the AAA. The arbitrator to be
selected by the AAA shall be an attorney-at-law of the State of New Jersey. All
decisions and awards shall be made by a majority of the arbitrators, except for
decisions relating to discovery as set forth herein.
In the event any arbitrator dies, or refuses to act, or becomes incapable,
incompetent or unfit to act before hearings have been completed and/or before an
award has been rendered, a successor arbitrator may be selected by the party who
originally made the selection. The selection of the successor arbitrator shall
be made consistent with the selection procedure set forth in the preceding
paragraph.
The arbitrators selected pursuant to this AGREEMENT shall be governed by
and apply the laws of the State of New Jersey and federal law, as applicable, in
conducting any arbitration proceeding and/or in making any award.
Notice of a demand for arbitration (hereinafter referred to as Demand for
Arbitration) of any controversy or dispute between the parties shall be filed in
writing with the AAA by the party seeking arbitration and a copy of same shall
be served contemporaneously with such filing on the other party. The notice
shall state, with specificity, the nature of the dispute and the remedy sought.
After such notice has been filed, the parties may make discovery of any matter
relevant to such dispute
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before the hearing, to the extent and in the manner provided by the Rules
Governing Civil Practice in the Superior Court contained in the Rules Governing
the Courts of the State of New Jersey. Any question that may arise with respect
to the obligations of the parties relative to discovery and/or relative to the
protection of the discovery materials shall be referred solely to the arbitrator
selected by the AAA. His determination shall be final and conclusive. Discovery
shall be completed not later than ninety (90) days after filing of the notice of
arbitration unless such period for discovery is extended by the arbitrator
selected by the AAA, upon a showing of good cause by either party to the
arbitration.
The arbitrators may consider any material which is relevant to the subject
matter of any such controversy even if such material might also be relevant to
an issue or issues not subject to arbitration hereunder. A stenographic record
shall be made of any arbitration hearing.
Any costs associated with any arbitration under this Article, including
but not limited to attorney fees and witness expenses, shall be paid by the
party against whom an award is entered unless the Arbitrators by their award
shall otherwise provide.
Arbitration may not be utilized and the arbitrators selected in accordance
with this Article shall not possess the authority or power to alter, amend or
modify any of the terms or conditions or charges set forth in this AGREEMENT,
and further, the arbitrators may not enter any award which alters, amends or
modifies such terms, conditions or charges in any form or manner.
ARTICLE XXVI
SPECIFIC PERFORMANCE
Without regard to the requirements or provisions of Article XXIV and
Article XXV of this AGREEMENT, in addition to any of the rights and/or
remedies referred to in this AGREEMENT, either party shall have the right to
institute an action
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against the other party in a court of equity in the State of New Jersey or at
the FERC to obtain specific performance by such other party of any of such other
party's obligations under this AGREEMENT.
ARTICLE XXVII
MODIFICATIONS
The terms and conditions under which SERVICE shall be provided, and the
charges applicable thereto, are as herein set forth. This AGREEMENT is subject
to modification from time to time, by mutual agreement of the parties, reduced
to writing and signed by both parties.
Either party shall have the right, from time to time, without limitation or
reservation, through filings with the FERC or any successor agency, to request
authorization to change the charges specified in Article X of this AGREEMENT;
provided however, PSE&G's right to file for authorization for a change in the
charges specified in Article X shall be limited to filings by PSE&G to modify
the transmission service charge to reflect changes in the transmission related
costs in PSE&G's most recently approved rates then in effect.
However, in the event the obligations of PSE&G under this AGREEMENT are
adversely affected in any material way at any time during any term of this
AGREEMENT as a result of any governmental, legislative and/or regulatory
action(s) which specifically deals with this type of transaction, the SERVICE
under this AGREEMENT and/or the terms and conditions thereof, PSE&G shall have
the right to make a filing with the FERC to request authority to alter, amend
or change any charge or term or condition in this AGREEMENT, other than the Term
as specified in Article VIII, which in PSE&G's judgment has been affected by
such action(s).
Any party shall have the right to oppose any filing made by the other party
under this Article XXVII to the extent that such other party is legally
permitted to do so.
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ARTICLE XXVIII
ASSIGNMENT/TRANSFER
VENTURE may and is expressly determined, at any time and from time-to-time
during the term of this AGREEMENT, to assign its rights in this AGREEMENT to
FINANCIER. In the event VENTURE requests PSE&G to execute a Consent to
Assignment in connection with any such assignment, the terms and conditions of
the Consent to Assignment must be acceptable to PSE&G and not contravene any
term or condition of this AGREEMENT. In such event, VENTURE shall request in
writing that PSE&G execute such Consent to Assignment. Except as otherwise
provided herein with respect to FINANCIER, VENTURE may not assign its rights
and/or transfer its rights and obligations in this AGREEMENT without the prior
written consent of PSE&G, which consent shall not be unreasonably withheld.
Nothing contained herein shall prevent VENTURE from pledging or mortgaging all
or any part of the property of the PROJECT in connection with financing the
PROJECT.
No assignee, transferee, pledgee or mortgagee and/or any person designated
by such assignee, transferee, pledgee or mortgagee may operate the PROJECT,
pursuant to any rights such party may have under any mortgage, assignment,
transfer or security agreement, unless such entity or person has been approved
and authorized by PSE&G to operate the PROJECT, and in connection with seeking
to obtain such approval and authorization, agrees to be bound by, subject to and
to comply with the terms and conditions of this AGREEMENT while operating the
PROJECT. PSE&G shall not unreasonably delay or withhold any such approval or
authorization.
PSE&G may, on notice to, end with the approval of, VENTURE, assign its
rights under this AGREEMENT. Additionally, PSE&G may, on notice to, and with the
approval of VENTURE, assign and transfer its rights and obligations under this
AGREEMENT to an entity controlled by or under common control with PSE&G. VENTURE
shall not unreasonably delay or withhold any approval of an assignment or
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assignment/transfer by PSE&G provided that the assignee or the
assignee/transferee agrees to be bound by, subject to and to comply with the
terms and conditions of this AGREEMENT.
ARTICLE XXIX
CURE BY FINANCIER
Within thirty (30) days of execution of this AGREEMENT, VENTURE shall
furnish to PSE&G a list containing the names and addresses of the FINANCIERS
VENTURE has or intends to utilize in connection with placing the COGENERATION
FACILITY into FULL COMMERCIAL OPERATION. During any term of this AGREEMENT,
VENTURE shall update the list as changes are made thereto. For so long as
VENTURE shall have outstanding and unpaid any financing liabilities, PSE&G
agrees to promptly furnish to all FINANCIERS, then known to PSE&G, a copy of any
Notice of Cancellation, Notice of Nonperformance, Notice of Suspension, Notice
of Breach, Demand for Arbitration or Notice of Termination given to VENTURE.
Additionally, PSE&G shall not terminate this AGREEMENT unless any written notice
of such termination or breach, as the case may be, and the reasons therefor have
been given to and received by each FINANCIER then known to PSE&G thirty (30)
days prior to the effective date of the termination. PSE&G shall not terminate
this AGREEMENT if, after notice thereof, and prior to any effective date of
termination FINANCIER has:
(i) cured the condition precipitating the Notice of Breach under Article
XXIV or the Notice of Termination under Article XXIII; or
(ii) if the condition precipitating such Notice of Breach or such Notice
of Termination is not capable of being cured prior to the date of
termination, commenced in a diligent manner to cure the condition
precipitating the Notice of
<PAGE>
84
Breach or Notice of Termination and for so long as the FINANCIER
diligently continues such efforts; or
(iii) if the condition precipitating the Notice of Breach or Notice of
Termination is not capable of being cured prior to the date of
termination, caused the initiation of and is diligently prosecuting
efforts to gain possession of the PROJECT and for so long as the
FINANCIER diligently continues such efforts.
As indicated herein, in the event the condition precipitating the Notice of
Breach or Notice of Termination is not capable of being cured prior to the date
of termination, PSE&G shall not terminate this AGREEMENT where FINANCIER is
diligently prosecuting efforts to gain possession of the PROJECT, provided
however, in the event the FINANCIER does not gain possession of the PROJECT
within ninety (90) days of the date of the notice PSE&G served on FINANCIER, and
FINANCIER intends to continue its efforts, FINANCIER shall be obligated
thereafter to commence payment of the applicable monthly demand charge specified
in Article X.
In the event FINANCIER gains possession of the PROJECT, FINANCIER shall
promptly designate a person to operate the PROJECT. The name and credentials of
the person so designated shall be promptly submitted thereafter to and such
person so designated must be approved and authorized by PSE&G to operate the
PROJECT. Any approval of the person so designated shall not be unreasonably
delayed or withheld by PSE&G. In the event PSE&G approves the person so
designated, PSE&G shall not be obligated to give authorization to the person so
designated to actually operate the PROJECT unless and until the person so
designated agrees in writing to be bound by, subject to and to comply with the
terms and conditions of this AGREEMENT for the period during which the person so
designated intends to operate the PROJECT. Upon execution of the aforesaid
instrument, the person so designated shall thereafter, inter
<PAGE>
85
alia, be responsible for and commence the payment of the charges set forth in
Article X. However, FINANCIER, and the person so designated, shall have no
responsibility whatsoever for any obligation of VENTURE incurred prior to the
date on which FINANCIER takes possession of the PROJECT.
In the event of a foreclosure and a resultant sale or transfer of the
PROJECT to a new entity, any obligation of PSE&G to perform its obligations
under the AGREEMENT shall be conditioned upon: (i) the approval by PSE&G of any
new operator of the PROJECT, which approval shall not be unreasonably withheld
or delayed; (ii) agreement by the new entity to comply with the rules and
regulations of the NJBPU, the FERC, and any other agency having jurisdiction
over the PROJECT relative to the sale or transfer of same; (iii) receipt by such
new entity of any license(s), permit(s) and approval(s) as may be required in
connection with the sale or transfer of the PROJECT; and (iv) the execution and
delivery of a written assumption agreement, in form satisfactory to PSE&G,
pursuant to which the new entity and/or operator agree to assume all obligations
under and agree therein to be bound by, subject to and to comply with the terms
and conditions of this AGREEMENT.
Notwithstanding any rights which FINANCIER may have, in the event PSE&G
interrupts SERVICE to the COGENERATION FACILITY in connection with the
occurrence of the condition or event which precipitated the Notice of
Termination or Notice of Breach, PSE&G shall not be obligated to resume SERVICE
to the PROJECT unless the condition or event or cause thereof which precipitated
the Notice of Termination or Notice of Breach is or has been remedied in
accordance with the provisions of this AGREEMENT. Prior to PSE&G being obligated
to resume SERVICE to the PROJECT, PSE&G shall have the right to require
FINANCIER to provide adequate assurance to PSE&G that the condition or event
precipitating the Notice of Termination or Notice of Breach will not recur.
<PAGE>
86
ARTICLE XXX
FINANCIER SECURITY AGREEMENTS
As indicated in Article XXVIII, VENTURE may assign any rights in this
AGREEMENT to FINANCIER and may pledge or mortgage any or all of the property of
the PROJECT. In the event FINANCIER alleges that a breach or an event of default
has occurred under any operative agreement between FINANCIER and VENTURE and
FINANCIER thereafter elects to exercise any right(s) under any applicable
security, mortgage, assignment or other agreement then in effect between
FINANCIER and VENTURE, it is agreed that, upon receipt of such notice from
FINANCIER, PSE&G shall provide notice to VENTURE and thereafter PSE&G shall
accept the instructions of FINANCIER in accordance with the terms of any
applicable security, mortgage or assignment agreement. In such event, VENTURE
shall have no claim against PSE&G for, and hereby agrees to release PSE&G from,
any liability for any cost, expense, loss, damage or liability VENTURE may incur
or sustain arising out of, relating to or resulting from any action(s) which
PSE&G determines it is obligated to take pursuant to any operative agreement
between VENTURE and FINANCIER.
ARTICLE XXXI
DETERMINATION OF PSE&G COSTS
The costs for any work done or service performed by PSE&G personnel, as
required by this AGREEMENT, which costs are to be billed to and to be paid by
VENTURE pursuant to this AGREEMENT shall be determined by PSE&G in accordance
with PSE&G's "Procedures for Work Done at the Expense of Others," then in
effect.
<PAGE>
87
ARTICLE XXXII
STANDARD FOR PERFORMANCE
Unless otherwise expressly provided for in this AGREEMENT, PSE&G shall
undertake and discharge any obligation it has in this AGREEMENT to, inter alia,
design, construct, install, operate, maintain, repair, replace, reinforce,
rearrange, purchase, select, examine, review, inspect or accept any facility or
equipment pursuant to and in accordance with any applicable PSE&G practice(s),
standard(s) and/or procedure(s). PSE&G shall use the same care and diligence in
controlling the costs of any such activity(ies) VENTURE is required to make
payment for under this AGREEMENT as if the activity(ies) was being performed by
and for PSE&G's own account.
ARTICLE XXXIII
STANDBY ELECTRIC SERVICE
Standby electric service to the COGENERATION FACILITY shall be furnished by
PSE&G, pursuant to an applicable tariff on file with the NJBPU.
ARTICLE XXXIV
ENTIRE AGREEMENT
This AGREEMENT supercedes, as of the date of this AGREEMENT, the Service
and Interconnection Agreement dated October 10, 1986 oy and between PSE&G and
VENTURE.
This AGREEMENT constitutes the entire agreement and understanding of the
parties relating to the subject matter of this AGREEMENT and each party confirms
that it is not relying upon any representation, assumption, understanding or
warranty, except as specifically set forth herein.
<PAGE>
88
ARTICLE XXXV
SUCCESSORS AND ASSIGNS
This AGREEMENT shall be binding upon and shall inure to the benefit of, or
may be performed by, the successors and assigns of the parties, except that no
assignment, pledge or other transfer of this AGREEMENT by any party shall
operate to release the assignor, pledgor or transferor from any of its
obligations under this AGREEMENT unless consent to the release is given in
writing by the other party or unless such transfer is incident to a merger or
consolidation with, or transfer of all or substantially all of the assets of the
transferor to another person or business entity which person or entity shall, as
part of such succession, assume all the obligations of the transferor under this
AGREEMENT.
ARTICLE XXXVI
CHOICE OF LAW
This AGREEMENT shall be interpreted, construed, governed by, performed and
enforced in accordance with the laws of the State of New Jersey and federal law,
where applicable. All questions concerning the validity, construction and
enforceability of the AGREEMENT as well as questions concerning the sufficiency
or other aspects of performance under the AGREEMENT shall be determined under
the laws of the State of New Jersey and federal law, where applicable.
ARTICLE XXXVII
CAPTIONS
The subject headings of the Articles of this AGREEMENT are inserted solely
for the purpose of convenient reference and are not intended to, nor shall same
affect the meaning of any provision of this AGREEMENT.
<PAGE>
89
ARTICLE XXXVIII
COUNTERPARTS
This AGREEMENT may be executed in counterparts. Each shall be deemed an
original but together shall constitute one and the same instrument.
ARTICLE XXXIX
MISCELLANEOUS
This AGREEMENT and the obligations of the parties hereunder are subject
to all present and future valid laws and to all valid present and future orders,
rules and regulations of duly constituted regulatory authorities having
jurisdiction.
In case of conflict between any provisions hereof and any applicable
law, regulation or regulatory order, such applicable law, regulation or
regulatory order shall govern.
All term defined in this AGREEMENT shall have the same defined meanings
when used in any notice, correspondence, report or other document made or
delivered pursuant to or in connection with this AGREEMENT, unless the context
shall otherwise require.
Each reference herein to VENTURE and PSE&G, shall be deemed to include
their respective successors and assigns.
All of the covenants, warranties, undertakings and agreements of VENTURE
and PSE&G shall bind the respective parties, their successors and assigns.
<PAGE>
90
ARTICLE XL
NOTICE OF AMENDMENTS TO PJM OR
MID-ATLANTIC AGREEMENTS
In the event that application is made for approval of any amendment to the
PJM Agreement, the Mid-Atlantic Area Coordination Group Agreement or any other
agreement to which PSE&G is a party, which amendment, if allowed to take effect,
would impair the SERVICE being provided to VENTURE under this AGREEMENT, PSE&G
shall provide timely notice to VENTURE of such application.
ARTICLE XLI
RESERVATIONS
No party shall be prejudiced or bound, except as otherwise specifically
provided herein, nor shall any party be deemed to have approved, accepted,
agreed or consented to any concept, theory or principle underlying or supposed
to underlie any of the matters contained herein, including but not limited to
any concept, theory, principle or method used to calculate the rates provided
for herein.
All parties further understand and agree that the provisions of this
AGREEMENT relate only to the specific matter referred to herein and no party or
person waives any claim or right which it may otherwise have with respect to any
matter not expressly provided for herein.
<PAGE>
91
ARTICLE XLII
NOTICES
Any notice, request, demand or statement which either PSE&G or VENTURE may
desire to give to the other shall be VENTURE writing and shall be considered as
duly delivered when mailed by certified mail addressed to said party as follows:
(a) If to PUBLIC SERVICE ELECTRIC AND GAS COMPANY:
Public Service Electric and Gas Company
80 Park Plaza - Mail Code T14A
P. 0. Box 570
Newark, New Jersey 07101-0570
ATTENTION: General Manager - System Planning
(b) If to COGEN TECHNOLOGIES NJ VENTURE:
Cogen Technologies NJ, Inc.
Managing Venturer
Cogen Technologies NJ Venture
14614 Failing Creek Drive
Suite 212
Houston, Texas 77068
ATTENTION: Robert C. McNair
President
Routine communications, including monthly BILLING STATEMENTS, shall be
considered as duly delivered when mailed by either certified or ordinary mail:
(a) If to PUBLIC SERVICE ELECTRIC AND GAS COMPANY:
Public Service Electric and Gas Company
80 Park Plaza - Mail Code T14A
P. 0. Box 570
Newark, New Jersey 07101-0570
ATTENTION: General Manager - System Planning
(b) If to COGEN TECHNOLOGIES NJ VENTURE:
Cogen Technologies NJ, Inc.
Managing Venturer
Cogen Technologies NJ Venture
14614 Falling Creek Drive
Suite 212
Houston, Texas 77068
ATTENTION: Robert C. McNair
President
<PAGE>
92
IN WITNESS WHEREOF, this AGREEMENT has been executed and delivered as of
the date and year first above written.
COGEN TECHNOLOGIES NJ VENTURE
By: /s/ ROBERT C. MCNAIR
---------------------------
ROBERT C. MCNAIR
PRESIDENT
COGEN TECHNOLOGIES NJ, INC.
MANAGING VENTURER
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
By: /s/ STEPHEN A. MALLARD
---------------------------
STEPHEN A. MALLARD
SENIOR VICE PRESIDENT
PUBLIC SERVICE ELECTRIC AND
GAS COMPANY
<PAGE>
===============================================================================
BAYONNE COGENERATION PROJECT
-----------------------
TERM LOAN AGREEMENT
Dated as of November 1, 1987
-----------------------
COGEN TECHNOLOGIES NJ VENTURE,
Borrower
and
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
Lender
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
Section 1. Definitions.............................. 1
Section 2. Term Loan................................ 1
2.1 Term Loan Commitment......................... 1
2.2 Interest on Term Notes....................... 2
Section 3. Method of Borrowing; Use of Proceeds..... 2
3.1 Method of Borrowings......................... 2
3.2 Use of Proceeds of Term Loan................. 2
Section 4. Payments; Prepayments; Fees.............. 2
4.1 Payments Due on Non-Business Days............ 2
4.2 Required Repayments of the Term Notes........ 3
4.3 Extraordinary Prepayment of the
Term Notes................................. 3
4.4 Optional Prepayment of Term Notes............ 3
4.5 Premium with Respect to Certain
Prepayments of Term Notes.................. 4
4.6 Partial Prepayments.......................... 4
4.7 Notice of Prepayments........................ 4
4.8 Non-Usage Fee................................ 4
4.9 Delayed Takedown Fee......................... 5
Section 5. Conditions Precedent..................... 5
5.1 Conditions to Closing Date................... 5
5.2 Conditions to Term Loan...................... 8
Section 6. Representations and Warranties........... 16
6.1 Liabilities.................................. 16
6.2 Existence and Business....................... 16
6.3 Compliance with Law.......................... 16
6.4 Power and Authorization; Enforceable
Obligations................................ 16
6.5 Governmental Actions......................... 17
6.6 No Legal Bar................................. 17
6.7 No Litigation................................ 18
6.8 No Default or Event of Loss ................. 18
6.9 Interests in Contracts....................... 18
6.10 Interests in Property; Liens................. 18
6.11 No Burdensome Restrictions................... 19
6.12 Taxes........................................ 19
(i)
<PAGE>
Page
----
6.13 Public Utility Status....................... 19
6.14 Federal Regulations......................... 20
6.15 ERISA....................................... 20
6.16 Investment Company Act...................... 20
6.17 Security Documents.......................... 20
6.18 Full Disclosure............................. 21
6.19 Power Purchase Agreements and Other
Assigned Contracts........................ 21
6.20 Principal Place of Business, Etc............ 22
6.21 Compliance with Building Codes,
Zoning Laws, Etc.......................... 22
6.22 Roads....................................... 22
6.23 Availability of Utilities................... 22
6.24 Sufficiency of Project Documents............ 22
6.25 FERC Exhibits............................... 23
6.26 Broker's or Finder's Commissions............ 23
6.27 Securities Acts............................. 23
6.28 Compliance with Environmental Laws.......... 23
6.29 Representations as to Partners.............. 24
Section 7. Representation of the Lender............... 26
7.1 Representation of the Lender................. 26
Section 8. Affirmative Covenants...................... 27
8.1 Financial Statements........................ 27
8.2 Certificates; Other Information............. 28
8.3 Payment of Obligations...................... 29
8.4 Conduct of Business and Maintenance
of Existence............................. 29
8.5 Maintenance of Property;
Restoration of Facility................... 30
8.6 Assigned Contracts.......................... 30
8.7 Inspection of Property; Books and
Records; Discussions...................... 30
8.8 Notices..................................... 31
8.9 Assignments of Additional Contracts;
Maintenance of Liens of the Security
Documents; Future Mortgages............... 33
8.10 Operating Budget............................ 33
8.11 Plans and Specifications.................... 35
8.12 Initial Date of Delivery.................... 35
8.13 Correction of Work.......................... 35
8.14 Defend Title................................ 35
8.15 Independent Engineer........................ 35
8.16 Debt Service Reserve Account................ 35
8.17 Regulatory Status........................... 35
8.18 Environmental Covenants..................... 36
(ii)
<PAGE>
Page
----
Section 9. Negative Covenants.................. 37
9.1 Indebtedness............................ 37
9.2 Limitation on Liens..................... 37
9.3 Limitation on Contingent obligations.... 38
9.4 Restricted Payments..................... 38
9.5 Restriction on Investments.............. 39
9.6 Prohibition of Fundamental Changes...... 39
9.7 Limitation on Leases.................... 39
9.8 No Plan................................. 39
9.9 Prohibition on Disposition of Assets.... 40
9.10 Amendments, Etc. of Contracts........... 40
9.11 Transactions with Affiliates
and Others............................ 40
9.12 FERC Exhibits........................... 41
Section 10. Events of Default.................. 41
10.1 Events of Default....................... 41
10.2 Non-Recourse Nature of Liability
to Partners........................... 47
Section 11. Insurance.......................... 47
11.1 Insurance............................... 47
11.2 Insurance Against Loss or
Damage to the Facility................ 47
11.3 Comprehensive General Liability
Insurance............................. 50
11.4 Adjustment of Losses.................... 51
11.5 Application of Payments Relating
to Partial Loss or Damage............. 51
11.6 Evidence of Insurance................... 53
Il.7 Report.................................. 53
11.8 Additional Insurance by the Lender or
the Borrower.......................... 53
Section 12. MISCELLANEOUS...................... 54
12.l Home Office Payment..................... 54
12.2 Registration, Transfer and Exchange of
Term Notes; Lost Term Notes........... 54
12.3 Survival of Representations
and Warranties........................ 55
12.4 Amendment and Waivers................... 55
12.5 Notices................................. 55
12.6 Payment of Expenses and Taxes........... 56
12.7 Successors and Assigns.................. 57
12.8 Additional Financing.................... 57
12.9 Notices to Subsequent Holders........... 59
12.l0 Lender Sole Beneficiary................ 59
(iii)
<PAGE>
Page
----
12.11 Counterparts 59
12.12 Descriptive Headings 59A
12.13 Satisfaction Requirement 59A
12.14 Severability 59A
12.15 GOVERNING LAW 59A
12.16 No Third Party Beneficiaries 59A
12.17 CONSENT TO JURISDICTION 59A
ANNEXES
- -------
Annex A Definitions
Annex B Address, Account and Other
Information Regarding Lender
Annex C Prepayment Schedule
SCHEDULES
- ---------
Schedule 1 Liabilities
Schedule 2 Governmental Actions -- received as of Closing
Date
Schedule 3 Governmental Actions -- to be obtained after the
Closing Date but before the Borrowing Date
Schedule 4 Governmental Actions -- to be obtained after the
Borrowing Date
Schedule 5 UCC and Other Security-Related Filings
Schedule 6 Budget and Project Schedule
Schedule 7 Addresses of Partners
Schedule 8 Existing Liens
EXHIBITS
- --------
Exhibit A Form of Term Notes
Exhibit B Forms of Opinions
Exhibit C-1 Form of Consent of General Electric Company to the Assignment of
the System Supply Agreement and the Operation & Maintenance
Contract.
Exhibit C-2 Form of Consent of Jersey Central Power & Light
Company to the Assignment of the Electric Power
Purchase Agreement.
Exhibit C-3 Form of Consent of IMTT-Bayonne to the Assignment of the IMTT Power
Purchase Agreement and the Steam Facilities Lease.
Exhibit C-4 Form of Consent of Bayonne Industries, Inc. and IMTT-Bayonne to the
Assignment of the Site Lease and the Purchase and Sale Agreement.
Exhibit C-5 Form of Consent of Public Service to the Assignment of the Service
and Interconnection Agreement and the Gas Purchase Agreement.
(iv)
<PAGE>
Exhibit C-6 Form of Consent of Bayonne Industries, Inc. to the Assignment of
the Option Agreement.
Exhibit C-7 Consent of Exxon to the Assignment of the Steam Purchase Agreement
and alternative form thereof
Exhibit D Form of Mortgage
Exhibit E Form of Security Agreement
Exhibit F Form of Disbursement Agreement
(v)
<PAGE>
TERM LOAN AGREEMENT dated as of November 1, 1987 (the "Agreement")
between COGEN TECHNOLOGIES NJ VENTURE, a general partnership organized under the
laws of the State of New Jersey (the "Borrower"), and THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA (the "Lender").
W I T N E S S E T H :
--------------------
WHEREAS, the Borrower desires that the Lender provide financing for
the Project (as hereinafter defined); and
WHEREAS, the Lender is willing to provide such financing subject to
and upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter contained and other valuable consideration,
the sufficiency of which is hereby acknowledged, the parties hereto hereby agree
as follows:
Section 1. Definitions. Each capitalized term used herein and not
otherwise defined herein shall have the meaning specified therefor in Annex A
hereto attached.
Section 2. Term Loan.
2.1 Term Loan Commitment. Subject to and upon the terms and
conditions herein set forth, the Lender agrees to lend to the Borrower on the
Borrowing Date an amount in United States Dollars not to exceed the lesser of
(a) $90,000,000 and (b) 75% of Project Cost (the "Term Loan") in the manner
described in Section 3 hereof. The Term Loan shall be evidenced by a note or
notes (each a "Term Note" and collectively the "Term Notes"). The Term Notes
shall (a) be dated the Borrowing Date, (b) mature on the 80th Interest Payment
Date to occur after the Borrowing Date, (c) bear interest on the unpaid
principal balance thereof from the date thereof until the principal thereof
shall be repaid at the rate per annum specified in Section 2.2, (d) be
substantially in the form of Exhibit A hereto attached, with the blanks
appropriately completed in conformity herewith
<PAGE>
and (e) be issued in fully registered form in denominations of $100,000 or more.
2.2 Interest on Term Notes. The Term Notes shall bear interest,
computed on the basis of a year of 360 days and the actual number of days
elapsed, on the unpaid principal amount thereof from the date thereof until the
principal amount thereof shall become due and payable at a fixed rate per
annum equal to 10.85%, payable on the first day of December, March, June and
September of each year, commencing on the first such date to occur following
the date of issuance of the Term Notes. If any principal or premium or interest
in respect of any Term Note shall not be paid when due, interest thereon, to the
extent permitted by law, shall be payable from the due date until paid at a rate
per annum which shall be 2% per annum in excess of the greater of (a) the
interest rate applicable such Term Note and (b) the rate of interest publicly
announced by Morgan Guaranty Trust Company of New York from time to time in New
York City as its prime rate for preferred borrowers (the "Stipulated Interest
Rate").
Section 3. Method of Borrowing; Use of Proceeds.
3.1 Method of Borrowings. The Borrower shall give the Lender at least
10 Business Days' prior written, telex, telecopier or telegraphic notice
("Notice of Borrowing") of its intention to borrow under Section 2.1 hereof,
specifying the proposed date (which shall be a Business Day) of the Term Loan
and the total amount thereof. Provided that there has been satisfactory
fulfillment of all requisite conditions precedent to the disbursement of the
proceeds of such Term Loan, the Lender shall make available such proceeds on the
date specified in the Notice of Borrowing by paying such proceeds to General
Electric Power Funding Corporation.
3.2 Use of Proceeds of Term Loan. The proceeds of the Term Loan shall
be used only to repay amounts owing by the Borrower under the Construction Loan
Agreement.
Section 4. Payments; Prepayments; Fees.
4.1 Payments Due on Non-Business Days. Payments with respect to any
Term Note due on any day other than a Business Day shall be due on the next
succeeding Business Day, with interest continuing to accrue until paid on the
amount of such payment to the extent permitted by law.
-2-
<PAGE>
4.2 Required Repayments of the Term Notes. The outstanding principal
amount of the Term Notes shall be repaid on the dates and in amounts determined
by reference to Annex C hereto attached as adjusted in accordance with the
provisions of Section 4.6. Such principal amounts of the Term Notes, together
with interest thereon to the repayment dates, shall become due on such repayment
dates.
4.3 Extraordinary Prepayment of the Term Notes. (a) If an Event of
Loss shall occur, the Borrower shall prepay in full the unpaid principal amount
of all outstanding Term Notes, together with accrued interest thereon to the
date of prepayment on the first Interest Payment Date occurring after such Event
of Loss. Any insurance or condemnation proceeds received in connection with an
Event of Loss shall be used in connection with the prepayment of the Term
Notes pursuant to this Section 4.3(a).
(b) If (a) any Partial Loss or Damage shall occur and (b) the
provisions of Section 11.5(b) regarding repair and restoration of the Project
shall not have been satisfied within 60 days of such event of Partial Loss or
Damage, then the Borrower shall prepay Term Notes in a principal amount equal
to an amount such that after such prepayment the Expected Coverage Ratio for
each subsequent year taking into account the condition of the Project shall be
at least equal to 1.5 together with accrued interest thereon to the date of
prepayment on the first Interest Payment Date occurring after the earlier of (a)
the date occurring 60 days after such event and (b) the date that it is
determined that the conditions set forth in Section 11.5(b) shall not be
satisfied.
(c) No prepayment of a Term Note pursuant to this Section 4.3 shall
relieve the Borrower of its obligation to make any of the repayments required
pursuant to Section 4.2 until such time as the principal amount of such Term
Note has been paid in full.
4.4 Optional Prepayment of Term Notes. The Term Notes shall be subject
to prepayment, in whole or in part in multiples of $100,000, together with
interest thereon to the date of prepayment plus premium, as provided in Section
4.5, on any Interest Payment Date on or after the 55th Interest Payment Date at
the option of the Borrower. No prepayment of a Term Note pursuant to this
Section 4.4 shall relieve the Borrower of its obligation to make any of the
repayments required pursuant to Section 4.2 until such time as the principal
amount of such Term Note has been paid in full.
-3-
<PAGE>
4.5 Premium with Respect to Certain Prepayments of Term Notes. In
addition to any other amount payable in connection therewith, the Borrower shall
pay a premium with respect to the principal amount of any Term Note being
prepaid pursuant to Section 4.4. The premium shall be equal to the product of
the Premium Rate and the principal amount being repaid of such Term Note. In no
event shall any premium be payable as a result of a prepayment pursuant to
Section 4.3.
4.6 Partial Prepayments. The amount of Term Notes required to be
prepaid at any time pursuant to the provisions of Section 4.3(b) shall be equal
to the least such amount necessary to comply with the provisions of (a) such
Section 4.3(b) and (b) the immediately succeeding sentence. Upon any partial
prepayment of Term Notes pursuant to the provisions of Section 4.3(b) the
prepayment amount shall be applied so as to reduce each subsequent repayment
required with respect to such Term Notes pursuant to Section 4.2 by an equal
percentage. Upon any other partial prepayment of Term Notes, the prepayment
amount shall be applied to repay Term Notes in inverse order of maturity (taking
into account mandatory repayments pursuant to Section 4.2). Upon any partial
prepayment of Term Notes, the amount of the prepayment shall be allocated
ratably (according to outstanding principal amounts) to all Term Notes of the
same maturity at the time outstanding being prepaid.
4.7 Notice of Prepayments. The Borrower shall give not less than 30
days' prior written notice to the Lender of each prepayment pursuant to Section
4.4, specifying the relevant prepayment date and the principal amount of Term
Notes to be prepaid on such date. Upon the delivery of such notice, the
principal amount of such Term Notes specified therein plus premium (if any, as
provided in Section 4.5), together with interest thereon to the prepayment date,
shall become due and payable on such prepayment date. Such notice shall be
irrevocable.
4.8 Non-Usage Fee. If on the Borrowing Date, or the date on which it
is determined that the Borrower will not borrow the Term Loan hereunder (the
"Cancellation Date"), as the case may be, any portion of the Fixed Amount is not
used to purchase the Term Note (the "Nondisbursed Portion"), then the Borrower
shall reimburse the Lender immediately upon demand in immediately available
funds in an amount (the "Non-Usage Fee") equal to the price increase (as
described in the next sentence) (the "Price Movement") divided by 100 and
multiplied by the amount of the
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Nondisbursed Portion (in excess of $1,000,000, if the Borrowing Date shall
occur). The Price Movement (expressed in decimals) shall be calculated by
subtracting (1) the closing price as of the Exercise Date of United States
Treasury Notes having a maturity comparable to 13.5 years (determined by
reference to the "weekly average yields" with respect to such United States
Treasury Notes as published by the Board of Governors of the Federal Reserve
(presently contained in Federal Reserve Statistical Release H.15 (519)) from (2)
the closing price of such United States Treasury Notes (similarly determined) on
the Borrowing Date, or the Cancellation Date, as the case may be. (Each closing
price shall be based on a United States Treasury Note having a par value of
$100.00 and shall be rounded to the second decimal place.) The Borrower will be
required to make a payment to the Lender under this Section 4.8 as a Non-Usage
Fee only if the figure specified in clause (2) exceeds the closing price
specified in clause (1). In no event shall the Lender be required to make
payment to the Borrower under this Section 4.8. If the payment due under this
Section 4.8 shall not be paid when due, to the extent permitted by law, interest
thereon shall be due at a rate per annum equal to the Stipulated Interest Rate.
4.9 Delayed Takedown Fee. If the Term Note has not been issued prior
to November 23, 1988, then the Borrower shall pay to the Lender monthly on the
first Business Day of each month following such date in immediately available
funds a fee (the "Delayed Takedown Fee") in respect of the Fixed Amount. The
Delayed Takedown Fee shall be in an amount equal to one-twelfth of the product
of (A) the Fixed Amount, and (B) the excess, if any, of (i) 10.85%, over (ii)
the one month London Interbank Offer Rate as reported by the Telerate System at
10:00 a.m. on such payment date, plus 1/2 of 1%. In no case shall the Delayed
Takedown Fee be less than zero. If the payment or payments due under this
Section 4.9 shall not be paid when due, to the extent permitted by law, interest
thereon shall be due at a rate per annum equal to the Stipulated Interest Rate.
Section 5. Conditions Precedent.
5.1 Conditions to Closing Date. The obligation of the Lender to
execute and deliver this Agreement is subject to the satisfaction of the
following conditions:
(a) This Agreement. There shall have been duly executed and delivered
by the Borrower this Agreement.
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(b) System Supply Agreement. There shall have been delivered by the
Borrower to the Lender a true and complete copy, as in effect on the Closing
Date, of the System Supply Agreement, certified as such by the Borrower on the
Closing Date.
(c) Operation & Maintenance Contract. There shall have been delivered by
the Borrower to the Lender a true and complete copy, as in effect on the Closing
Date, of the Operation & Maintenance Contract, certified as such by the Borrower
on the Closing Date.
(d) Joint Venture Agreement; Assigned Contracts. (1) There shall have been
delivered by the Borrower to the Lender a true and complete copy of the Joint
Venture Agreement, certified as such by the Borrower on the Closing Date.
(2) There shall have been delivered by the Borrower to the Lender a true
and complete copy, as in effect on the Closing Date, of each of the Assigned
Contracts certified by the Borrower as such on the Closing Date.
(e) Engineering Report. The Lender shall have received a favorable written
report(s) of the Independent Engineer in form and substance satisfactory to the
Lender (i) as to Facility design, the Project Schedule, the Budget and the
anticipated operating costs for the Facility, (ii) as to the ability of the
Contractor to perform its obligations under the System Supply Agreement, (iii)
to the effect that, assuming that the Facility is constructed in a good and
workmanlike manner in accordance with the Project Schedule, the Facility will
perform upon Completion so as to meet the Minimum Performance Requirements and
(iv) as to such other information as the Lender may reasonably request.
(f) Budget. The Borrower shall have furnished to the Lender a budget
setting forth all Project Costs anticipated to be incurred (the "Budget"), which
shall be in form and substance satisfactory to the Lender and set forth in
Schedule 6 hereto attached.
(g) Project Schedule. The Borrower shall have furnished to the Lender
a balanced statement of sources and uses of proceeds, together with any other
funds necessary to complete the Project, broken down as to separate construction
phases and anticipated expenditure
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dates (the "Project Schedule"), which shall be in form and substance
satisfactory to the Lender and set forth in Schedule 6 hereto attached.
(h) Legal Opinions. There shall have been delivered and addressed to the
Lender the following opinions of counsel each dated the Closing Date:
(i) an opinion of Fulbright & Jaworski, special counsel for the
Borrower, substantially in the form of, and concerning such matters
(including matters of New York law) as set forth in, Exhibit B-1 hereto
attached;
(ii) an opinion of Milbank, Tweed, Hadley & McCloy, special New York
counsel for the Borrower, substantially in the form of Exhibit B-2
hereto attached;
(iii) an opinion of Kimmelman, Wolff & Samson, special New Jersey
counsel for the Borrower, substantially in the form of Exhibit B-3 hereto
attached;
(iv) an opinion of White & Case, special counsel to the Lender, in form
and substance satisfactory to the Lender;
(v) an opinion of Kirsten Simon Friedman Allen Cherin & Linken,
special New Jersey counsel to the Lender, in form and substance
satisfactory to the Lender; and
(vi) such other opinions of counsel as the Lender may reasonably
request.
(i) No Default or Event of Loss. There shall exist no Default or Event of
Default. No Event of Loss shall have occurred.
(j) Representations and Warranties. All representations and warranties of
the Borrower contained herein or in any Project Document to which it is a party,
or which are contained in any certificate, document or financial or other
statement furnished by it or on its behalf at any time hereunder or thereunder
or in connection herewith or therewith, shall be true and correct in all
material respects.
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(k) All Proceedings to be Satisfactory. As of the Closing Date all
corporate, partnership and other proceedings and all instruments in
connection with the transactions contemplated by this Agreement and the
other Project Documents shall be satisfactory in form and substance to the
Lender. The Lender shall have received such counterpart originals or such
copies certified by proper corporate, partnership or governmental
authorities of all documents, including records of corporate or partnership
proceedings and copies of any government approval required in connection
with any transaction herein contemplated, which the Lender may reasonably
have requested in connection herewith.
(1) Financial Statements; Adverse Events. There shall have been
delivered to the Lender a pro forma balance sheet of the Borrower as of the
Closing Date. In the good faith opinion of the Lender, no material adverse
change in the financial condition or business or operations of the Borrower
shall have occurred since the date as of which such financial statements
report and no event shall have occurred which might reasonably be expected
to have a material adverse effect on the ability of the Borrower to perform
its obligations under any of the Project Documents to which it is a party.
(m) The Partner Conditions Precedent. (1) Each of the Partners shall
have certified as true and complete on the Closing Date the Joint Venture
Agreement delivered to the Lender pursuant to Section 5.1(c).
(2) No representation or warranty of any Partner contained in any
Project Document to which it is a party, is not true and correct in all
material respects as of the Closing Date if such failure to be true and
correct reasonably might be expected as of the Closing Date to have a
material adverse effect on the ability of the Borrower to perform its
obligations under any of the Project Documents.
5.2 Conditions to Term Loan. The obligation of the Lender to make the
Term Loan to the Borrower is subject to the satisfaction of the following
conditions at the time of the making of and immediately after giving effect to
such Term Loan:
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(a) The Term Notes. There shall have been delivered to the Lender the Term
Note or Term Notes, duly authorized and executed by the Borrower.
(b) Certain Security Documents. There shall have been duly executed and
delivered by the Borrower and delivered to the Lender the Mortgage, the Security
Agreement and the Disbursement Agreement.
(c) Consents. There shall have been duly executed and delivered to the
Lender with respect to each of the contracts listed in the table immediately set
forth below a Consent duly executed by the party or parties listed opposite the
title of such contract (and an assignment of such contract to the Borrower if
the Borrower was not originally a party thereto):
Contract Consent of
- -------- ----------
Operation & Maintenance Contractor
Contract
System Supply Agreement Contractor
Electric Power Purchase JCP&L
Agreement
Steam Purchase Agreement EXXON
IMTT Power Purchase IMTT
Agreement
Site Lease Bayonne and IMTT
Service and Interconnection Public Service
Agreement
Gas Purchase Agreement Public Service
Steam Facilities Lease IMTT
Purchase and Sale Agreement Bayonne and IMTT
Option Agreement Bayonne
(d) There shall have been delivered by the Borrower to the Lender a true
and complete copy, as in effect on the Borrowing Date, of each of the Assigned
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Contracts certified by the Borrower as such on the Borrowing Date.
(e) New Jersey Approval of Electric Power Purchase Agreement. The Lender
shall have received evidence satisfactory to it that the Electric Power Purchase
Agreement has been approved by the New Jersey Public Utilities Commission.
(f) Survey. There shall have been delivered to the Lender a survey of the
property described in the Mortgage and Site Lease, satisfactory in form and
substance to the Lender, prepared not more than three months prior to the
Borrowing Date and certified to the Lender by a surveyor satisfactory to the
Lender.
(g) Mortgage Title Insurance. The Lender shall have received a policy of
mortgage title insurance on American Land Title Association standard loan
policy, revised coverage, most recent form (or other form acceptable to the
Lender), with respect to the Site, which policy shall be issued by a title
company or companies reasonably acceptable to the Lender and shall insure that
the Mortgage constitutes a valid, first lien on the leasehold estate of the
Borrower in the Site and on all improvements thereon, subject only to Permitted
Exceptions. Such policy shall include mechanics' lien coverage and any and all
endorsements thereto as shall be reasonably required by the Lender. Such policy
shall be satisfactory in form and substance to the Lender and shall insure the
Lender against loss in an amount not less than the sum of the aggregate unpaid
Term Notes (from time to time outstanding).
(h) Perfection of Liens and Security Interests. All filings, recordings and
other actions that are necessary or desirable in order to establish, protect,
preserve and perfect the Lender's lien on and/or security interest in the
Collateral intended to be created by the Security Documents required to be
delivered pursuant to Sections 5.2(b) and (c), including, without limitation,
the filing of financing statements, the recordation of the Mortgage and the
execution and delivery of such Security Documents, shall have been duly made or
taken. All fees, taxes and other charges relating to such filings and recordings
shall have been paid by the Borrower. The Lender shall have received
authenticated copies or other evidence of all consents,
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recordings and filings obtained or made in order to create and perfect such
liens and security interests.
(i) Evidence of Priority. The Lender shall have received the results of a
search, reflecting a record satisfactory to the Lender, conducted in the UCC
filing records in each of the jurisdictions in which the Lender's UCC-1
financing statements are to be filed in respect of the Collateral covered by the
Security Documents.
(j) Capital Contribution. Each of the Partners shall have made its
respective capital contribution to the Borrower required as of the Borrowing
Date pursuant to the Joint Venture Agreement.
(k) Qualifying Facility. A true and complete copy of the Order of the
Federal Energy Regulatory Commission to the effect that the Facility is a
"qualifying facility" under Part 292 of the rules and regulations of the Federal
Energy Regulatory Commission shall have been delivered to the Lender, certified
as such by the Borrower on the Borrowing Date.
(1) Budget. The Borrower shall have adopted an Operating Budget for its
first Operating Year pursuant to Section 8.10 hereof and such Operating Budget
shall have been approved.
(m) Evidence of Insurance. The Lender shall have received evidence,
satisfactory to it, of the existence of the insurance specified in Section 11
hereof and of the designation of the Lender as an additional insured, mortgagee,
loss payee or obligee, as the case may be, with respect thereto.
(n) Financial Statements; Adverse Events. There shall have been delivered
to the Lender a pro forma balance sheet of the Borrower as of the Borrowing Date
assuming receipt by the Borrower of the Term Loan proceeds and incurrence of all
expenses contemplated to be incurred by the Borrower in connection with the
transactions contemplated by this Agreement. In the good faith opinion of the
Lender, no material adverse change in the financial condition or business or
operations of the Borrower shall have occurred since the Closing Date, and no
event shall have occurred which might reasonably be expected to have a material
adverse effect on the ability of the Borrower to perform its
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obligations under any of the Project Documents to which it is a party.
(o) Projections. The Borrower shall have furnished to the Lender
projections satisfactory to the Lender of operating expenses and cash flow for
the Project over the term of the Term Notes.
(p) Permitted Investment. No change shall have occurred after the Closing
Date in any applicable law or regulation or in the interpretation thereof by
any governmental or regulatory authority which would cause the purchase of the
Term Notes by the Lender on the Borrowing Date not to qualify as a legal
investment under the laws of each jurisdiction to which the Lender is subject,
without recourse to any provision of such laws that permits the making of an
investment without restriction as to the character of the particular investment
being made.
(q) Opinions of Counsel. There shall have been delivered and addressed to
the Lender the following opinions of counsel each dated the Borrowing Date:
(i) an opinion of Fulbright & Jaworski, special counsel for the
Borrower, substantially in the form of, and concerning such matters
(including matters of New York law) as set forth in, Exhibit B-4 hereto
attached;
(ii) an opinion of Milbank, Tweed, Hadley & McCloy, special New York
counsel for the Borrower, substantially in the form of Exhibit B-5 hereto
attached;
(iii) an opinion of Kimmelman, Wolff & Samson, special New Jersey
counsel for the Borrower, substantially in the form of Exhibit B-6 hereto
attached;
(iv) an opinion of Van Ness, Feldman, Sutcliffe & Curtis, special FERC
counsel to the Borrower, substantially in the form of Exhibit B-7 hereto
attached;
(v) an opinion of Edward Jacobi, Esq., counsel to the Disbursement
Trustee, substantially in the form of Exhibit B-8 hereto attached;
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(vi) an opinion of White & Case, special counsel to the Lender, in form
and substance satisfactory to the Lender;
(vii) an opinion of Kirsten Simon Friedman Allen Cherin & Linken,
special New Jersey counsel to the Lender, in form and substance
satisfactory to the Lender; and
(viii) such other opinions of counsel as the Lender may reasonably
request.
(r) No Default or Event of Loss. There shall exist no Default or Event of
Default. No Event of Loss shall have occurred.
(s) Representations and Warranties. All representations and warranties of
the Borrower contained herein or in any Project Document to which it is a party,
or which are contained in any certificate, document or financial or other
statement furnished by it or on its behalf at any time hereunder or thereunder
or in connection herewith or therewith, shall be true and correct in all
material respects with the same force and effect as though such representations
and warranties had been made on and as of such time.
(t) Government Approvals, Permits, etc. (i) Except for the Governmental
Actions specified in Schedule 4 all Governmental Actions which are necessary in
connection with the Project Documents shall have been duly obtained or made and
shall be in full force and effect on the Borrowing Date, including (without
limitation): all Governmental Actions relating to the construction of the
Facility, compliance with applicable environmental laws and regulations, the
ownership of the Facility by the Borrower, the use, occupancy and operation of
the Project by the Borrower, the mortgaging of, and the grant of a security
interest in, all the Borrower's right, title and interest in and to the Project
by the Borrower under the Security Documents, the performance (to the best
knowledge of the Borrower) by each Buyer and Public Service of its respective
obligations under the Power Purchase Agreements and the Service and
Interconnection Agreement and the execution, delivery and performance by the
respective parties thereto of the Project Documents.
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(ii) Except for the Governmental Actions specified in Schedule 4 each
Governmental Action shall be final and shall not be the subject of any pending
or threatened judicial or administrative proceedings.
(iii) Except for the Governmental Actions specified in Schedule 4 a copy of
each Governmental Action necessary for the use and occupancy of the Facility
that the Borrower to the best of its knowledge is aware of, certified to be true
and correct by the Borrower, shall have been delivered to the Lender at least
three Business Days prior to the Borrowing Date.
(iv) With respect to those Government Actions specified in Schedule 4, there
shall be no reason to believe that such Governmental Actions shall not be
obtainable when necessary in proper form in the ordinary course upon due
application therefor.
(u) No Change in Law. No change shall have occurred after the Closing Date
of this Agreement in any applicable law or regulation or in the interpretation
thereof by any governmental or regulatory authority which would make the
Lender's participation in the transactions contemplated hereby illegal or which
would subject the Lender to any unreimbursed tax (other than taxes imposed upon
or measured by the income of the Lender), penalty or other liability.
(v) No Public Utility. The statements set forth in Section 6.13 shall, in
the reasonable opinion of the Lender and its counsel, be true and correct.
(w) All Proceedings to be Satisfactory. As of the Borrowing Date, all
corporate, partnership and other proceedings and all instruments in connection
with the transactions contemplated by this Agreement and the other Project
Documents shall be satisfactory in form and substance to the Lender. The Lender
shall have received such counterpart originals or such copies certified by
proper corporate, partnership or governmental authorities of all documents,
including records of corporate or partnership proceedings and copies of any
government approval required in connection with any transaction herein
contemplated, which the Lender may reasonably have requested in connection
herewith.
(x) No Material Adverse Change (Borrower). Since the Closing Date, no event
shall have occurred which
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causes or constitutes a material adverse change in the current or reasonably
foreseeable business, operations or financial condition of the Borrower.
(y) Facility Capability. Performance Adequacy has been achieved and
Completion (subject to a reasonable "punch list") has been achieved, each in the
opinion of the Lender and (as evidenced in a certificate delivered by the
Independent Engineer to the Lender) the Independent Engineer.
(z) Partner Conditions Precedent. (i) No representation or warranty of any
Partner contained in any Project Document to which it is a party, is not true
and correct in all material respects as of the Borrowing Date with the same
force and effect as though such representation or warranty had been made on and
as of such time if such failure to be true and correct reasonably might be
expected as of the Borrowing Date to have a material adverse effect on the
ability of the Borrower to perform its obligations under any of the Project
Documents.
(ii) No material adverse change in the financial condition or business or
operations of any Partner shall have occurred since the Closing Date which
reasonably might be expected to have a material adverse effect on the ability of
the Borrower to perform its obligations under any of the Project Documents.
(aa) Storage Tanks. Borrower shall, at the Borrowing Date, furnish evidence
satisfactory to Lender that the two (2) tanks used for the storage of petroleum
product in conjunction with the boiler plant meet or exceed all environmental,
construction and safety standards applicable thereto.
(bb) Electric Power Purchase Agreement Amendment. The Amendment to the
Electric Power Purchase Agreement, dated October 29, 1985, shall have been filed
with the New Jersey Board of Public Utilities, together with a letter of
explanation, satisfactory to the Lender and its counsel.
(cc) FERC Order. The FERC Order approving the Service and Interconnection
Agreement shall have been delivered to the Lender.
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Section 6. Representations and Warranties. In order to induce the
Lender to enter into this Agreement and to make the Term Loan, the Borrower
represents and warrants to, and agrees with, the Lender that:
6.1 Liabilities. All liabilities, direct and contingent, of the
Borrower as at the Closing Date are disclosed in the pro forma balance sheet of
the Borrower delivered pursuant to Section 5.1(l), the notes thereto or Schedule
1 hereto attached.
6.2 Existence and Business. The Borrower is a partnership duly
organized and validly existing under the laws of the State of New Jersey. No
filing, recording, publishing or other act is necessary to establish the legal
existence of the Borrower. The Borrower has engaged in no business other than
the development of the Project and the negotiation, execution, delivery and
performance of the Project Documents to which it is a party, and has no
obligations or liabilities other than those incidental to its organization,
those incurred in connection with its execution and delivery of the Project
Documents to which it is a party, those incurred in connection with the Project
and those incurred pursuant to the provisions of such Project Documents. The
Borrower is and will be engaged solely in the business of constructing, owning
and operating the Project and any expansion thereto.
6.3 Compliance with Law. The Borrower is in compliance with all
Requirements of Law except to the extent that the failure to comply therewith
(i) would not reasonably be expected, in the aggregate, to have a material
adverse effect on the business, operations, properties or financial or other
condition of the Borrower and (ii) would not materially adversely affect the
ability of the Borrower to perform its obligations under this Agreement, the
Term Notes and the other Project Documents to which it is or is to become a
party.
6.4 Power and Authorization; Enforceable Obligations. The Borrower has
full power and authority and the legal right to: construct, own and operate the
Project, to conduct its business as now conducted and as proposed to be
conducted by it, to execute, deliver and perform this Agreement, the Term Notes
and the other Project Documents to which it is or is to become a party, to grant
the mortgages and security interests provided for in the Security Documents, and
to borrow hereunder. The Borrower has taken all necessary partnership and legal
action to authorize the
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borrowing on the terms and conditions of this Agreement, the Term Notes and the
other Project Documents to which it is a party, and to grant the mortgages and
security interests provided for in the Security Documents. Each of this
Agreement and the other Project Documents to which the Borrower is a party, has
been duly executed and delivered by the Borrower and constitutes the legal,
valid and binding obligation of the Borrower, enforceable against the Borrower
in accordance with its terms. On the Borrowing Date, each of the Term Notes
shall have been duly executed and delivered by the Borrower and shall constitute
the legal, valid and binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms.
6.5 Governmental Actions. All Governmental Actions, required in
connection with the execution, delivery and performance by any party to the
Project Documents, or the construction, ownership or operation of the Project in
accordance with the applicable provisions of the Project Documents and in
compliance with all applicable environmental laws and regulations are set forth
in Schedule 2 or Schedule 3 or Schedule 4 hereto attached, other than Permits
which, if not obtained, would not adversely affect the construction, use,
ownership or operation of the Project in accordance with the applicable
provisions of the Project Documents, the Budget and the Project Schedule. Each
of the Governmental Actions listed in Schedule 2 (in the case of the Closing
Date) and in Schedules 2 and 3 (in the case of the Borrowing Date) will have
been duly obtained or made, will be in full force and effect, will not be the
subject of any pending or threatened judicial or administrative proceedings, and
if the applicable statute, rule or regulation provides for a fixed period for
judicial or administrative appeal or review thereof, such period shall have
expired.
6.6 No Legal Bar. The execution, delivery and performance of this
Agreement, the Term Notes and the other Project Documents, the borrowings
hereunder, the use of the proceeds thereof and the construction, ownership and
operation of the Project will not violate any Requirement of Law or any
Contractual Obligation of the Borrower and will not result in, or require, the
creation or imposition of any Lien on any of its properties or revenues pursuant
to any Requirement of Law or Contractual Obligation of the Borrower except for
the Liens created by the Security Documents and except as otherwise contemplated
herein. No approvals and consents of any trustee or any holder of any
indebtedness, obligations or securities of the Borrower to the best
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knowledge of the Borrower, of any other Person (other than a Governmental
Authority) are required in connection with the execution, delivery and
performance by the Borrower of any Project Document to which it is, or is to
become a party, except such as have been duly obtained and are in full force and
effect or, with respect to such approvals and consents which are not required
prior to the Closing Date, will be duly obtained and will be in full force and
effect as of the Borrowing Date (other than those approvals and consents set
forth in Schedule 4).
6.7 No Litigation. No litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or, to the best of
its knowledge, threatened, by or against the Borrower or against any of its
properties or revenues (a) with respect to this Agreement, the Term Notes or the
other Project Documents or any of the transactions contemplated hereby or
thereby which has a reasonable likelihood of having a material adverse effect
upon such transactions, (b) which has a reasonable likelihood of having a
material adverse effect on the business, operations, property or financial or
other condition of the Borrower or (c) which has a reasonable likelihood of
materially adversely affecting the ability of the Borrower to perform its
obligations under this Agreement, the Term Notes or any of the other Project
Documents to which it is or is to become a party.
6.8 No Default or Event of Loss. The Borrower is not in default under
or with respect to any Contractual Obligation in any respect which could be
materially adverse to the business, operations, property or financial or other
condition of the Borrower, or which could materially adversely affect the
ability of the Borrower to perform its obligations under this Agreement, the
Term Notes or any of the other Project Documents to which it is or is to become
a party. No Default or Event of Default has occurred and is continuing; no Event
of Loss has occurred.
6.9 Interests in Contracts. All contracts, Permits, entitlements and
other property relating to the Project are held by the Borrower free and clear
of any Lien (other than Permitted Liens).
6.10 Interests in Property; Liens. The Borrower has good and
indefeasible leasehold estate in the Site for a period of 20 years from the
commencement thereof subject only to the Permitted Exceptions, and has good and
valid title to the Facility (to the extent the Facility is at any
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time in existence), in each case free and clear of all Liens other than
Permitted Liens.
6.11 No Burdensome Restrictions. No Contractual Obligation of the
Borrower and no Requirement of Law materially adversely affects (or insofar as
the Borrower may reasonably foresee is likely to materially adversely affect)
the business, operations, property or financial or other condition of the
Borrower or its ability to perform its obligations under the Project Documents
to which it is a party and to take the actions contemplated hereunder and
thereunder to be taken by it.
6.12 Taxes. The Borrower has filed or caused to be filed all tax
returns which are required to be filed by it, and has paid all taxes owed by it
as shown to be due and payable on said returns or on any assessments made
against it or any of its property and all other taxes, fees or other charges
imposed on it or any of its property by any Governmental Authority (other than
those the amount or validity of which is currently being contested in good faith
by appropriate proceedings and with respect to which adequate reserves in
conformity with GAAP have been provided on the books of the Borrower); and no
tax liens have been filed and no claims are being asserted with respect to any
such taxes, fees or other charges.
6.13 Public Utility Status. (a) The Borrower will not, solely by
reason of (i) the ownership of the Project and the operation thereof by the
Borrower, or (ii) any other transaction contemplated by this Agreement or any of
the other Project Documents, be subject to regulation as an "electric utility",
"electric corporation", "electrical company", "public utility", "public utility
holding company" or similar entity under any existing law, rule or regulation of
any Governmental Authority, except as set forth in 18 C.F.R. (S) 292.601 or 18
C.F.R. (S) 292.602.
(b) Neither the Lender nor any of its Affiliates, will, solely by
reason of (i) the ownership of the Project or the operation thereof by the
Borrower, (ii) the making of the Term Loan hereunder, (iii) the securing of the
Term Loan by Liens on the Project and the Assigned Contracts or (iv) any other
transaction contemplated by this Agreement or any of the other Project
Documents, be subject to regulation as an "electric utility", "electric
corporation", "electrical company", "public utility", "public utility holding
company" or similar entity under any existing law, rule or regulation of any
Governmental Authority. None of the Lender or any of
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its Affiliates, will, solely by reason of its ownership or operation of the
Project upon the exercise of the Lender's remedies under the Security Documents,
be subject to regulation as an "electric utility", "electric corporation",
"electrical company", "public utility" or a "public utility holding company"
under any existing law, rule or regulation of any Governmental Authority, except
as set forth in 18 C.F.R. (S) 292.601 or 18 C.F.R. (S) 292.602 and assuming that
the Lender or such Affiliates are entitled to hold such ownership interest
without such interest being considered to be an equity interest held by an
electric utility, electric utility holding company, or any combination thereof
within the meaning of 18 C.F.R. (S) 292.602.
(c) The Facility is a Qualifying Facility and is exempt from all
regulation under the Public Utility Holding Company Act of 1935, as amended.
(d) The Borrower satisfies the ownership criteria for a cogeneration
facility set forth in 18 C.F.R. (S) 292.206 and a cogeneration facility under
the New Jersey Small Power Production Facilities Act.
6.14 Federal Regulations. The Borrower is not engaged and will not
engage in the business of extending credit for the purpose of "purchasing" or
"buying" or "carrying" any "margin stock" within the respective meanings of each
of the quoted terms under Regulations G, T, U or X of the Board of Governors of
the Federal Reserve System as now and from time to time hereafter in effect. No
part of the proceeds of the Term Loan will be used for "purchasing" or "buying"
or "carrying" any "margin stock" as so defined or for any purpose which
violates, or which would be inconsistent with, the provisions of such
Regulations.
6.15 ERISA. The Borrower will not maintain any Plan. The execution,
delivery and performance by the Borrower of this Agreement and the Term Notes
will not involve any prohibited transaction within the meaning of ERISA or
Section 4975 of the Code.
6.16 Investment Company Act. The Borrower is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
6.17 Security Documents. Upon execution and delivery of the Security
Documents, the provisions of the Security Documents will be effective to create
(in favor of
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the Lender) legal, valid and enforceable mortgage liens on or security interests
in all of the Collateral. When the recording and filings described on Schedule 5
hereto attached have been effected in the public offices listed on Schedule 5,
such liens and security interests will constitute perfected liens on and
perfected security interests in all right, title, estate and interest of the
Borrower in the Collateral prior and superior to all existing Liens, except for
Permitted Liens. The recordings and filings shown on Schedule 5 constitute all
of the actions necessary or advisable in order to establish, protect and perfect
the interest of the Lender in the Collateral, other than possession of
Collateral by the Lender with respect to any Collateral as to which perfection
of security interests may be effected only by possession, execution and delivery
of the Consents by the respective contractors under the Assigned Contracts.
6.18 Full Disclosure. Neither this Agreement nor any certificate,
written statement or other document furnished to the Lender, or to any appraiser
or engineer submitting a report to the Lender, by or on behalf of the Borrower,
in connection with the transactions contemplated by this Agreement and the other
Project Documents or the design, description, testing or operation of the
Project, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact known to the Borrower which the
Borrower has not disclosed in writing to the Lender which materially adversely
affects or, so far as the Borrower can now reasonably foresee, will materially
adversely affect the properties, business, prospects or financial or other
condition of the Borrower or the ability of the Borrower to perform its
obligations hereunder and under the Assigned Contracts and the other Project
Documents.
6.19 Power Purchase Agreements and Other Assigned Contracts. Each of
the Power Purchase Agreements has been duly executed and delivered by the
parties thereto and constitutes the legal, valid and binding obligation of such
parties, enforceable against such parties in accordance with its terms. Each of
the other Assigned Contracts has been duly executed and delivered by the parties
thereto and constitutes the legal, valid and binding obligation of such parties,
enforceable against such parties in accordance with its terms. As of the
Borrowing Date the Borrower will have duly performed and complied with all
agreements and conditions to be performed and complied with by it under the
Assigned Contracts at or before such date. Each of the
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Assigned Contracts is in full force and effect and has not been amended, except
for amendments disclosed to the Lender and not prohibited by the Project
Documents. There exists no default or event of default or breach in the
performance of any material covenant, agreement, obligation or condition to be
performed by the Borrower under any Assigned Contract, and no notice of default
has been given under any Assigned Contract.
6.20 Principal Place of Business, Etc. The chief executive office and
principal place of business of the Borrower, and the office where the Borrower
keeps its records concerning the Project and all contracts relating thereto, is
located at 1600 Smith Street, Suite 5000, Houston, Texas 77002 or such other
office as the Borrower shall notify the Lender at least 15 days prior to
relocation.
6.21 Compliance with Building Codes, Zoning Laws, Etc. The
construction, ownership and operation of the Project will be in all material
respects in compliance with all applicable zoning, environmental protection, use
and building codes, laws, regulations and ordinances. The Facility is to be
constructed as contemplated in the FERC Exhibits. There are no violations of any
Requirements of Law or Governmental Actions, the penalty for violating which
could materially adversely affect the Project, the financial condition of the
Borrower or the ability of any party to perform its obligations under any
Project Document.
6.22 Roads. All roads necessary for the construction and full
utilization of the Project for its intended purposes have either been completed
or the necessary rights of way therefor have been acquired by the Borrower or
appropriate Governmental Authorities.
6.23 Availability of Utilities. All utility services necessary for the
operation of the Project for its intended purposes will be available at or
within the boundaries of the Site when needed.
6.24 Sufficiency of Project Documents. The Borrower possesses all
rights and interests in property (including without limitation the Site and
rights of ingress to and egress from the site) and all rights under contracts
(including without limitation the System Supply Agreement) necessary for the
development, construction, installation, completion, operation and maintenance
of the Facility on the Site in accordance with all Requirements of Law and in
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accordance with the Minimum Performance Requirements. There are no equipment,
materials or services necessary for the development, construction,
installation, completion, operation and maintenance of the Facility on the Site
other than equipment, materials or services that can reasonably be expected to
be available at the Site on commercially reasonable terms consistent with the
Budget.
6.25 FERC Exhibits. The Facility is being constructed, and at
completion will have been constructed in accordance with the FERC Exhibits.
6.26 Broker's or Finder's Commissions. No broker's or finder's fee or
commission or similar fee will be payable by the Borrower with respect to the
Term Loan to be made hereunder or the other transactions contemplated hereby
other than a fee payable by the Borrower to Kidder Peabody & Co.
6.27 Securities Acts. Neither the Borrower nor any other Person has,
directly or indirectly, offered the Term Notes or any similar securities of the
Borrower for sale to, or solicited any offers to buy the Term Notes or any
similar security of the Borrower from, or otherwise approached or negotiated
with respect thereto with, any Person or Persons other than the Lender. Neither
the Borrower nor any other Person has, directly or indirectly, taken or will
take any action which would subject the issuance or sale of the Term Notes to
the provisions of Section 5 of the Securities Act of 1933, as amended, or to the
registration provisions of any securities or blue sky law of any applicable
jurisdiction.
6.28 Compliance with Environmental Laws. (a) Borrower has no
knowledge, after due and diligent inquiry and investigation, of any Hazardous
Substances or Wastes being present on the Site, or in the subsurface soil or
groundwater below the Site, with the exception of hydrocarbons.
(b) No lien pursuant to Environmental Laws has been attached to any
revenues or any real or personal property owned or leased by the Borrower and
located in the State of New Jersey.
(c) The Borrower has not received a summons, citation, directive,
letter or other communication, written or oral, from the New Jersey Department
of Environmental Protection concerning any allegations of "Discharge" (as
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such term is defined in N.J.S.A. 58:10-23b(h)) of "Hazardous Substances", as
such term is defined in the Spill Act. To the best of Borrower's knowledge
(other than with respect to such hydrocarbons), there are no existing
conditions which could result in any such notices, complaints, citations,
orders, liens or penalties.
(d) Borrower represents that to its best knowledge and belief it is in
compliance with all federal, state and local laws, rules and regulations
relating to emissions into the air, discharges onto lands and waters, storage
and disposal of hazardous or toxic wastes or substances or otherwise relating to
the environment (collectively, "Environmental Laws").
(e) Borrower will have obtained all necessary environmental Permits
needed for construction and operation of the Project as of the Borrowing Date.
(f) The Project will be a "Major Facility" as such term is defined in
N.J.S.A. 58:10-23.11(b)(1) since 250,000 gallons of #2 oil will be stored on
Site.
(g) The Borrower's use or proposed use of the Project or business
conducted thereon will not involve "treatment," "storage," or "disposal" of such
hazardous substances, each as defined in the Resource, Conservation and Recovery
Act ("RCRA"), 42 U.S.C. (S) 6901, et seg. other than (a) oil to be utilized as
a backup fuel in the event that natural gas is unavailable, and (b) chemicals to
be used in the cogeneration process.
6.29 Representations as to Partners. (a) Liabilities. Since October 5,
1987, there has been no change in the properties, business, operations or
financial condition of any Partner that has a reasonable likelihood of
materially adversely affecting such Partner's ability to perform its obligations
under any Project Document to which it is a party.
(b) Existence and Business. Each of the Partners is a corporation duly
organized, validly existing and in good standing under the laws of its
respective state of incorporation, and each is duly qualified to do business as
a foreign corporation and in good standing in each jurisdiction in which the
failure to qualify would have a material adverse effect on its business taken as
a whole.
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(c) Power and Authorization. Each of the Partners has full corporate
power and authority, and the legal right to own its properties and to conduct
its business as now conducted by it and proposed to be conducted by it, to
execute, deliver and perform the Project Documents to which it is or is to
become a party, to take all action as may be necessary to complete the
transactions contemplated hereunder and thereunder and to act as the general
partners of the Borrower. Each of the Partners has taken all necessary corporate
action to authorize the execution, delivery and performance of the Project
Documents to which it is or is to become a party.
(d) Compliance with Law. Each of the Partners is in compliance with
all Requirements of Law except to the extent that the failure to comply
therewith (i) would not reasonably be expected, in the aggregate, to have a
material adverse effect on the business, operations, properties or financial or
other condition of the Borrower and (ii) would not materially adversely affect
the ability of the Borrower to perform its obligations under this Agreement, the
Term Notes and the other Project Documents to which it is or is to become a
party.
(e) No Legal Bar. The execution, delivery and performance of this
Agreement, the Term Notes and the other Project Documents, the borrowings
hereunder, the use of the proceeds thereof and the construction, ownership and
operation of the Project will not violate any Contractual Obligation of a
Partner and will not result in, or require, the creation or imposition of any
Lien on any of their respective interests in the Borrower pursuant to any
Requirement of Law or Contractual Obligation of a Partner. No approvals and
consents of any trustee or any holder of any indebtedness, obligations or
securities of a Partner are required in connection with the execution, delivery
and performance by a Partner of any Project Document to which it is, or is to
become a party, except such as have been duly obtained and are in full force and
effect.
(f) No Litigation. No litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or, to the best
knowledge of the Borrower, threatened, by or against a Partner or against any of
their respective properties or revenues (a) with respect to this Agreement, the
Term Notes or the other Project Documents or any of the transactions
contemplated hereby or thereby which has a reasonable likelihood of having a
material adverse effect upon such transactions, (b) which has a
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reasonable likelihood of having a material adverse effect on the business,
operations, property or financial or other condition of the Borrower or (c)
which has a reasonable likelihood of materially adversely affecting the ability
of a Partner to perform its obligations under any of the Project Documents to
which it is or is to become a party.
(g) No Default or Event of Loss. No Partner is in default under or
with respect to any Contractual Obligation in any respect which could be
materially adverse to the business, operations, property or financial or other
condition of such Partner, or which could materially adversely affect the
ability of the Borrower to perform its obligations under any of the Project
Documents to which it is or is to become a party.
(h) No Burdensome Restrictions. No Contractual Obligation of a Partner
and no Requirement of Law materially adversely affects (or insofar as the
Borrower may reasonably foresee is likely to materially adversely affect) the
business, operations, property or financial or other condition of any Partner or
its ability to perform its obligations under the Project Documents to which it
is a party and to take the actions contemplated hereunder and thereunder to be
taken by it.
(i) Full Disclosure. Neither this Agreement nor any certificate,
written statement or other document furnished to the Lender, or to any appraiser
or engineer submitting a report to the Lender, by or on behalf of a Partner in
connection with the transactions contemplated by this Agreement and the other
Project Documents or the design, description, testing or operation of the
Project, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact known to the Borrower which the
Borrower has not disclosed in writing to the Lender which materially adversely
affects or, so far as the Borrower can now reasonably foresee, will materially
adversely affect the properties, business, prospects or financial or other
condition of any Partner or the ability of any Partner to perform its respective
obligations under the Project Documents.
Section 7. Representation of the Lender.
7.1 Representation of the Lender. The Lender represents to the
Borrower that it is acquiring the Term Notes to be acquired by it hereunder for
the purpose of
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investment and not with a view to or for sale in connection with any
distribution thereof, provided, however, that the disposition of its property
shall at all times be and remain within the Lender's control.
Section 8. Affirmative Covenants. So long as any Term Note remains
outstanding and unpaid or any other amount is owing to the Lender hereunder or
under the Security Documents, the Borrower hereby agrees as follows:
8.1 Financial Statements. The Borrower shall furnish to the Lender:
(a) as soon as practicable and in any event within 120 days after the
end of each fiscal year of the Borrower, a copy of the balance sheet of
the Borrower as at the end of such year and the related statement of
income, partners' capital and changes in financial position of the Borrower,
setting forth in each case in comparative form the figures for the previous
year, certified without qualification arising out of the scope of the audit
by a nationally recognized firm of independent public accountants
reasonably satisfactory to the Lender; and
(b) as soon as practicable and in any event within 45 days after the
end of each quarterly period of each fiscal year of the Borrower, the
unaudited balance sheet of the Borrower as at the end of such quarterly
period, the related unaudited statements of income, partners' capital and
changes in financial position of the Borrower and a statement as to the
amount of energy sold during each month of such quarterly period and the
price received therefor and the amount expended (other than from
insurance proceeds, warranty claims or similar reimbursement sources)
during such quarter for major, non-routine maintenance and repairs or
renewals and replacements, setting forth in each case in comparative form
the fiqures for the comparable period for the previous year, certified as
to accuracy by an Authorized Representative (subject to normal year-end
audit adjustments);
all financial statements delivered pursuant to this Section 8.1 shall be
complete and correct in all material respects (subject, in the case of interim
statements, to normal year-end audit adjustments) and shall be prepared in
reasonable detail and in accordance with GAAP applied consistently throughout
the periods reflected therein.
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8.2 Certificates; Other Information. The Borrower shall furnish to the
Lender and, with respect to the information set forth in Section 8.2(c), (d),
(e) and (f), the Independent Engineer and, with respect to the information set
forth in Section 8.2(k), the Disbursement Trustee:
(a) concurrently with the delivery of the financial statements
referred to in Section 8.1(a), a certificate of the independent public
accountants which certified such financial statements of the Borrower
stating that in making the examination necessary for the audit thereof no
knowledge was obtained of any Default or Event of Default, except as
specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in Sections 8.1(a) and 8.1(b), a certificate of an Authorized
Representative of the Borrower familiar with such financial matters that
during the period covered by such financial statements the Borrower has
observed and performed all of its covenants and other agreements, and
satisfied every condition, contained in this Agreement and the other Project
Documents to be observed, performed or satisfied by it, and that such
officer has obtained no knowledge of any Default or Event of Default at any
time during such period or on the date of such certificate, except as
specified in such certificate;
(c) at least 30 days prior to the date when it expects Completion to
occur, notice of such anticipated Completion date;
(d) every 60 days prior to Completion, a report describing in
reasonable detail the progress of the construction of the Project, all
developments bearing materially on Project Cost or time of Completion and
other items of material importance relating to the Project since the date of
the last such report delivered pursuant to this Section 8.2(d);
(e) prior to Completion, promptly after delivery to the Borrower, or
preparation by the Borrower, copies of all material change orders and other
material revisions to the Plans and Specifications or the Project;
(f) promptly after delivery to the Borrower, copies of all notices,
reports or certificates furnished
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to the Borrower pursuant to any Project Document;
(g) promptly after receipt thereof, a copy of each report delivered to
the Borrower by the independent public accountants which certify the
Borrower's financial statements in connection with any annual or interim
audit of its books, including any letters or reports addressed to the
Borrower or any of its officers by such accountants concerning the Project;
(h) as of the 25th day of each month, a statement of actual revenues
and actual expenses for the immediately preceding month;
(i) at least 15 days prior to the end of each fiscal year of the
Borrower, a budget of anticipated revenues and expenses for the Borrower for
the forthcoming fiscal year;
(j) promptly, such additional financial and other information with
respect to the Borrower or the Project as the Lender may from time to time
reasonably request; and
(k) within 20 days after the end of each calendar quarter (commencing
with the second full calendar quarter to occur after the Borrowing Date), a
calculation of the Coverage Ratio over the preceding 12 months or, if 12
months have not elapsed since the Borrowing Date, the period since the
Borrowing Date (provided, that the Borrower shall exclude one calendar month
of operation of the Project from the period used for the first two
calculations of the Coverage Ratio hereunder), certified as to accuracy by
an Authorized Representative.
8.3 Payment of Obligations. The Borrower will pay, discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all of its obligations of whatever nature, except for any
obligations which are being contested in good faith and by appropriate
proceedings if such contest does not involve any risk of the sale, forfeiture or
loss of any of the Collateral.
8.4 Conduct of Business and Maintenance of Existence. The Borrower at
all times will (a) engage solely in the business of designing, constructing,
owning and operating the Facility, (b) preserve, renew and keep in full force
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and effect its existence as a general partnership under the laws of the State of
New Jersey (except that the Borrower may become a corporation or limited
partnership with the consent of the Lender (such consent not to be unreasonably
withheld)), (c) take all action necessary to maintain the Facility as a
Qualified Facility and (d) take all action necessary to maintain in full force
and effect all Governmental Actions in effect on the Closing Date and to obtain
in timely fashion and maintain in full force and effect the Governmental
Actions listed in Schedules 3 and 4 and all other Governmental Actions required
at any time after the Closing Date in connection with the ownership or operation
of the Facility. The Borrower will comply with all Contractual Obligations,
Governmental Actions and Requirements of Law relating to the Project or any
other property of the Borrower to the extent necessary to permit the Borrower
to continue to operate the Project in the manner contemplated by this Agreement.
8.5 Maintenance of Property; Restoration of Facility. The Borrower, at
its expense, will keep the Facility in good working order and condition and will
make all repairs, replacements, renewals, additions and betterments thereto, and
take all such other actions, which are necessary for the Facility to operate
efficiently so as to continue to satisfy the standards of Performance Adequacy,
any applicable requirements of insurance policies, accepted industry standards
for similar properties, all applicable laws and all applicable manufacturers'
warranties and suggested maintenance procedures. All repairs, replacements and
renewals with respect to the Project shall be comparable or superior in quality
and class to the original work.
8.6 Assigned Contracts. The Borrower will maintain or cause to be
maintained in full force and effect, without amendment or modification (except
as permitted by Section 9.10), and observe and perform in all material respects
all of its covenants and obligations under, comply in all material respects with
all conditions under, and diligently enforce in all material respects all of its
rights under and in accordance with the terms of, each Assigned Contract.
8.7 Inspection of Property; Books and Records; Discussions. The
Borrower will keep proper books of record and account in which full, true and
correct entries in conformity with GAAP and all Requirements of Law shall be
made of all dealings and transactions in relation to its business and
activities, and will permit representatives of the
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Lender during normal business hours and after reasonable notice to visit and
inspect any of its properties and examine and make abstracts from any of its
books and records, as often as reasonably may be desired, and to discuss the
business, operations, properties and financial and other condition of the
Borrower with officers and employees of the Borrower and with its independent
public accountants.
The Lender shall have the right, at the Lender's expense (unless such
expense is to be reimbursed by the Borrower in accordance with the provisions of
Section 12.6), from time to time at reasonable intervals during the term of this
Agreement, to have the Project inspected by the Independent Engineer. If the
Borrower obtains an inspection report on the Project or any portion thereof at
its own request, it will promptly provide a copy of such report to the Lender.
The Borrower agrees to correct or cause to be corrected any substantial defect
in the Project which the Borrower discovers or which is disclosed by any
inspection provided for in this Section 8.8 upon learning of same, or to
promptly give the Lender a reasonably detailed explanation in writing specifying
the reasons that such correction is not required within a reasonable time.
8.8 Notices. The Borrower will, promptly upon obtaining knowledge of
any of the following occurrences (or, in the case of any occurrence involving
any Partner, Buyer or Public Service, upon the managing Partner of the Borrower
obtaining knowledge thereof), give notice thereof to the Lender:
(a) the occurrence of any Default or Event of Default, specifically
stating that a Default or an Event of Default, as the case may be, has
occurred and describing such Default or Event of Default;
(b) the occurrence or assertion of any material default or event of
default under any of the Assigned Contracts or the occurrence of an Event
of Loss;
(c) any (i) default or event of default under any Contractual
Obligation (other than the Assigned Contracts) on the part of the Borrower,
any Partner or the Buyers or Public Service or (ii) litigation,
investigation or proceeding which may exist at any time between the
Borrower, any Partner, the Buyers or Public Service and any Governmental
Authority, which in either case would have a material adverse effect on the
business, operations, property or financial or other condition of
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the Borrower, any Partner, the Buyers or Public Service;
(d) any litigation or proceeding affecting the Borrower or any Partner
in which the amount involved is $100,000 or more or in which injunctive or
similar relief is sought;
(e) any litigation or proceeding affecting the Buyers or Public
Service which if adversely determined would have a material adverse effect
on the business, operations, property or financial or other condition of the
Buyers, Public Service or any Partner;
(f) any material adverse change in the business, operations, property,
prospects or financial or other condition of the Borrower, any Partner, the
Buyers or Public Service and of any actual or prospective change of law,
rule or regulation which has or would have such a material adverse effect;
(g) any physical loss or damage to the Collateral in excess of
$250,000;
(h) the assertion of any Lien (other than Permitted Liens) against
the Collateral or the occurrence of any event that would have a material
adverse effect on the aggregate value of the Collateral or the liens and
security interests created under the Security Agreement;
(i) any Force Majeure Event or other reason for delay in the Project
Schedule;
(j) any assertion by any Governmental Authority or other Person that
any Work does not comply with Requirements of Law;
(k) any event or condition that would change any matter represented to
in Section 6.13; and
(1) any proposed Additional Contract.
Each notice pursuant to this Section shall be accompanied by a statement of an
Authorized Representative of the Borrower setting forth details of the
occurrence referred to therein and stating what action the Borrower, the
relevant Partner, Buyer or Public Service, as the case may be, proposes to take
with respect thereto and, with respect to a notice
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given pursuant to clause (1), shall be accompanied by a copy of the proposed
Additional Contract or, if the proposed Additional Contract has not yet been
prepared, shall include a description of the proposed terms and conditions of
such Additional Contract.
8.9 Assignments of Additional Contracts; Maintenance of Liens of the
Security Documents; Future Mortgages. The Borrower will:
(a) on the Borrowing Date (with respect to any Additional Contract in
existence thereon) and concurrently with the execution of any Additional
Contract (with respect to any Additional Contract executed after the Closing
Date), execute and deliver to the Lender an assignment (in form and
substance satisfactory to the Lender) with respect to such Additional
Contract and cause the other party or parties to such Additional Contract to
execute and deliver to the Lender a Consent with respect thereto;
(b) promptly upon the request of the Lender, and at the Borrower's
expense, execute and deliver, or cause the execution and delivery of, and
thereafter register, file or record in each appropriate governmental
office, any document or instrument supplemental to or confirmatory of the
Security Documents, and take such other action, deemed by the Lender to be
necessary or desirable for the creation or perfection of the liens and
security interests purported to be created by the Security Documents; and
(c) if the Borrower shall at any time acquire any real property or
leasehold or other interests therein or with respect thereto not covered
by the Mortgage, promptly upon such acquisition execute, deliver and record
a supplement to the Mortgage in the form provided or referred to therein
covering such real property or leasehold or other interests (which
instrument shall be satisfactory in form and substance to the Lender), and
in connection therewith deliver to the Lender such opinions of counsel and
certificates as shall be reasonably required by the Lender.
8.10 Operating Budget. (a) The Borrower shall, not less than 30 days
before the Borrowing Date, adopt an operating plan and a budget of debt service,
proposed partnership distributions, maintenance, repair and operation expenses
for the period from the Borrowing Date to the conclusion
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of the initial Operating Year; and no less than 30 days in advance of the
beginning of each Operating Year thereafter it will similarly adopt an operating
plan and a budget of debt service, proposed partnership distributions,
maintenance, repair and operation expenses (including reasonable allowances for
contingencies) for the ensuing Operating Year. Copies of the proposed budget for
each Operating Year shall be furnished at least 30 days before final adoption
thereof to the Lender for its approval (such approval not to be unreasonably
withheld). A proposed budget so furnished to the Lender shall be deemed to have
been approved by the Lender if the Lender does not inform the Borrower of any
objections with respect thereto within 20 days of the receipt thereof. The
approved budget, as amended by approved amendments pursuant to Section 8.10(b)
hereof, is referred to herein as the "Operating Budget". The Operating Budget
shall be prepared on the basis of requirements for each month within the
relevant Operating Year, showing the debt service, proposed partnership
distributions, maintenance, repair and operation expenses for such month. If for
any reason the Borrower shall not have adopted an annual Operating Budget before
the beginning of any Operating Year, the Operating Budget for the preceding
Operating Year shall, until the adoption of an Operating Budget for the new
Operating Year, be deemed to be in force and be effective as the Operating
Budget for such Operating Year.
(b) The Borrower may at any time adopt an amended annual Operating
Budget for the remainder of the then current Operating Year and, when so
adopted, such amended Operating Budget shall be deemed to be and shall be
effective as the Operating Budget for such Operating Year. A copy of any such
amended Operating Budget which is proposed shall be furnished at least 10 days
before final adoption thereof to the Lender for its approval (not to be
unreasonably withheld).
(c) The Borrower covenants that it will not expend any amount or incur
any obligation for any item or classification of maintenance, repair and
operation expenses during any Operating Year which exceeds the amount provided
for such item and classification in the Operating Budget for such Operating Year
unless such expenditures could not reasonably be anticipated and failure to make
such expenditure would have created an abnormal risk of personal injury to
employees or significant damage to the Facility and, in any event, the Borrower
covenants that it will advise the Lender
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of such excess expenditures and prepare an amended Operating Budget to reflect
such changes as soon as practicable.
8.11 Plans and Specifications. The Borrower will at all times maintain
at the Facility or its principal office an accurate and complete set of "as
built" Plans and Specifications for the Facility, which shall be amended and
supplemented from time to time to reflect on a current basis all improvements,
additions and modifications to the Facility.
8.12 Initial Date of Delivery. The Borrower will cause the Completion
of the Proj ect to occur on or before October 12, 1988; provided, however, that
if no Default or Event of Default shall have occurred and be continuing, the
Lender shall not unreasonably withhold its consent to any reasonable request by
the Borrower to extend such date, provided that in no event shall such date be
extended beyond April 12, 1990.
8.13 Correction of Work. Upon demand of the Lender, the Borrower shall
correct, or cause to be corrected, any material structural defect in the Project
or any material departure from the Plans and Specifications, without cost to the
Lender.
8.14 Defend Title. The Borrower will at all times at its own cost and
expense warrant and defend the title to the Project against the claims and
demands of all Persons whomsoever, except with respect to Permitted Liens and
Permitted Exceptions.
8.15 Independent Engineer. The Lender shall be permitted to employ the
Independent Engineer to advise it with respect to the Project. The Borrower
shall reimburse the Lender for all reasonable costs incurred with respect to the
Independent Engineer's services.
8.16 Debt Service Reserve Account. The Borrower shall fund and
maintain the Debt Service Reserve Account pursuant to the terms of the
Disbursement Agreement.
8.17 Regulatory Status. (a) On the Closing Date and thereafter at all
times, the Facility will be a Qualifying Facility and will be exempt from all
regulation under the Public Utility Holding Company Act of 1935, as amended.
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(b) The Borrower will, on the Closing Date and thereafter at all
times, meet the ownership criteria for a cogeneration facility set forth in 18
CFR (S) 292.206.
8.18. Environmental Covenants. (a) Borrower shall at all times comply
with Environmental Laws as they apply to the Project, and if a violation thereof
shall occur, Borrower shall expeditiously cure such violation.
(b) If Borrower shall receive (i) notice from the New Jersey
Department of Environmental Protection pursuant to the New Jersey Spill
Compensation and Control Act, N.J.S.A. 58:10-23.11 et seg., as amended (the
"Spill Act") of any discharge on the Site which is to be remedied or (ii) any
complaint, citation, order, lien or penalty relating to alleged violations of or
non-compliance with Environmental Laws on or about the Site, Borrower
shall provide notice of same to Lender within seven (7) days after receipt of
any such notice.
(c) In the event that there shall be filed a notice of lien against
the Site by the New Jersey Department of Environmental Protection, pursuant to
and in accordance with the provisions of the Spill Act, the Borrower shall
within 30 days from the date that Borrower is given notice that the notice of
lien has been filed with respect to the Site, or within such shorter period of
time in the event that the State of New Jersey has commenced steps to cause the
Site to be sold pursuant to the lien, either (i) pay the claim and remove the
lien from the Site, or (ii) furnish (a) a bond satisfactory to the title insurer
and Lender in the amount of the claim out of which the lien arises, (b) a cash
deposit in the amount of the claim out of which the lien arises, or (c) other
security reasonably satisfactory to Lender in an amount sufficient, to discharge
the claim out of which the lien arises.
(d) Borrower shall comply with all requirements and affirmative
obligations imposed on a "Major Facility" as set forth in N.J.S.A 10-23.11b(1)
as long as it operates the Facility.
(e) In the event Borrower constructs and/or operates any underground
tanks as defined in New Jersey P.L. 1986 c.102 (an Act regulating the
underground storage of hazardous substances), Borrower will comply with all
requirements and affirmative obligations imposed under said legislation with
respect to such tanks.
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(f) Borrower will take all actions necessary to prevent any tanks or
other facilities utilized to store any hazardous substances or wastes, including
but not limited to fuel oil, from leaking, spilling or otherwise discharging
such hazardous substances or wastes into the environment.
(g) Borrower shall provide to Lender, as soon as same is available, a
true copy of the certification regarding the hydrostatic testing of the 250,000
gallon storage tank being constructed at the Site, which certification shall
attest to and otherwise evidence that said tank meets or exceeds all
environmental, construction, and safety standards applicable thereto.
Section 9. Negative Covenants. So long as any Term Note remains
outstanding and unpaid or any other amount is owing to the Lender hereunder
or under the Security Documents, the Borrower hereby agrees as follows:
9.1 Indebtedness. The Borrower will not create, incur, assume or
suffer to exist any Indebtedness except Indebtedness in respect of (a) the Term
Notes, (b) Indebtedness (including for purposes of this Section 9.1, Contingent
Obligations) not in excess of $500,000 outstanding at any one time, (c)
Indebtedness in an amount not to exceed $5,000,000 for working capital purposes,
(d) Indebtedness provided by the Lender (or such other Person, if any, as is
permitted under Section 12.8) for the purpose of financing up to 100% of the
cost of expansion of the Facility to incorporate a fourth turbine, (e)
Indebtedness incurred for purposes of financing the acquisition from IMTT of the
steam boilers in an amount not exceeding $2,600,000, and (f) Indebtedness with
respect to the Borrower's reimbursement obligations related to the issuance of a
letter of credit having a stated amount not greater than $4,600,000 to guarantee
the obligations of Borrower pursuant to paragraph 7 of the Gas Purchase
Agreement.
9.2 Limitation on Liens. The Borrower will not create, incur, assume
or suffer to exist any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired, except: (a) Liens in favor of the
Lender created by the Security Documents; (b) Liens for taxes not yet due, or
which are being contested in good faith and by appropriate proceedings if (i)
adequate reserves with respect thereto are maintained on the books of the
Borrower in accordance with GAAP and (ii) such contest does not involve any risk
of the sale, forfeiture or loss of any of the Collateral; (c) carriers',
warehousemen's, mechanics',
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materialmen's, repairmen's or other like Liens arising in the ordinary course of
business which secure payment of sums which are not overdue for a period of more
than 45 days, or are bonded, or which are being contested in good faith and by
appropriate proceedings if (i) adequate reserves with respect thereto are
maintained on the books of the Borrower in accordance with GAAP and (ii) such
contest does not involve any risk of the sale, forfeiture or loss of any of the
Collateral; (d) pledges or liens in connection with workmen's compensation,
unemployment insurance and other social security legislation; (e) deposits to
secure the performance of statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business; (f) Permitted Exceptions; (g) rights-of-way,
restrictions and other similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not substantial in amount, and which do
not in any case materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business of the Borrower;
(h) precautionary UCC filings with respect to property subject to leases
permitted pursuant to Section 9.7; (1) Liens in favor of the Lender on a pari
passu basis with the Liens specified in clause (a) above for purposes of
securing Indebtedness provided by the Lender specified in Section 9.1(d) hereof;
(j) pre-existing Liens encumbering the Borrower's property and set forth in
Schedule 7 hereto; (k) Liens representing purchase money security interest in
the steam boilers acquired from IMTT and securing the Indebtedness specified in
Section 9.1(e); (1) the Liens on the steam boilers acquired from IMTT arising
under the Option Agreement; and (m) Liens superior (in form and substance
satisfactory to the Lender) to the Liens specified in clause (a) above, on
revenues received under the Power Purchase Agreements securing the Indebtedness
specified in Section 9.1(c).
9.3 Limitation on Contingent Obligations. The Borrower will not agree
to, or assume, guarantee, endorse or otherwise in any way be or become
responsible or liable for, directly or indirectly, any Contingent Obligation,
except those created by the Security Documents or the other Project Documents or
permitted pursuant to Section 9.1(b) and 9.1(f).
9.4 Restricted Payments. The Borrower will not declare, make or commit
to make, or set aside any sum or property for the purpose of making, any
Restricted Payment except for (a) repayments of non-interest bearing advances
made by a Partner to the Borrower in connection with the
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Project to the extent permitted under the Disbursement Agreement, (b) general
distributions to the Partners as partners in accordance with the Operating
Budget, (c) repayment of Indebtedness not otherwise prohibited by this
Agreement, (d) a management fee payable to CTNJI under the terms of the Joint
Venture Agreement equal to 1 1/2% of gross revenues from the Project received by
the Borrower each month, (e) payments made pursuant to the Project Documents
(other than the Joint Venture Agreement), or (f) payments made in the ordinary
course of the Borrower's trade or business; provided, however, that no
Restricted Payment can be made if a Default or an Event of Default has occurred
and is continuing other than (a) payments to CTNJI to reimburse it for its
certified expenses in managing the Borrower incurred at any time after 30 days
after the occurrence of such Default or Event of Default, (b) payments to the
Contractor pursuant to the Operation & Maintenance Contract and (c) payments
to Public Service under the Gas Purchase Agreement or the Service and
Interconnection Agreement.
9.5 Restriction on Investments. The Borrower will not make any
Investment other than Permitted Investments.
9.6 Prohibition of Fundamental Changes. The Borrower will not enter
into any transaction of merger or consolidation, or change its form of
organization or its business, or liquidate or dissolve itself (or suffer any
liquidation or dissolution), provided that with the prior written consent of the
Lender (such consent not to be unreasonably withheld) the Borrower shall have
the right to transform itself into a corporation or a limited partnership.
9.7 Limitation on Leases. Except for the Site Lease and the Steam
Facilities Lease the Borrower will not enter into any agreement, or be or become
liable as lessee under any agreement, for the lease, hire or use of any real or
personal property without the prior written consent of the Lender, except for
operating leases of personal property entered into in the ordinary course of
business under which the Borrower's aggregate payment obligations do not exceed
$250,000 in any fiscal year and which are not for the purpose of acquiring fixed
or capital assets unless included in the Operating Budget.
9.8 No Plan. The Borrower will not adopt any Plan.
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9.9 Prohibition on Disposition of Assets. The Borrower will not sell,
lease (as lessor, except pursuant to the Steam Facilities Lease), approve the
transfer, abandon or otherwise dispose of any of its property or assets except
to the extent that such property is worn out, operationally unsatisfactory or no
longer usable in connection with the operation of the Facility and (a) the
Borrower either promptly replaces such property in a manner so as not to affect
adversely the operations or value of the Facility or (in connection with a sale
or lease of such property which does not materially adversely affect the
operations or value of the Facility) receives consideration in connection with
such transaction having a fair market value equal to or greater than the fair
market value of the property being sold, leased, transferred or otherwise
disposed or (b) the item of property to be sold, leased, transferred or
otherwise disposed has a fair market value of less than $50,000.
9.10 Amendments, Etc. of Contracts. The Borrower will not, without the
prior written consent of the Lender, enter into or consent to or permit (i) the
cancellation or termination of any Project Document (except upon expiration of
the stated term thereof or in a situation not resulting from the Borrower's
inaction or action), (ii) the assignment of the rights or obligations of any
party to any Project Document except as contemplated by this Agreement or such
Project Document, (iii) any material amendment, supplement or material
modification of, or waiver with respect to any of the provisions of, any Project
Document (provided that the Lender's prior written consent need not be
obtained in connection with an amendment of the Joint Venture Agreement unless
such amendment reasonably might be expected to have a material adverse effect on
the ability of the Borrower to perform its obligations under any of the Project
Documents or reduce the anticipated Coverage Ratio) or (iv) any material
modification or supplement of the Plans and Specifications.
9.11 Transactions with Affiliates and Others. Notwithstanding any
other provision of this Agreement, the Borrower will not (a) directly or
indirectly, purchase, acquire, exchange or lease any property from, or sell,
transfer or lease any property to, or borrow any money from, or enter into any
management or similar fee agreement with, any Affiliate or any officer, director
or employee of the Borrower or any Partner or (b) enter into any other
transaction or arrangement or make any payment (except as permitted by Section
9.4) to or otherwise deal with, in the ordinary
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course of business or otherwise, any Affiliate, except in either case (a) or (b)
for transactions contemplated by the Project Documents in existence on the
Closing Date (including the management fee arrangement with CTNJI referenced in
Section 9.4(d)) and other transactions provided (i) such transactions shall be
on reasonable terms no less favorable to the Borrower than it would obtain in a
comparable arm's length transaction with a Person not an Affiliate and (ii) in
the case of any transaction or related series of transactions involving more
than $75,000, the Borrower receives the Lender's prior written approval.
9.12 FERC Exhibits. The Borrower will not make any substantial
alteration or addition to the Facility that does not conform to the FERC
Exhibits or make any substantial use of lands in connection with the operation
of the Project that, in either case, results in the Project ceasing to be a
Qualified Facility.
Section 10. Events of Default.
10.1 Events of Default. If any of the following events shall occur and
be continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(a) the Borrower defaults in the payment of principal or premium on
any Term Note when the same shall become due, either by the terms thereof
or otherwise, as herein provided and such nonpayment shall continue for a
period of 5 days or more; or
(b) the Borrower defaults in the payment of interest on any Term Note
or any other amount payable hereunder or under any Security Document when
the same shall become due, either by the terms thereof or otherwise as
herein or therein provided, and such nonpayment shall continue for a period
of 5 days or more; or
(c) any representation or warranty made by the Borrower in this
Agreement or in any other Project Document or which is contained in any
certificate, document or financial or other statement furnished at any time
under or in connection with this Agreement or any other Project Document
shall prove to have been incorrect in any material respect on or as of the
date made; provided, however, that if such representation or warranty can
be made true and correct in all material
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respects and all consequences thereof can be cured in all material respects,
such event shall not be an Event of Default unless such representation or
warranty shall continue to be false or misleading in any material respect or any
consequence thereof shall not be cured in all material respects to the
satisfaction of the Lender within 30 days after written notice from the Lender
to the Borrower; or
(d) the representations in Section 6.13(b) shall cease to be true and
correct at any time; or
(e) the Borrower shall default in the observance or performance of any
covenant or agreement contained in Sections 8.4 (to the extent such default
results in the Project being shut down for in excess of 10 days), 8.8(a), 8.12,
8.16 or 9 (other than Sections 9.2 and 9.11); or
(f) the Electric Power Purchase Agreement or the Service and
Interconnection Agreement shall be terminated for any reason prior to the
scheduled termination provided for under the provisions thereof or JCP&L or
Public Service shall default in any material respect in the observance or
performance of any covenant or agreement contained in the Electric Power
Purchase Agreement or the Service and Interconnection Agreement and such default
shall continue unremedied for a period of 30 days after knowledge thereof by
JCP&L or Public Service, or the obligations of JCP&L, or Public Service
thereunder shall be terminated for any reason (including a termination by JCP&L
or Public Service of the Electric Power Purchase Agreement or the Service and
Interconnection Agreement), unless within 60 days of such default or
termination the Borrower provides to the Lender additional security to
supplement the Collateral, in form and substance satisfactory to the Lender (as
determined in the sole discretion of the Lender); or
(g) the Borrower shall default in the observance or performance of any
covenant or agreement contained in this Agreement (to the extent not covered in
another paragraph of this Section 10.1), or the Borrower shall default in any
material respect in the observance or performance of any covenant or agreement
contained in the Joint Venture Agreement, and, in each such case, in the event
such covenant or agreement does not itself contain a grace period, such default
shall continue
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unremedied for a period of 30 days after knowledge thereof by the Borrower, and
provided that such grace period shall be extended for up to 60 additional days
if such default is curable and the Borrower is diligently attempting to cure; or
(h) the Borrower shall (i) default in any payment of principal of or
interest on any indebtedness for borrowed money (other than any Term Note or
indebtedness having an outstanding principal amount of less than $100,000) or
(ii) default in the observance or performance of any other agreement or
condition relating to any such indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any, other event shall
occur or condition exist, and as a result of such default, event or condition,
the holder or holders of such indebtedness (or a trustee on behalf of such
holder or holders) is permitted to cause such indebtedness to become due prior
to its stated maturity or to realize upon any collateral given as security
therefor; or
(i) the Borrower, Public Service or a Buyer makes a general assignment for
the benefit of creditors or is generally not paying its debts as such debts
become due; or
(j) any order, judgment or decree is entered under any bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment of debt,
dissolution, liquidation or similar law (collectively referred to as the
"Bankruptcy Law") or any jurisdiction adjudicates the Borrower, Public Service
or a Buyer bankrupt or insolvent; or
(k) the Borrower, Public Service or a Buyer petitions or applies to any
tribunal for, or consents to, the appointment of, or taking possession by, a
trustee, receiver, custodian, liquidator or similar official, of the Borrower,
Public Service or a Buyer, or of any substantial part of the assets of the
Borrower, Public Service or a Buyer, or commences a voluntary case under the
Bankruptcy Law of the United States or any proceedings relating to the Borrower,
Public Service or a Buyer under the Bankruptcy Law of any other jurisdiction,
whether now or hereafter in effect; or
(1) any such petition or application is filed, or any such proceedings are
commenced, against the Borrow-
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er, Public service or a Buyer and the Borrower, Public Service or a Buyer by any
act indicates its approval thereof, consent thereto or acquiescence therein, or
an order for relief is entered in an involuntary case under the Bankruptcy Law
of the United States, as now or hereafter constituted, or an order, judgment or
decree is entered appointing any such trustee, receiver, custodian, liquidator
or similar official, or approving the petition in any such proceedings, and such
order, judgment or decree remains unstayed and in effect for more than 60 days;
or
(m) any order, judgment or decree is entered in any proceedings against the
Borrower, Public Service or a Buyer decreeing the dissolution of the Borrower,
Public Service or a Buyer and such order, judgment or decree remains unstayed
and in effect for more than 60 days; or
(n) any order, judgment or decree is entered in any proceedings against the
Borrower, Public Service or a Buyer decreeing a split-up of the Borrower, Public
service or a Buyer or which requires the divestiture of any substantial part of
the assets of the Borrower, Public Service or a Buyer, and such order, judgment
or decree remains unstayed and in effect for more than 60 days; or
(o) any Security Document shall cease, for any reason, to be in full force
and effect (except upon the termination thereof in accordance with its terms),
or the Borrower shall so assert in writing, or any Security Document shall fail
to create a valid and perfected lien and security interest on or in any
Collateral purported to be covered thereby having the priorities (subject only
to Permitted Exceptions) set forth therein; or
(p) the Site Lease shall be terminated for any reason, except upon
expiration of the stated term thereof; or
(q) the Steam Purchase Agreement or the IMTT Power Purchase Agreement shall
be terminated for any reason prior to the scheduled termination provided for
under the provisions thereof unless such terminated agreement shall be replaced
within 60 days after any such termination by another steam purchase agreement,
in form and substance satisfactory to the Lender, with
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a steam purchaser satisfactory to the Lender or unless the Borrower establishes
within 60 days after any such termination, to the satisfaction of the Lender,
that the failure of the Borrower to replace such terminated agreement with
another steam purchase agreement will neither cause the Facility to cease being
a Qualifying Facility nor materially adversely affect the business, operations
or financial condition of the Borrower; or
(r) the Operation & Maintenance Contract shall be terminated for any reason
prior to the scheduled termination provided for under the provisions thereof
unless such terminated agreement shall be replaced within 60 days with another
operations and maintenance agreement, in form and substance satisfactory to the
Lender, with an operator satisfactory to the Lender; or
(s) the Joint Venture Agreement shall at any time or for any reason cease
to be in full force and effect, or shall be declared null and void, in whole or
in part except as a result of the Borrower becoming a corporation or a limited
partnership with the consent of the Lender (such consent not to be unreasonably
withheld), or the Borrower shall be dissolved; or
(t) title to any part of the Collateral material to the operation of the
Project shall at any time not be satisfactory to the Lender by reason of any
defect other than Permitted Liens and Permitted Exceptions, and such defect
shall not be corrected within 45 days after notice thereof to the Borrower; or
(u) CTNJI shall cease to be the Managing Venturer of the Borrower, unless
CTNJI shall be replaced as Managing Venturer by a Person which is (a) a Partner
as of the Closing Date and, at the time of such replacement, has a net worth in
excess of $1,000,000 and continues to be a subsidiary of Enron Corp. (in the
case of Enron Cogeneration Five Company), Public Service Enterprise Group
Incorporated (in the case of CEA Bayonne, Inc.), Transco Energy Company (in the
case of Transco Cogeneration Company) or General Electric Company (in the case
of PSVO Bayonne, Inc.) or (b) approved by the Lender (such approval not to be
unreasonably withheld) prior to such replacement; or
(v) a final judgment in an amount in excess of $100,000 is rendered
against the Borrower and, within 30 days after entry thereof, such judgment is
not dis-
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charged or execution thereof stayed pending appeal, or, within 60 days
after the expiration of any such stay, such judgment is not discharged; or
(w) any Partner shall take or fail to take any action, or any event
shall occur with respect to any Partner, which action, inaction or event
has or, in the reasonable judgment of the Lender, could have a material
adverse effect on the business, operations or financial condition of the
Borrower;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i), (j), (k) or (1) of this Section 10.1 with respect to the
Borrower, the outstanding principal amount of the Term Notes (with accrued
interest thereon) and all other amounts owing under this Agreement and the
Security Documents shall immediately become due and payable without
presentment, demand, protest or other notice of any kind (all of which are
hereby expressly waived by the Borrower) and without any action by the Lender,
and (B) if such event is an Event of Default specified in clause (i), (j), (k),
(1), (m) or (n) of this Section 10.1 with respect to a Buyer (other than JCP&L)
then the Lender shall have the right to take the action described in clause (C)
below if in the reasonable determination of the Lender the Facility would cease
to be a Qualifying Facility if the Power Purchase Agreement to which such Buyer
is a party should terminate, provided that Lender shall give the Borrower 60
days notice to Borrower of its intent to declare an Event of Default with
respect to the event relating to such Buyer unless the Borrower enters into an
additional steam purchase contract which in the reasonable determination of the
Lender would preserve the status of the Facility as a Qualifying Facility and
(C) if such event is any other Event of Default specified in this Section 10.1,
the Lender may, by notice to the Borrower, declare the outstanding principal
amount of the Term Notes (with accrued interest thereon) and all other amounts
owing under this Agreement and the Security Documents to be due and payable
forthwith, whereupon the same shall immediately become due and payable, without
presentment, demand, protest or (except as expressly required by this Section
10.1) notice of any kind (all of which are hereby expressly waived by the
Borrower). Any acceleration of the Term Notes as a result of the occurrence of
any Event of Default (other than an Event of Default specified in clause (i),
(j), (k), (1), (m) or (n) of this Section 10.1) shall be deemed a prepayment
pursuant to Section 4.4 requiring the payment of the premiums described in
Section 4.5 (provided, that if such payment occurs prior to the 55th
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Interest Payment Date the applicable premium shall be equal to the greater of
(1) the Yield-Maintenance Premium, if any, and (2) the interest rate borne by
the Term Notes) and the proceeds received pursuant to any such acceleration
shall be applied to all amounts due hereunder or with respect to any Term Note
ratably (according to the outstanding amounts owed to the holders of the Term
Notes).
10.2 Non-Recourse Nature of Liability to Partners. Notwithstanding
anything to the contrary contained in this Agreement or in any of the Project
Documents, no recourse under or upon any obligation contained in this Agreement
shall be had against the Partners or any partner, stockholder, director, officer
or employee thereof, and the Lender expressly waives and releases all right to
assert liability under this Agreement, any Term Note or any other Project
Document against, or to satisfy any claim arising hereunder or thereunder
against, any such Person out of any assets of any such Person other than the
interest of any such Person in the Collateral; provided, however, that nothing
in this Section 10.2 shall be deemed to release a Partner from liability for its
fraudulent actions or from any of its obligations or liabilities under any
agreement, document, instrument or certificate executed by such Partner in its
individual capacity in connection with the transactions contemplated by this
Agreement and the other Project Documents.
Section 11. Insurance
Section 11.1 Insurance. Without limiting any of the other obligations
or liabilities of the Borrower hereunder, the Borrower will at all times
following the Borrowing Date carry and maintain at its own expense at least the
minimum insurance coverage with respect to the Facility set forth in this
Section 11 and any other insurance that may be reasonably required by the Lender
from time to time, in each case with insurers of recognized responsibility in
such amounts and in such form as shall be satisfactory to the Lender. Such
insurance may be carried under blanket policies maintained by the Borrower so
long as such policies otherwise comply with the terms and provisions of this
Section 11.
Section 11.2 Insurance Against Loss or Damage to the Facility. The
Borrower shall maintain all-risk property insurance covering physical loss or
damage to the Facility. At all times after the Borrowing Date, the amount of
such insurance shall be at least equal to the outstanding amount
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of principal on the Term Notes as of the next succeeding Interest Payment Date
plus an amount equal to any principal and interest due and payable with respect
to the Term Notes on such Interest Payment Date (provided, that the insurance
shall at all times be in an amount at least sufficient to prevent the Borrower
from being deemed a coinsurer of the Facility), and such insurance shall
include, without limitation, the following:
(a) flood, windstorm, tornado and earthquake insurance, customarily
included under all risk policies available with respect to facilities
similar in construction, location and occupancy to the Facility, with
sublimits of no less than $5,000,000 each for flood and earthquake;
(b) "boiler and machinery" property damage insurance with respect to
damage to the machinery, plants, equipment, storage facilities or similar
apparatus included in the Facility from risks normally insured against
under machinery policies in an amount equal to the replacement value of
such machinery, plant, equipment, storage facilities or similar apparatus;
and
(c) business interruption insurance to provide coverage against loss
resulting from interruption of business and consequent reduction in gross
revenues caused by damage to the Facility and extra expense incurred to
continue the normal operation of business following such damage in an
amount at least equal to one year's gross operating revenues, minus non-
continuing expenses, including (to the extent commercially available)
coverage against loss resulting from interruption of business arising
because of damage to boilers and machinery.
Such insurance may include deductible amounts for the account of the
Borrower not to exceed the following:
(a) all-risk property coverage . . . $250,000;
(b) boiler and machinery . . . $250,000
except $250,000 per occurrence with respect to the gas turbines; $250,000
with respect to the steam turbine and $1.00 per KVA for the transformers;
(c) business interruption coverage . . . 60 days; and
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(d) flood damage . . . $100,000.
Any insurance carried in accordance with this Section 11.2 shall
provide or be endorsed to provide that:
(a) the Lender, as its interest may appear, is included as named
insured, with the understanding that any obligation imposed upon the
insured (including, without limitation, the liability to pay premiums)
shall be the sole obligation of the Borrower and not that of any other
insured;
(b) losses, if any, in excess of $250,000 in respect of the Facility
shall be payable to the Disbursement Trustee for deposit in the Insurance
Account and other losses shall be payable to the Borrower;
(c) the interest of the Lender shall not be invalidated by any action
or inaction of the Borrower or any other Person and shall insure the Lender
regardless of any breach or violation by the Borrower or any other Person
of any warranties, declaration or conditions contained in such policies;
(d) the insurer thereunder waives all rights of subrogation against
the Lender, any right of setoff and counterclaim and any other right to
deduction whether by attachment or otherwise;
(e) such insurance shall be primary without right of contribution of
any other insurance carried by or on behalf of the Lender with respect to
its interests in the Facility; and
(f) if such insurance is canceled for any reason whatsoever
(including, without limitation, nonpayment of premium) or any substantial
change is made in the coverage that affects the interests of the Lender,
such cancellation or change shall not be effective as to the Lender for ten
(10) days for nonpayment of premiums and otherwise for forty-five (45)
days, in both cases after receipt by the Lender of written notice sent by
registered mail from such insurer of such cancellation or change;
provided that upon payment in full of the Term Notes and any other amounts due
and owing hereunder, the Lender shall no longer be entitled to any benefits
under any insurance policy maintained pursuant to this Section 11.2.
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Section 11.3 Comprehensive General Liability Insurance. The Borrower
shall maintain comprehensive personal injury and property damage insurance
(including, without limitation, comprehensive automobile liability, product
liability and completed operations) covering claims arising out of the
ownership, operation, maintenance, condition or use of the Facility. In no event
shall such insurance be written for limits less than $1,000,000 per occurrence
and $1,000,000 in the aggregate for combined bodily injury, personal injury and
property damage. Additionally, the Borrower shall maintain employer's liability
coverage with limits of $3,000,000 containing no exclusion for occupational
disease (unless commercially unavailable) and workers' compensation coverage as
required by applicable statutes.
Any insurance carried in accordance with this Section 11.3 shall
provide or shall be endorsed to provide:
(a) the Lender, as its interests may appear, is included as an
additional insured with the understanding that any obligation imposed upon
the insured (including, without limitation, the liability to pay premiums)
shall be the sole obligation of the Borrower and not that of any other
insured;
(b) if commercially available, the interest of such an additional
insured shall not be invalidated by an action or inaction of the Borrower
or any other Person and shall insure the Lender regardless of any breach or
violation by the Borrower or any other Person than the Lender, of any
warranties, declaration or conditions contained in such policies;
(c) such insurance shall be primary without right of contribution of
any other insurance carried by or on behalf of such additional insured with
respect to its interests as such in the Facility;
(d) if such insurance is cancelled for any reason whatsoever
(including, without limitation, nonpayment of premium) or any substantial
change is made in the coverage that affects the interest of the Lender,
such cancellation or change shall not be effective as to the Lender for ten
(10) days for nonpayment of premiums and otherwise for forty-five (45)
days, in both cases after receipt by the Lender of written notice sent by
registered mail from such insurer of such cancellation or change; and
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(e) inasmuch as the policy is written to cover more than one insured,
all terms, conditions, insuring agreements and endorsements, with the
exception of limits of liability, shall operate in the same manner as if
there were a separate policy covering each insured;
provided that upon payment in full of the Term Notes and any other amounts due
and owing hereunder, the Lender shall no longer be entitled to any benefits
under any insurance policy maintained pursuant to this Section 11.3.
Section 11.4 Adjustment of Losses. The loss, if any, under any
insurance covering the Facility required to be carried by Section 11.2 shall be
adjusted with the insurance companies or otherwise collected, including, without
limitation the filing of appropriate proceedings, by the Lender. All such
policies shall provide that the loss, if any, under such insurance shall be
adjusted and paid as provided herein.
Section 11.5. Application of Payments Relating to Partial Loss or
Damage. (a) Upon the occurrence of a Partial Loss or Damage, the Borrower shall
give the Lender written notice thereof as soon as possible and all amounts in
excess of $250,000 payable or paid to any Person in connection therewith shall
be paid over to the Disbursement Trustee and held by the Disbursement Trustee in
the Insurance Account and applied pursuant to the provisions of Section 4.3(b)
unless the Borrower shall satisfy the conditions of clause (b) below within 60
days of the occurrence of such event, in which case the proceeds shall be
released to the Borrower as specified below.
(b) The Borrower shall not be obligated to prepay the Term Notes
pursuant to Section 4.3(b) if the following conditions shall be satisfied within
60 days of the occurrence of such Partial Loss or Damage:
(1) the Borrower shall notify the Lender within 30 days of the
occurrence of the event of Partial Loss or Damage of the Borrower's
intention to repair and/or restore the Project to its original condition,
wear and tear excepted, pursuant to this Section 11.5(b);
(2) no Default or Event of Default shall have occurred and be
continuing;
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(3) the Lender shall have received a written application of the
Borrower accompanied by a sworn statement of the managing general partner of
the Borrower showing in reasonable detail the nature (including scope and
timing) of such repairs or restoration, the actual cash expenditures made to
date for such repairs or restoration and expected total cash expenditures
required to complete the work;
(4) the Lender shall have received a written certificate from the
Independent Engineer confirming (x) the accuracy of the application of
Borrower specified in clause (3) above; (y) that such proposed repair and
restoration shall restore the Facility to its original condition (ordinary
wear and tear excepted); and (z) setting forth the estimated cost to
complete such repairs or restoration;
(5) the Lender shall have reasonably determined that the Expected
Coverage Ratio for each subsequent year after completion of the restoration
or repair shall be at least equal to 1.5;
(6) any deficiency between the amounts then held by the Disbursement
Trustee in the Insurance Account as a result of such Partial Loss or Damage
and the cost specified by the Independent Engineer in its certificate
delivered to the Lender pursuant to clause (4) above (plus all payments due
hereunder or on the Term Notes during the period of repair or restoration)
shall be notified to the Borrower by the Lender and the Borrower or any
other Person shall have deposited with the Disbursement Trustee to be held
in the Insurance Account an amount equal to the deficiency within 60 days
of such notification.
(c) If the conditions specified in clause (b) shall have been
satisfied, the Lender shall request the Disbursement Trustee to apply the
amounts then available to it in the following of priority:
first, to payments due hereunder and on the Term Notes,
second, directly in payment for repairs or restoration of the
property, if such repairs have not already been paid for by the Borrower,
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third, if such repairs or restoration have already been paid for by
the Borrower, to reimburse the Borrower for such payment, and
fourth, the balance remaining, if any, shall be paid to the Borrower.
(d) All payments received or payable on account of an Event of Loss
shall be dealt with in accordance with Section 4.3(a) hereof.
Section 11.6. Evidence of Insurance. On or before the Borrowing Date
and each anniversary of the Borrowing Date, the Borrower shall arrange for
furnishing the Lender with approved certification of all required insurance.
Such certification shall be executed by each insurer or by an authorized
representative of each insurer where it is not practical for such insurer to
execute the certificate itself. Such certification shall identify the
underwriters, the type of insurance, the insurance limits (including applicable
deductibles) and the policy term, shall specifically list the special provisions
enumerated for such insurance required by this Section 11, and, with respect to
insurance required under Section 11.2, shall be accompanied by a report of the
managing general partner of the Borrower stating the full replacement value of
the Facility as of the effective date of such policy or renewal thereof. Upon
request, the Borrower will furnish the Lender with copies of all insurance
policies, binders and cover notes or other evidence of such insurance relating
to the Facility.
Section 11.7. Report. Concurrently with the furnishing of the
certification referred to in Section 11.6, the Borrower will furnish the Lender
with a report of an independent insurance broker setting forth the insurance
obtained by the Borrower in accordance with this Section 11 and stating that, in
the opinion of such broker, such insurance complies with the requirements of
this Section 11 and is in full force and effect, and that the Borrower is not
delinquent in the payment of any premiums then due thereon. The Lender may at
its sole option obtain such insurance if not produced by the Borrower and, in
such event, the Borrower shall reimburse the Lender, upon demand for the cost
thereof (together with interest thereon at the Stipulated Interest Rate from the
date the Lender expends such funds to the date of such repayment).
Section 11.8. Additional Insurance by the Lender or the Borrower.
Nothing in this Section 11 shall prohibit
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the Lender or the Borrower as their respective interests may appear from
maintaining for its own account, at the expense of the Person purchasing such
insurance, additional insurance on or with respect to the Facility or any part
thereof, or the operation thereof with coverage exceeding that otherwise
required under this Section 11 unless such insurance would conflict with or
limit the insurance otherwise required under this Section 11.
Section 12. Miscellaneous.
12.1 Home Office Payment. The Borrower agrees to make payments of
principal of and premium and interest on the Term Notes not later than 1:00
p.m., New York time, on the date such payment is due, in lawful money of the
United States by wire transfer of immediately available funds to the Lender
at the account shown on Annex B, or such other account in the United
States (other than in Texas) as the Lender may designate in writing,
notwithstanding any contrary provision contained herein or in the Term Notes
with respect to the place of payment. Each such wire transfer shall set forth
the name of the Borrower, the full title (including the stated interest rate, if
any, and final maturity date) of the Term Note or Term Notes with respect to
which payment is being made, any special references designated in Annex B and
the due date and desired application (as to principal, premium and interest) of
the payment being made. The Lender agrees that, before disposing of any Term
Note, it will make a notation thereon of all principal payments previously made
thereon and of the date to which interest thereon has been paid, and will notify
the Borrower of the name and address of the transferee of such Term Note. The
Borrower agrees to afford the benefits of this Section 12.1 to any institutional
investor or bank of recognized standing which is the direct or indirect
transferee of any Term Note obtained by the Lender hereunder and which has made
the same agreement relating to such Term Note as the Lender has made in this
Section 12.1.
12.2 Registration, Transfer and Exchange of Term Notes; Lost Term
Notes. Upon surrender for registration of transfer of any Term Note at the
principal office of the Borrower, the Borrower shall, at its expense, execute
and deliver one or more new Term Notes of like tenor and of a like aggregate
principal amount. At the option of the holder of any Term Notes such Term Notes
may be exchanged for other Term Notes of any authorized denominations, of a like
tenor, maturity date and aggregate principal amount, upon surrender of the Term
Notes to be exchanged at the
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office of the Borrower. Whenever any Term Note is so surrendered for exchange,
the Borrower shall execute and deliver, at its expense, the Term Notes which
the holder thereof making the exchange is entitled to receive. Every Term Note
presented or surrendered for registration of transfer shall be duly endorsed,
or be accompanied by a written instrument of transfer duly executed, by the
holder of such Term Note or by his attorney duly authorized in writing. Any
Term Note or Term Notes issued in exchange for any other Term Note or Term
Notes or upon transfer thereof shall carry the rights to unpaid interest and
interest to accrue which were carried by the Term Note or Term Notes so
exchanged or transferred, so that neither gain nor loss of interest shall
result from any such transfer or exchange. Upon receipt of written notice from
the Lender or other evidence reasonably satisfactory to the Borrower of the
loss, theft, destruction or mutilation of any Term Note held by the Lender and,
in the case of any such loss, theft or destruction, upon receipt of an
indemnity agreement of the Lender reasonably satisfactory to the Borrower
(which need not be secured), or in the case of any such mutilation, upon
surrender and cancellation of such Term Note, the Borrower will make and
deliver a new Term Note, of like tenor, in lieu of such lost, stolen, destroyed
or mutilated Term Note.
12.3 Survival of Representations and Warranties. All representations
and warranties contained herein or made in writing by the Borrower in
connection herewith shall survive the execution and delivery of this Agreement
and of the Term Notes and payment of any Term Note, regardless of any
investigation made by the Lender or on its behalf.
12.4 Amendments and Waivers. This Agreement may be amended, and the
Borrower may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if the Borrower shall obtain the written
consent to such amendment, action or omission to act given by the Lender. No
course of dealing between the Borrower and the holder of any Term Note nor any
delay in exercising any rights hereunder or under any Term Note shall operate
as a waiver of any rights of any holder of such Term Note. As used herein and
in the Term Notes, the term "this Agreement" and references thereto shall mean
this Agreement as it may, from time to time, be amended or supplemented.
12.5 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing and shall be
either delivered in person or mailed by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows or to such other
address as any party may hereafter designate in writing to the other parties
hereto:
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The Borrower: Cogen Technologies NJ Venture
1600 Smith Street,
Suite 5000
Houston, Texas 77002
Attention: Mr. Robert C. McNair
The Lender: as set forth on Annex B
Every notice, request and demand hereunder to the Borrower or the Lender shall
be deemed to have been duly given or made when delivered to it, or if mailed,
when actually received by it (as evidenced by the postal receipt there for),
except that a notice of default pursuant to Section 10 shall be deemed to have
been duly received by the Borrower when delivered, if in person or by telegram,
or when received if sent by mail or private courier service. The Lender shall
endeavor to give copies of any notices delivered hereunder to the Borrower to
the Partners at the addresses listed on Schedule 7 hereto, provided that the
failure of the Lender to provide such copies shall not affect in any manner the
effectiveness of notice given hereunder to the Borrower and the Lender shall
incur no liability under any circumstances to any Person for failing to provide
a copy of such notice to any Partner.
12.6 Payment of Expenses and Taxes. Whether or not the Term Loan is
made or any of the other transactions contemplated by this Agreement is
consummated, the Borrower agrees (a) to pay or reimburse the Lender for the
reasonable fees and disbursements of White & Case, special counsel to the Lender
and of special New Jersey counsel for the Lender, and the reasonable fees and
expenses of the Independent Engineer incurred in connection with the
negotiation, preparation and execution of, and any amendment, supplement or
modification to, this Agreement, the Project Documents and the Term Notes and
any other documents prepared in connection herewith, and the consummation of the
transactions contemplated hereby and thereby including, without limitation, all
such costs incurred subsequent to the Closing Date; (b) to pay or reimburse the
Lender for all costs and expenses, including, without limitation, fees and
disbursements of counsel, incurred in connection with the enforcement or
preservation of any rights under this Agreement, the Term Notes and the Project
Documents; (c) to pay the premium for any policy of title insurance issued to
the Lender in connection with the Mortgage, including, without limitation, any
endorsements thereto and continuations thereof; (d) to pay, indemnify, and hold
the Lender harmless from, any and all title and conveyancing charges, mortgage
taxes, escrow fees, and any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any delay in paying, stamp,
excise and other taxes, if any (other than
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income or franchise taxes), that may be payable or determined to be payable in
connection with the execution and delivery of, or the consummation of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement, the Term Notes
or any other Project Document; and (e) to pay, indemnify, and hold the Lender
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration (excluding payroll costs, overhead
costs and payroll taxes incurred by the Lender) of this Agreement, the Term
Notes and the other Project Documents (all the foregoing being called,
collectively, the "indemnified liabilities"), provided that the Borrower shall
have no obligation hereunder with respect to indemnified liabilities arising
from the gross negligence or willful misconduct of, or any income or franchise
taxes payable by, the Lender. The Borrower also agrees to pay, and save the
Lender harmless against liability for, all income taxes, together with any
interest or penalties in connection therewith, owing by the Lender as a result
of any reimbursement or payment by the Borrower pursuant to this Section 12.6,
after taking into account any deductions or credits available (current or
future) in connection with the loss, expense or other matter for which such
reimbursement or payment was made; provided that the Borrower shall have no
obligation to indemnify the Lender for any income taxes incurred by the Lender
with respect to payments received by the Lender from the Borrower relating to
payments due to the Independent Engineer and the Lender's counsel. The
agreements in this Section shall survive repayment of the Term Notes and the
termination of this Agreement and the Project Documents.
12.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Lender and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights under this Agreement without the prior written consent of the
Lender.
12.8 Additional Financing. Notwithstanding any other provision to the
contrary in this Agreement, the Term Notes, Mortgage, Security Agreement,
Disbursement Agreement or any other document, Borrower shall have the right to
seek outside financing (whether in the form of debt, equity, lease, joint
venture or otherwise) to finance the cost of the expansion of the Facility
(beyond the 165 megawatts of generating capacity currently under construction)
to include one or more additional turbines and other related protec-
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tive, interconnection and transmission equipment ("the Additional Assets").
Such financing may contemplate that the proposed obligations would be secured,
in whole or in part, by (i) a first and exclusive lien on the Additional Assets,
and/or (ii) the assignment of any Additional Contracts providing for the sale or
transmission of electricity or steam generated solely by the Additional Assets,
which Additional Contracts are separate and independent from the Power Purchase
Agreements and other similar contracts then in existence relating to the
purchase of electricity or steam from the Facility as then in existence
("Additional Asset Contracts"), and/or (iii) the assignment of a first lien
security interest in the cash flow from the sale of such electricity and steam
(the "Additional Cash Flow") (collectively, the "Additional Financing
Security"); provided, that the Liens on the Additional Financing Security shall
not in any manner, in the reasonable opinion of the Lender, impair the Liens on
the Collateral (other than the Additional Financing security) arising under the
Security Documents nor shall the holders of the obligations secured by the
Additional Financing Security share or have any rights with respect to the
Collateral (other than the Additional Financing security) or any portion
thereof. Each of the Lender and the Borrower agrees to negotiate in good faith
for the Lender to provide to the Borrower at competitive terms and rates the
portion of such financing, if any, which shall be in the form of debt secured by
such additional assets or the cash flow generated therefrom (an "Additional
Loan"). Borrower shall be entitled to solicit offers from other parties,
including without limitation, the Partners, to provide the Additional Loan, but
agrees to negotiate in good faith to obtain the Additional Loan from the Lender
for a period of 30 days after the Lender's receipt of written notice from
Borrower to the Lender that the Borrower desires to obtain the Additional Loan.
If Lender and Borrower fail to agree in writing as to the terms of the
Additional Loan within such 30 day period (it being understood that the final
loan documents need not be executed within such 30 day period), Borrower shall
thereafter be free to effectuate the Additional Loan with any other party (the
"Additional Lender").
To the extent the Additional Assets are financed other than with funds
provided by Lender, the parties intend that notwithstanding anything to the
contrary in this or any other document, the Additional Assets and Additional
Asset Contracts be available to secure the Additional Loan unencumbered by
Lender in any respect. In such event, Lender agrees to release any right, title
or interest it may have (i) in such Additional Assets (such that they do not
constitute Collateral) and (ii) in the Additional Asset Contracts (such that
they do not constitute Assigned Contracts or Collateral). Lender further agrees
to cause to be assigned to
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the Additional Lender all amounts paid or payable under the Additional Asset
Contracts in respect of steam or electricity generated by the Additional Assets.
Lender agrees to execute any further documents, amendments, waivers or releases
which may from time to time be reasonably requested by Borrower or the
Additional Lender to put into effect the provisions of this Section 12.8,
resulting in circumstances equivalent to those which would exist if such
Additional Financing security did not constitute and had never constituted
Collateral or Assigned Contracts and such Additional Financing Security had at
all times been fully available to secure additional financing.
12.9 Notices to Subsequent Holders. If any Term Note shall have been
transferred to another holder, and such holder shall have designated in writing
the address to which communications with respect to such Term Note shall be
mailed, all notices, certificates, requests, statements and other documents
required or permitted to be delivered to the Lender by any provision hereof
shall also be delivered to each such holder.
12.10 Lender Sole Beneficiary. All conditions to the obligation of the
Lender to make the Term Loan hereunder are imposed solely and exclusively for
the benefit of the Lender and its assigns, and no other Person shall have
standing to require satisfaction of such conditions in accordance with their
terms and no Person shall, under any circumstances, be deemed to be a
beneficiary of such conditions, any or all of which may be freely waived in
whole or in part by the Lender at any time if in its sole discretion it deems it
advisable to do so. Inspections and approvals of the Plans, the Project, and the
workmanship and materials used therein impose no responsibility or liability of
any nature whatsoever on the Lender, and no Person shall, under any
circumstances, be entitled to rely upon such inspections and approvals by the
Lender for any reason. The Lender is obligated hereunder to make the Term Loans
solely to the extent required by this Agreement. The Lender has no implied
obligations under this Agreement and shall have only those obligations expressly
set forth herein.
12.11 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any
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number of separate counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
12.12 Descriptive Headings. The table of contents and the descriptive
headings of the several Sections of this Agreement are inserted for convenience
only and do not constitute a part of this Agreement.
12.13 Satisfaction Requirement. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to the Lender, the determination of such
satisfaction shall be made by the Lender in its sole and exclusive judgment
exercised in good faith except as otherwise provided in this Agreement.
12.14 Severability. If any provision of this Agreement or any Term
Note shall be held or deemed to be or shall, in fact, be illegal, inoperative
or unenforceable, the same shall not affect any other provision or provisions
herein contained or render the same invalid, inoperative or unenforceable to any
extent whatever.
12.15 GOVERNING LAW. THIS AGREEMENT, THE TERM NOTES AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE TERM NOTES SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
12.16 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the Borrower and the Lender and their respective successors and
assigns (except as otherwise expressly provided herein) and nothing contained
herein shall be deemed to confer upon any other Person any right to insist on or
to enforce the performance or observance of any of the obligations contained
herein. All conditions to the obligations of the Lender to make the Term Loan
hereunder are imposed solely and exclusively for the benefit of the Lender and
its successors and assigns and no other Person shall have standing to require
satisfaction of such conditions in accordance with their terms and no other
Person shall under any circumstances be deemed to be beneficiary of such
conditions.
12.17 CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY AGREES
THAT ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TERM NOTES MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
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YORK, THE STATE OF NEW JERSEY, OR THE UNITED STATES OF AMERICA FOR THE STATE OF
NEW JERSEY OR FOR THE SOUTHERN DISTRICT OF NEW YORK, AS THE LENDER OR THE HOLDER
OF THE TERM NOTES MAY ELECT. BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
BORROWER HEREBY IRREVOCABLY ACCEPTS AND SUBMITS GENERALLY AND UNCONDITIONALLY,
FOR ITSELF AND WITH RESPECT TO ITS PROPERTY, TO THE JURISDICTION OF ANY SUCH
COURT IN ANY SUCH ACTION OR PROCEEDING, AND HEREBY WAIVES, IN THE CASE OF ANY
SUCH ACTION OR PROCEEDING BROUGHT IN THE COURTS OF THE STATE OF NEW YORK, THE
STATE OF NEW JERSEY, OR OF THE UNITED STATES OF AMERICA FOR THE STATE OF NEW
JERSEY OR FOR THE SOUTHERN DISTRICT OF NEW YORK, DEFENSES BASED ON
JURISDICTION, VENUE, FORUM NON CONVENIENS AND, IN CONNECTION WITH OR BASED UPON
ANY ACTION OR PROCEEDING INITIATED BY THE BORROWER, LIS ALIBI PENDENS, AND
HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS CT CORPORATION SYSTEM,
INC., WHOSE PRESENT NEW YORK ADDRESS IS CT CORPORATION SYSTEM, 1633 BROADWAY,
NEW YORK, NEW YORK 10019, AND THE CORPORATION TRUST COMPANY, WHOSE PRESENT NEW
JERSEY ADDRESS IS THE CORPORATION TRUST COMPANY, 2828 WEST STATE STREET,
TRENTON, NEW JERSEY 08608, AS ITS AUTHORIZED AGENTS TO RECEIVE, FOR AND ON
BEHALF OF THE BORROWER AND ITS PROPERTY, SERVICE OF PROCESS IN THE STATES OF NEW
YORK AND NEW JERSEY, RESPECTIVELY, WHEN AND AS SUCH LEGAL ACTIONS OR PROCEEDINGS
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK, THE STATE OF NEW JERSEY,
OR OF THE UNITED STATES OF AMERICA FOR THE STATE OF NEW JERSEY OR FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND SUCH SERVICE OF PROCESS SHALL BE DEEMED
COMPLETED UPON THE DATE OF DELIVERY THEREOF TO SUCH AGENTS WHETHER OR NOT SUCH
AGENTS GIVE NOTICE THEREOF TO THE BORROWER, OR UPON THE EARLIEST OF ANY OTHER
DATE PERMITTED BY APPLICABLE LAW. IT IS UNDERSTOOD THAT A COPY OF SAID PROCESS
SERVED ON SUCH AGENTS WILL BE PROMPTLY FORWARDED TO THE BORROWER AT ITS ADDRESS
SET FORTH BELOW, BUT THE FAILURE OF THE BORROWER TO RECEIVE SUCH COPY SHALL NOT
AFFECT IN ANY WAY THE SERVICE OF SAID PROCESS ON SAID AGENTS AS THE AGENTS OF
THE BORROWER. THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF THE COPIES THEREOF BY CERTIFIED AIR MAIL, POSTAGE PREPAID, TO THE BORROWER AT
ITS ADDRESS SET FORTH BELOW, SUCH SERVICE TO BECOME EFFECTIVE UPON THE EARLIER
OF (i) THE DATE 5 DAYS AFTER SUCH MAILING OR (ii) ANY EARLIER DATE PERMITTED BY
APPLICABLE LAW. THE BORROWER AGREES THAT IT WILL AT ALL TIMES CONTINUOUSLY
MAINTAIN AN AGENT TO RECEIVE SERVICE OF PROCESS IN THE STATE OF NEW YORK AND THE
STATE OF NEW JERSEY ON BEHALF OF ITSELF AND ITS PROPERTIES WITH RESPECT TO THIS
AGREEMENT OR THE TERM NOTES AND IN THE EVENT THAT, FOR ANY REASON, EITHER OF THE
AGENTS NAMED ABOVE OR ITS SUCCESSOR SHALL NO LONGER
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SERVE AS AGENT OF THE BORROWER TO RECEIVE SERVICE OF PROCESS IN THE STATE OF NEW
YORK OR THE STATE OF NEW JERSEY ON ITS BEHALF, AS THE CASE MAY BE, THE BORROWER
SHALL PROMPTLY APPOINT A SUCCESSOR SO TO SERVE AND SHALL ADVISE THE LENDER
THEREOF. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER JURISDICTION
OR TO SERVE PROCESS IN ANY OTHER JURISDICTION OR TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY APPLICABLE LAW. THE BORROWER FURTHER AGREES THAT FINAL
JUDGMENT AGAINST IT ANY SUCH ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TERM NOTES SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
ANY OTHER JURISDICTION WITHIN THE UNITED STATES OF AMERICA BY SUIT ON THE
JUDGMENT, A CERTIFIED OR EXEMPLIFIED COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE
OF THE FACT AND OF THE AMOUNT OF ITS INDEBTEDNESS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers or
representatives as of the day and year first above written.
-59C-
<PAGE>
ANNEX A
-------
DEFINITIONS
-----------
In addition to the terms defined in the Term Loan Agreement, the
following terms have the following meanings (such definitions to be equally
applicable to both singular and plural forms of the terms defined) as used in
the Agreement, the Term Notes and the Security Documents:
"Additional Assets": as defined in Section 12.8 of the Term Loan
Agreement.
"Additional Asset Contracts": as defined in Section 12.8 of the Term
Loan Agreement.
"Additional Cash Flow": as defined in Section 12.8 of the Term Loan
Agreement.
"Additional Contract": any contract or undertaking to which the
Borrower is a party or of which it is a beneficiary providing for (i) the sale
or exchange by the Borrower of any of the Facility's electrical or steam output
or (ii) relating in any way to the operation of the Facility or the use and
occupancy of the Site, other than employment contracts and contracts involving
less than $50,000, entered into after the Closing Date.
"Additional Financing Security": as defined in Section 12.8 of the
Term Loan Agreement.
"Additional Lender": as defined in Section 12.8 of the Term Loan
Agreement.
"Additional Loan": as defined in Section 12.8 of the Term Loan
Agreement.
"Affiliate": of any designated Person, any Person which, directly or
indirectly, controls or is controlled by or is under common control with such
designated Person and, without limiting the generality of the foregoing, shall
include (i) any Person which beneficially owns or holds 10% or more of any class
of voting securities of such designated Person or 10% or more of the equity
interest in such designated Person and (ii) any Person of which such designated
Person beneficially owns or holds 10% or more of any class of voting securities
or in which such designated Person beneficially owns or holds 10% or more of the
equity interest; for the purposes of this definition,
<PAGE>
Annex A
page 2
"control" (including, with correlative meanings, the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Assigned Contracts": the collective reference to the Electric Power
Purchase Agreement, the Steam Purchase Agreement, the IMTT Power Purchase
Agreement, the System Supply Agreement, the Operation & Maintenance Contract,
the Site Lease, the Gas Purchase Agreement, the Steam Facilities Lease, the
Purchase and Sale Agreement, the Option Agreement, the Service and
Interconnection Agreement and, from and after the date any Additional
Contract is entered into by the Borrower, such Additional Contract, and any
amendment, supplement or modification to any thereof after the Closing Date.
"Authorized Representative": with respect to a Partner, the president
or any vice president of such Partner or, with respect to financial matters, the
chief financial officer of such Partner, and with respect to the Borrower, an
Authorized Representative of a Partner.
"Bayonne": Bayonne Industries Inc., a New Jersey corporation.
"Borrower": Cogen Technologies NJ Venture, a New Jersey general
partnership of the Partners.
"Borrowing Date": the date on which the Term Loan is made.
"Budget": as defined in Section 5.1(f) of the Term Loan Agreement.
"Business Day": a day other than a Saturday, a Sunday or any other
day on which commercial banks in New York City are required or authorized by law
to be closed.
"Buyers": the parties designated as such under the Power Purchase
Agreements.
"Called Principal": with respect to any Term Note, the principal of
such Term Note that is immediately
<PAGE>
Annex A
page 3
due and payable pursuant to Section 10.1 of the Term Loan Agreement.
"Cancellation Date": as def ined in Section 4.8 of the Term Loan
Agreement.
"Capital Lease": any lease of property, real or personal, which, in
accordance with GAAP, would be required to be capitalized on a balance sheet of
the lessee or, if not so capitalized, for which the amounts of the asset and
liability (had such lease been capitalized) would at such time be so required to
be disclosed in a note to such a balance sheet.
"Closing Date": the date on which the Term Loan Agreement is executed
and delivered by the Borrower.
"Code": The Internal Revenue Code of 1986, as amended.
"Collateral": the collective reference to all real and personal
property, tangible and intangible, and the proceeds thereof, subjected from time
to time to the Liens intended to be created by any Security Document.
"Commonly Controlled Entity": an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of Section
414(b) or (c) of the Code.
"Completion": completion of the Work.
"Consents": the collective reference to the Consents, each
substantially in the forms set forth as parts of Exhibits C-1 to C-7 to the Term
Loan Agreement, to be executed and delivered by the parties (other than the
Borrower) to each Assigned Contract consenting to the assignment by the Borrower
to the Lender of the Borrower's rights under such Assigned Contract.
"Construction Loan Agreement": the Construction Loan Agreement dated
as of September 8, 1986 between the Borrower and General Electric Power Funding
Corporation, a New York corporation.
"Contingent Obligation": as to any Person, any obligation of such
Person guaranteeing or in effect guaranteeing any Indebtedness, leases,
dividends or other obliga-
<PAGE>
Annex A
page 4
tions ("primary obligations") of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, 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, (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation or (d)
otherwise to assure or hold harmless the owner of such primary obligation
against loss in respect thereof; provided, however, that the term "Contingent
Obligation" shall 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 an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by the independent public accountants
for the Borrower or a Partner.
"Contractor": General Electric Company, a corporation organized under
the laws of the State of New York.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its property is bound.
"Coverage Ratio": for any consecutive 12 months, the quotient obtained
by dividing (a) the sum of the Net Revenue for such period plus the amount, if
any, on deposit in the Debt Service Reserve Account as of the last day of such
period, by (b) the aggregate payments on account of principal of and interest on
the Term Note payable during such period.
"CTNJI": Cogen Technologies NJ, Inc., a corporation organized under
the laws of the State of Delaware.
"Debt Service Reserve Account": as defined in the Disbursement
Agreement.
<PAGE>
Annex A
page 5
"Default": any of the events specified in Section 10.1 of the Term
Loan Agreement, whether or not any requirement for the giving of notice, the
lapse of time, or both, or for the happening of any other condition, has been
satisfied.
"Disbursement Agreement": the agreement substantially in the form of
Exhibit F to the Term Loan Agreement, as amended, supplemented or modified from
time to time after the Closing Date.
"Disbursement Trustee": as defined in the Disbursement Agreement.
"Discounted Value": with respect to the Called Principal of any Term
Note, the amount calculated by discounting all Remaining Scheduled Payments with
respect to such Called Principal from their respective scheduled due dates to
the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on a quarterly
basis) equal to the Reinvestment Yield with respect to such Called Principal.
"Electric Power Purchase Agreement": the Agreement for Purchase of
Electric Power between CTNJI and JCP&L dated as of October 29, 1985, as assigned
to the Borrower pursuant to the Assignment Agreement, dated as of September 8,
1986, as amended, supplemented or otherwise modified from time to time.
"Environmental Laws": as defined in Section 6.28 of the Term Loan
Agreement.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default": any of the events specified in Section 10.1 of
the Term Loan Agreement, provided that any requirement for the giving of notice,
the lapse of time, or both, or for the happening of any other condition, has
been satisfied.
"Event of Loss": any of the following events or conditions:
(i) all or substantially all of the Facility shall become lost,
stolen, destroyed, damaged beyond
<PAGE>
Annex A
page 6
repair or permanently rendered unfit for commercial operation, as a
consequence of any event whatsoever (including governmental regulation),
including without limitation anything affecting the Site; or
(ii) any damage to or loss of all or any portion of the Facility
occurring through any cause whatsoever, including without limitation
anything affecting the Site, which results in the receipt of insurance
proceeds with respect to the Facility on the basis of an actual or
constructive total loss; or
(iii) the condemnation, confiscation or seizure of, or other requisition
of title to, or use of, all or substantially all of the Facility or the
Site or such portion of the Facility and/or the Site as shall render the
Facility unable to continue to satisfy the standards for Performance
Adequacy (including the taking of title to, or use of, all or substantially
all or such portion as aforesaid of the Facility and/or the Site under
power of eminent domain or by forfeiture pursuant to any proceeding
commenced under any provision of law providing for escheat), provided that,
in the case of a requisition of use by a governmental authority, such
requisition shall be for a period of at least six months.
"Exercise Date": October 23, 1987.
"Expected Coverage Ratio": for any calendar year, the quotient
obtained by dividing (a) the Expected Net Revenue for such calendar year by (b)
the aggregate payments on account of the principal of and interest on the Term
Notes to be made during such calendar year, assuming that no prepayments are
made pursuant to Section 4.3(a), 4.3(b) or 4.4 of the Term Loan Agreement.
"Expected Net Revenue": for any calendar year, the excess of (a) the
gross revenue expected to be received by the Borrower pursuant to the Power
Purchase Agreements for such calendar year over (b) the expected costs of
operating and maintaining the Facility for such calendar year (including costs
of fuel, property taxes, insurance, labor and maintenance and repairs), all as
determined by the Lender in consultation with the Independent Engineer.
"EXXON": Exxon Company, U.S.A., a division of Exxon Corporation, a New
Jersey corporation.
<PAGE>
Annex A
page 7
"Facility": the approximately 165 megawatt gas fired combined cycle
cogeneration facility to be constructed on the Site, as described in the System
Supply Agreement, including the related interconnection and other equipment to
be installed by the Borrower.
"FERC Exhibits": the maps, plans, specifications and statements
described and designated as exhibits to the application submitted to the Federal
Energy Regulatory Commission with respect to the certification of the Project as
a Qualifying Facility.
"Fixed Amount": $90,000,000.
"Force Majeure Event": any act or event caused by "force majeure" as
described in any Project Document.
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time.
"Gas Purchase Agreement": the letter agreement, dated October 10,
1986, between the Borrower and Public Service, as amended, supplemented or
modified from time to time.
"Governmental Actions": all Permits and other authorizations,
consents, approvals, waivers, exemptions, variances, franchises, permissions,
permits and licenses of, and filings and declarations with, any Governmental
Authority, including, without limitation, the Federal Energy Regulatory
Commission, the New Jersey Public Utilities Commission and the State of New
Jersey Department of Environmental Protection.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
"Hazardous Substances or Wastes": "hazardous substances" as defined in
the Spill Act or "hazardous substances" or "hazardous wastes" as such terms are
defined in N.J.A.C. 7:1-3.3, other than petroleum products.
<PAGE>
Annex A
page 8
"IMTT": IMTT Bayonne, a Delaware partnership.
"IMTT Power Purchase Agreement": the Agreement between CTNJI and IMTT
for the Sale of Steam and Electricity for a Cogeneration Plant, dated June 13,
1985, as amended by an Amendment thereto, dated June 13, 1985 as assigned by
CTNJI to the Borrower pursuant to the Assignment and Assumption Agreement, dated
as of September 8, 1986, as amended, supplemented or modified from time to time.
"Indebtedness": as to any Person, at a particular time, (a)
indebtedness for borrowed money or for the deferred purchase price of property
(other than trade and other accounts payable in the ordinary course of business
in accordance with customary trade terms), including obligations under Capital
Leases, in respect of which such Person is liable, directly, contingently or
otherwise, as obligor, guarantor or otherwise or in respect of which such Person
otherwise assures a creditor against loss and (b) voluntarily incurred
indebtedness secured by a Lien (other than inchoate Liens arising in the
ordinary course of such Person's business) on any property owned by such Person,
whether or not such Person is liable for the payment thereof.
"Independent Engineer": Burns & Row Company, or such other providers
of consulting engineering services as the Lender may designate by written notice
to the Borrower.
"Insurance Account": as defined in the Disbursement Agreement.
"Interest Payment Date": any March 1, June 1, September 1 and December
1 of each year (or the next succeeding Business Day thereafter if such date is
not a Business Day).
"Investment": as to any Person, all investments, computed in
accordance with GAAP, made by purchase of stock, bonds, notes, debentures or
other securities, capital contribution, loan, advance, guarantee of any
Indebtedness of such Person or creation or assumption of any other contingent
liability in respect of any Indebtedness of such Person, or otherwise.
"JCP&L": Jersey Central Power & Light Company, a corporation
organized under the laws of the State of New Jersey.
<PAGE>
Annex A
page 9
"Joint Venture Agreement": the Amended and Restated Joint Venture
Agreement of the Borrower among the Partners, dated August 28, 1986, as amended,
supplemented or modified from time to time.
"Lender": The Prudential Insurance Company of America.
"Lien": any mortgage, pledge, hypothecation, assignment, encumbrance,
lien (statutory or other), or preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any statement under the Uniform Commercial Code
or comparable law of any jurisdiction).
"Mortgage": the mortgage and security agreement substantially in the
form of Exhibit D to the Term Loan Agreement, as amended, modified or
supplemented from time to time after the Closing Date.
"Mortgage Supplement": as defined in Section 2.1 of the Mortgage.
"Net Revenue": for any consecutive 12 months, the excess of (a) the
gross revenue received by the Borrower pursuant to the Power Purchase Agreements
(or any additional contract to which Borrower is a party for the sale of any of
the Facility's electrical or steam output (other than any Additional Asset
Contracts)) for such period over (b) the costs incurred of operating and
maintaining the Facility (other than such costs relating to any expansion of the
Facility as permitted under Section 12.8 of the Term Loan Agreement) for such
period (including all interest payments made on the indebtedness described in
Section 9.1(c) of the Term Loan Agreement and all costs of fuel, property taxes,
insurance, labor and maintenance and repairs).
"Nondisbursed Portion": as defined in Section 4.8 of the Term Loan
Agreement.
"Non-Usage Feel": as defined in Section 4.8 of the Term Loan
Agreement.
"Notice of Borrowing": as defined in Section 3.1 of the Term Loan
Agreement.
<PAGE>
Annex A
page 10
"Operating Budget": as defined in Section 8.11 of the Term Loan
Agreement.
"Operating Year": each consecutive period of 12 months except that the
first operating Year shall commence on the Borrowing Date and terminate on
December 31 of the same year, with each subsequent Operating Year commencing on
the day following the last day of the preceding Operating Year.
"Operation & Maintenance Contract": the Operation & Maintenance
Contract between the Borrower and the Contractor dated September 8, 1986, as
amended, supplemented or modified from time to time.
"Option Agreement": the Option Agreement, dated as of May 22, 1986,
between Bayonne Industries, Inc. and CTNJI, as assigned to the Borrower by CTNJI
pursuant to Assignment and Assumption Agreement, dated September 8, 1986, as
amended, supplemented or modified from time to time.
"Partial Loss or Damage": any loss, confiscation, theft or seizure of,
or requisition of title to or use of, damage to or loss of use of the
Facility or any part thereof which does not constitute an Event of Loss.
"Partner": each of CTNJI, Enron Cogeneration Five Company, a Delaware
corporation, CEA Bayonne, Inc., a New Jersey corporation, PSVO Bayonne, Inc., a
Delaware corporation and Transco Cogeneration Company, a Delaware corporation.
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor entity thereto.
"Performance Adequacy": as defined in the System Supply Agreement.
"Permits": all applicable authorizations, consents, certificates,
licenses, approvals, waivers, exemptions, variances, franchises, permissions and
permits of any Governmental Authority required in connection with the purchase,
acquisition, design, construction, installation, ownership or operation of the
Project and/or in connection with any of the transactions contemplated by the
Project Documents.
<PAGE>
Annex A
page 11
"Permitted Exceptions": Liens on, !and limitations on and defects in
title to, the Site, as disclosed in the Title Insurance Policy.
"Permitted Investments": investments in the instruments and securities
specified in the term "Permitted Investments" as defined in the Disbursement
Agreement and advances customarily required in the ordinary course of business
to agents and suppliers of the Borrower as advance payment of insurance
premiums, taxes and utility charges, fuel, supplies, operating deposits or other
like payments or expenses.
"Permitted Liens": the Liens permitted under Section 9.2 of the Term
Loan Agreement.
"Person": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan": any pension plan which is covered by Title IV of ERISA and in
respect of which the Borrower, or a Commonly Controlled Entity is an "employer"
as defined in Section 3(5) of ERISA.
"Plans and Specifications": the plans and specifications for the
Project as set forth in the System Supply Agreement.
"Power Purchase Agreements": the Electric Power Purchase Agreement,
the IMTT Power Purchase Agreement and the Steam Purchase Agreement,
collectively.
"Premium Rate": as of any Interest Payment Date occurring after the
54th Interest Payment Date, a percentage beginning at the interest rate borne by
the Term Notes and decreasing ratably to zero as of the final Interest Payment
Date.
"Project": the Facility and the Site.
"Project Cost": all costs, expenses and other obligations paid or
incurred, including, without limitation, all interest, taxes and other carrying
costs, and all reserves required to be established, in connection with the
development, financing, design, engineering, acquisition, construction,
inspection, testing and completion of the
<PAGE>
Annex A
page 12
Project and an amount of working capital not to exceed $5,000,000.
"Project Documents": the collective reference to the Agreement, the
Term Notes, the Security Documents, the Assigned Contracts and the Joint Venture
Agreement.
"Project Schedule": as defined in Section 5.1(g) of the Term Loan
Agreement.
"Public Service": Public Service Electric & Gas Company, a New Jersey
corporation.
"Purchase and Sale Agreement": the Purchase and Sale Agreement, dated
as of May 22, 1986, between Bayonne and IMTT, as sellers and CTNJI, as
buyer, as assigned by CTNJI to the Borrower pursuant to the Assignment and
Assumption Agreement, dated as of September 8, 1986, as amended, supplemented or
modified from time to time.
"Qualifying Facility": a cogeneration facility meeting all the
requirements for a "qualifying facility" set forth in Part 292 of the rules and
regulations of the Federal Energy Regulatory Commission (or any successor agency
to its duties and responsibilities) under the Public Utility Regulatory Policies
Act of 1978, as amended.
"Reinvestment Yield": with respect to the Called Principal of any
Term Note, the yield to maturity implied by the Treasury Constant Maturity
Series yields reported (for the latest day for which such yields shall have been
so reported as of the Business Day next preceding the Settlement Date with
respect to such Called Principal) in Federal Reserve Statistical Release H.15
(519) (or any comparable successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to the remaining weighted
average life to final maturity (calculated in accordance with accepted financial
practice) of such Called Principal as of such Settlement Date. Such implied
yield shall be determined (a) by calculating the remaining weighted average life
to final maturity of such Called Principal rounded to the nearest quarter-year
and, (b) if necessary, by interpolating linearly between Treasury Constant
Maturity Series yields.
"Remaining Scheduled Payments": with respect to the Called Principal
of any Term Note, all payments of such Called Principal and interest thereon
that would be due on
<PAGE>
Annex A
page 13
or after the Settlement Date with respect to such Called Principal if no payment
of such Called Principal were made prior to its scheduled due date.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or partnership agreement or other organizational or
governing documents of such Person, and as to any Person or the Project, any
law, treaty, rule or regulation, or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding upon (a)
such Person or any of its properties or (b) the Project.
"Restricted Payment": as to any Person, any payment or distribution by
such Person to a Partner, to any Affiliate of a Partner or to any other Person
claiming under right therefrom, including, without limitation, any repayment by
such Person of Indebtedness to a Partner, to any Affiliate of a Partner or to
any other Person claiming under right therefrom.
"Security Agreement": the agreement substantially in the form of
Exhibit E to the Term Loan Agreement, as amended, supplemented or modified from
time to time.
"Security Documents": the collective reference to the Mortgage, the
Security Agreement, the Disbursement Agreement, the Consents, and any other
agreement or instrument which secures payment of the indebtedness evidenced by
the Term Notes or payment or performance of any other covenant or obligation or
liability of the Borrower to the Lender under the Agreement or under any other
agreement or instrument referred to herein.
"Service and Interconnection Agreement": the Revised Transmission
Service and Interconnection Agreement between the Borrower and Public Service
dated April 27, 1987, as further amended, supplemented or modified from time to
time.
"Settlement Date": with respect to the Called Principal of any Term
Note, the date on which such Called Principal is immediately due and payable
pursuant to Section 10.1 of the Term Loan Agreement.
"Site": the parcel or parcels of land leased by the Borrower under the
Site Lease or over which the Borrower has an easement pursuant to the Site
Lease.
<PAGE>
Annex A
page 14
"Site Lease": collectively, the Lease Agreement, dated as of October
18, 1986, between Bayonne and IMTT, as lessor, and the Borrower as Lessee, as
amended, supplemented or modified from time to time, and the Easement, dated as
of October 20, 1986, from Bayonne and IMTT to the Borrower, as amended,
supplemented or modified from time to time.
"Spill Act": as defined in Section 8.18 of the Term Loan Agreement.
"Steam Facilities Lease": the Steam Producing Facilities Lease
Agreement, dated as of May 22, 1986, between the CTNJI and IMTT as assigned by
CTNJI to the Borrower pursuant to the Assignment and Assumption Agreement, dated
as of September 8, 1986, as amended, supplemented or modified from time to time.
"Steam Purchase Agreement": the Agreement between the Borrower and
EXXON dated February 17, 1987, as amended, supplemented or modified from time to
time.
"Stipulated Interest Rate": as defined in Section 2.2 of the Term Loan
Agreement.
"System Supply Agreement": the System Supply Agreement dated September
8, 1986 between the Contractor and the Borrower, as amended by Amendments Nos. 1
through 7, as further amended, supplemented or modified from time to time.
"Term Loan": as def ined in Section 2. 1 of the Term Loan Agreement.
"Term Loan Agreement": the Term Loan Agreement, dated as of November
1, 1987, between the Borrower and the Lender.
"Term Notes": as defined in Section 2.1 of the Term Loan Agreement.
"Title Insurance Policy": the title insurance policy delivered
pursuant to, and meeting the requirements of, Section 5.2(g) of the Term Loan
Agreement.
"Yield-Maintenance Premium": with respect to any Term Note, a premium
equal to the excess, if any, of the Discounted Value of the Called Principal of
such Term Note over the sum of such Called Principal plus interest accrued
thereon as of (including interest due on) the Settlement
<PAGE>
Annex A
page 15
Date with respect to such Called Principal. The Yield Maintenance Premium shall
in no event be less than zero.
"Work": as defined in the System Supply Agreement.
As used in the Term Loan Agreement, any Term Note or any Security
Document and in any certificate or other document made or delivered pursuant to
any thereof, accounting terms relating to the Borrower not defined in this Annex
A, and accounting terms partly defined in this Annex A to the extent not
defined, shall have the respective meanings given to them under GAAP.
The words "hereof," "herein" and "hereunder" and words of similar
import when used in an agreement shall refer to such agreement as a whole and
not to any particular provision of such agreement, and section, schedule and
exhibit references in any agreement are to such agreement unless otherwise
specified.
<PAGE>
ANNEX B
-------
ADDRESS, ACCOUNT AND OTHER
INFORMATION REGARDING LENDER
Name and Address
- ----------------
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA ...................
In the case of all payments on account of the Term Notes:
By bank wire transfer in immediately available funds
to its account #050-54-526 in:
Morgan Guaranty Trust
Company of New York
23 Wall Street
New York, New York 10015
Term Notes to be registered in the name of:
The Prudential Insurance Company of America
In the case of all other communications:
c/o PruCapital Management, Inc.
Three Gateway Center
Newark, New Jersey 07102
Attention: Regional Vice President --
Special Industries (East)
<PAGE>
ANNEX C
-------
PREPAYMENT SCHEDULE
Interest Payment Date
to occur after the Principal
Borrowing Date Repayment
---------------------- ---------
1 $ 325,122.19
2 333,941.13
3 342,999.28
4 352,303.14
5 361,859.36
6 371,674.80
7 381,756.47
8 392,111.62
9 402,747.65
10 413,672.18
11 424,893.03
12 436,418.26
13 448,256.10
14 460,415.05
15 472,903.81
16 485,731.32
17 498,906.79
18 512,439.63
19 526,339.56
20 540,616.52
21 555,280.74
22 570,342.73
22 585,813.28
24 601,703.46
25 618,024.67
26 634,788.59
27 652,007.23
28 669,962.93
29 687,858.35
30 706,516.50
31 725,680.76
32 745,364.85
33 765,582.88
34 786,349.31
35 807,679.04
36 829,587.33
37 852,089.89
38 875,202.83
39 898,942.70
40 923,326.52
41 948,371.75
<PAGE>
Annex C
page 2
Interest Payment Date
to occur after the Principal
Borrowing Date Repayment
--------------------- ---------
42 974,096.34
43 1,000,518.70
44 1,027,657.77
45 1,055,532.99
46 1,084,164.32
47 1,113,572.28
48 1,142,777.93
49 1,174,802.90
50 1,206,669.43
51 1,239,400.34
52 1,273,019.07
53 1,307,549.72
54 1,343,011.00
55 1,379,446.34
56 1,416,863.82
57 1,455,296.25
58 1,494,771.16
59 1,535,316.83
60 1,576,962.30
61 1,619,737.40
62 1,663,672.78
63 1,708,799.90
64 1,755,151.10
65 1,802,759.57
66 1,851,659.43
67 1,901,885.69
68 1,953,474.34
69 2,006,462.33
70 2,060,887.62
71 2,116,789.20
72 2,174,207.10
73 2,233,182.47
74 2,293,757.55
75 2,355,975.72
76 2,419,881.56
77 2,485,520.85
78 2,552,940.60
79 2,622,189.11
80 2,693,315.96
<PAGE>
COGEN TECHNOLOGIES NJ VENTURE
By COGEN TECHNOLOGIES NJ, INC.,
Managing Venturer
By /s/ ROBERT C. MCNAIR
-------------------------------
Mr. Robert C. McNair
President
By ENRON COGENERATION FIVE
COMPANY, Venturer
By /s/ JAY BERRIMAN
--------------------------------
Name: Jay Berriman
Title: Managing Committee Representative
By CEA BAYONNE, INC., Venturer
By /s/ DONALD A. SCHNURE
---------------------------------
Name: Donald A. Schnure
Title: Vice President
<PAGE>
By PSVO BAYONNE, INC., Venturer
By /s/ JAMIE H. GEARON
----------------------------------
Name: Jamie H. Gearon
Title: Attorney In Fact For H. Jakoc,
Managing Committee Representative
By TRANSCO COGENERTION COMPANY,
Venturer
By /s/ WILLIAM JAMES MURRAY
----------------------------------
Name: William James Murray
Title: Attorney In Fact For James J. Moore,
Managing Committee Representative
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By PRUCAPITAL MANAGEMENT, INC.,
agent
By /s/ MARIA C. RICHTER
----------------------------------
Name: Maria C. Richter
Title: Vice President, Corp. Finance
<PAGE>
FIRST AMENDMENT TO THE TERM LOAN AGREEMENT
FIRST AMENDMENT TO THE TERM LOAN AGREEMENT dated as of December 15,
1988 (the "Amendment") by and between COGEN TECHNOLOGIES NJ VENTURE, a general
partnership organized under the laws of the State of New Jersey (the "Borrower")
and THE PRUDENTIAL INSURANCE COMPANY OF AMERICA (the "Lender").
The parties hereto have entered into a Term Loan Agreement dated as of
November 1, 1987 (the "Term Loan Agreement") providing for the permanent
financing of the Project, subject to certain conditions, as more fully set
forth therein. Each of the parties hereto is willing to amend the Loan Agreement
as set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions. Unless the context shall otherwise require, the
capitalized terms used herein shall have the respective meanings assigned
thereto in Annex A to the Term Loan Agreement.
2. Amendments to the Term Loan Agreement. The following amendments
shall be made to the Term Loan Agreement:
(a) The first sentence of Section 2.2 shall be amended and
restated in its entirety as follows:
"The Term Notes shall bear interest, computed on the basis of a year
of 360 days and the actual number of days elapsed, on the unpaid principal
amount thereof from the date thereof until the principal amount thereof shall
become due and payable at a fixed rate per annum equal to 10.85%, payable on the
first day of January, April, July and October of each year, commencing on April
1, 1989."
(b) The definition of "Interest Payment Date" contained in Annex A
attached to the Term Loan Agreement shall be amended and restated in its
entirety as follows:
<PAGE>
"Interest Payment Date": any January 1, April 1, July 1 and
October 1 of each year (or the next suceeding Business Day thereafter if such
date is not a Business Day).
(c) The definition of "Partner" contained in Annex A attached to the
Term Loan Agreement shall be amended and restated in its entirety as follows:
"Partner": each of CTNJI, Enron Cogeneration Five Company, a Delaware
corporation, CEA Bayonne, Inc., a New Jersey corporation and Transco
Cogeneration Company, a Delaware corporation.
(d) The definition of "Site Lease" shall include the First Amendment
to Easement, dated as of December 15, 1988, from Bayonne and IMTT to the
Borrower.
3. The Borrower hereby represents and warrants that prior to the date
hereof, PSVO Bayonne, Inc. transferred all of its right, title and interest in
the Borrower to CTNJI, and Enron Cogeneration Five Company transferred 1/17th of
its right, title and interest in the Borrower to Ajax Corporation, as assignee.
As of the date hereof, Ajax Corporation is not a partner in Borrower and the
only partners of the Borrower are those entities executing this Agreement on
behalf of the Borrower.
4. Full Force and Effect. Except as expressly amended hereby, all
provisions of the Term Loan Agreement remain unaffected and in full force and
effect.
5. Counterparts. This Amendment may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original.
6. GOVERNING LAW. THIS AMENDMENT SHALL IN ALL RESPECTS BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
7. Effective Date. This Amendment shall be effective when all of the
parties hereto shall have executed a copy hereof.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Amendment
to be duly executed as of the day and year first written above.
COGEN TECHNOLOGIES NJ VENTURE
By: COGEN TECHNOLOGIES NJ, INC.,
Managing Venturer
By /s/ Lawrence Thomas
---------------------------------
Name: Lawrence Thomas
Title: Vice President
By: ENRON COGENERATION FIVE
COMPANY, Venturer
By /s/ Jay D. Berriman
-------------------------------
Name: Jay D. Berriman
Title: Executive Vice President
and Chief Operating
Officer
By: CEA BAYONNE, INC., Venturer
By /s/ Arthur S. Nislick
---------------------------------
Name: Arthur S. Nislick
Title: President
By: TRANSCO COGENERATION COMPANY,
Venturer
By /s/ Robert M. Chiste
---------------------------------
Name: Robert M. Chiste
Title: President
-3-
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: PruCapital Management, Inc.,
Agent
By /s/ William Brad Winegar
------------------------------
Name: William Brad Winegar
Title: Vice President, Corporate Finance
-4-
<PAGE>
SECOND AMENDMENT TO TERM LOAN AGREEMENT
SECOND AMENDMENT TO TERM LOAN AGREEMENT dated as of July 31, 1996 (the
"Amendment") by and between COGEN TECHNOLOGIES NJ VENTURE, a general partnership
organized under the laws of the State of New Jersey (the "Borrower"), and THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA (the "Lender").
The parties hereto have entered into a Term Loan Agreement dated as of
November 1, 1987, as amended by First Amendment to Term Loan Agreement dated as
of December 15, 1988 (the "Term Loan Agreement"), providing for the permanent
financing of the Project, subject to certain conditions, as more fully set forth
therein. Each of the parties hereto is willing to amend the Loan Agreement as
set forth herein.
NOW THEREFORE, in consideration of good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. Unless the context otherwise requires, capitalized
terms used but not defined herein shall have the respective meanings assigned to
them in Annex A to the Term Loan Agreement.
2. Amendments to the Term Loan Agreement. The following amendments
shall be made to the Term Loan Agreement:
(a) Clause (b) of the second sentence of Section 2.1 shall be
amended and restated in its entirety as follows:
"(b) mature on October 1, 2008,11
(b) Exhibit A attached to the Term Loan Agreement shall be
amended by the allonge in the form of Exhibit A attached hereto.
(c) Annex C attached to the Term Loan Agreement shall be amended
and restated in its entirety by the schedule in the form of Exhibit B attached
hereto.
3. Full Force and Effect. Except as expressly amended hereby, all
provisions of the Term Loan Agreement remain unaffected and in full force and
effect.
4. Counterparts. This Amendment may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed
to be an original.
5. GOVERNING LAW. THIS AMENDMENT SHALL IN ALL RESPECTS BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE TERMS OF THE STATE OF NEW YORK.
<PAGE>
6. Effective Date. This Amendment shall be effective when all of the
parties hereto shall have executed a copy hereof.
IN WITNESS WHEREOF, the parties hereto have each caused this Amendment
to be duly executed as of the day and year first written above.
COGEN TECHNOLOGIES NJ VENTURE
By: COGEN TECHNOLOGIES NJ, INC.
Managing Venturer
By: /s/ R. A. Lydecker
-----------------------------
Name: Richard A. Lydecker, Jr.
Title: Vice President and Chief
Financial Officer
By: ENRON COGENERATION FIVE
COMPANY, Venturer
By: /s/ Tony W. Belcher
-------------------------------
Name: Tony W. Belcher
Title: Manager-Operations
By: CEA BAYONNE, INC., Venturer
By: /s/ Jeffrey W. Moore
-------------------------------
Name: Jeffrey W. Moore
Title: Vice President
By: TEVCO/MISSION BAYONNE
PARTNERSHIP, Venturer
By: T/M BAYONNE, INC. AS GP
By: /s/ James Moore
-------------------------------
Name: James Moore
Title: President
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
By: /s/ Joseph J. Lemanowicz
-----------------------------------
Name: Joseph J. Lemanowicz
Title: Vice President
2
<PAGE>
ALLONGE
TO
COGEN TECHNOLOGIES NJ VENTURE
TERM NOTE
DUE JANUARY 1, 2009
THIS ALLONGE is attached to, made a part of and amends that certain
promissory note, No. 1, dated December 29, 1988, entitled "COGEN TECHNOLOGIES NJ
VENTURE TERM NOTE DUE January 1, 2009" (the "Note"), in the principal amount of
$90,000,000 made by COGEN TECHNOLOGIES NJ VENTURE, a Delaware corporation (the
"Company") to The Prudential Insurance Company of America ("Prudential").
WITNESSETH:
WHEREAS, the Company and Prudential desire to amend the muturity date
and final interest payment date of the Note:
NOW, THEREFORE, the Company agrees that:
(i) the heading and first sentence of the Note are each hereby amended by
deleting the reference to "January 1, 2009" in the heading and the tenth line
of the first sentence of the Note, and substituting therefor a reference to
"October 1, 2008"; and
(ii) that the final Interest Payment Date will be October 1, 2008.
IN WITNESS WHEREOF, the company has caused this Allonge to be executed
and delivered effective the day of July, 1996, by an officer thereunto
validly authorized, and Prudential has accepted this Allonge and caused the same
to be attached to and become a part of the Note.
COGEN TECHNOLOGIES NJ VENTURE
By: COGEN TECHNOLOGIES NJ, INC.
Managing Venturer
By: /s/ R. A. Lydecker
--------------------------------
Name:
Title:
Accepted effective the
31st day of July, 1996.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ Joseph J. Lemanowicz
----------------------------
Title: Vice President
3
<PAGE>
U.S. $5,000,000
REVOLVING CREDIT LOAN AGREEMENT
Dated as of December 19, 1996
by and between
COGEN TECHNOLOGIES NJ VENTURE,
as Borrower
and
SOUTHWEST BANK OF TEXAS, N.A.,
as Bank
<PAGE>
REVOLVING CREDIT LOAN AGREEMENT
This REVOLVING CREDIT LOAN AGREEMENT dated as of December 19,1996 (this
"Agreement") is between COGEN TECHNOLOGIES NJ VENTURE, a New Jersey general
partnership (the "Borrower"), and SOUTHWEST BANK OF TEXAS, N. A., a national
banking association (the "Bank").
W I T N E S S E T H
WHEREAS, the Borrower has requested that the Bank provide revolving credit
loans to it from time to time for short-term working capital needs and other
general corporate purposes; and
WHEREAS, the Bank has agreed to make such revolving credit loans subject to
the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and of the loans and commitments hereinafter referred to, the
parties hereto, each intending to be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and the plural forms of the terms defined):
"Account" or "Accounts" means all present and future accounts receivable
and rights to payments for electrical or steam power sold under any Power
Purchase Agreement.
"Additional Asset Contracts" shall have the meaning assigned to such term
in Section 12.8 of the Prudential Loan Agreement.
"Affiliate" means any Person: (a) which directly or indirectly controls, is
controlled by, or is under common control with, the Borrower; (b) which directly
or indirectly beneficially owns or holds ten percent (10%) or more of any class
of voting equity interest in the Borrower; or (c) ten percent (10%) or more of
the voting stock or other voting equity of which is directly or indirectly
beneficially owned or held by the Borrower. The term "control" (including, with
its correlative meanings, "controlled by" and "under common control with") means
the possession, directly or indirectly, of a Person, whether through the
ownership of voting interests or
<PAGE>
securities, by contract, or otherwise, of the power to direct or cause the
direction of the management and policies of the Borrower.
"Agreement" means this Revolving Credit Loan Agreement, as same may be
amended, supplemented or modified from time to time in the future.
"Autopay Agreement" means the Autopay Agreement dated of even date herewith
between the Borrower and the Bank, in the form of Exhibit E hereto.
"Base Rate" shall have the meaning assigned to such term in Section
2.04(a).
"Borrower" shall have the meaning assigned to such term in the introductory
paragraph to this Agreement.
"Business Day" means any day other than Saturday, Sunday,or any other day
on which commercial banks are required or authorized to close in Houston, Texas.
"Capital Lease" means any lease of Property which, in accordance with GAAP,
would be capitalized on the lessee's balance sheet or for which the amount of
the asset and liability thereunder as if so capitalized should, in accordance
with GAAP, be disclosed in a note to such balance sheet.
"Change of Control" means, without the prior written approval of the Bank,
Cogen Technologies NJ, Inc. ceases to be the managing general partner of the
Borrower.
"Closing Date" shall mean December 19, 1996.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor Federal tax code, and any reference to any statutory
provision of the Code shall be deemed to be a reference to any successor
provision or provisions.
"Collateral" means all Property which is subject to, or is to be subject
to, the Lien granted by the Security Agreement.
"Commitment" means the Bank's obligation to make Loans to the Borrower
pursuant to Section 2.01 in the amount referred to therein.
"Debt" means, at any time, the sum of the following (without duplication):
(a) all obligations for borrowed money or evidenced by bonds, debentures, notes,
or other similar instruments; (b) all obligations as lessee under Capital
Leases; (c) all obligations of such Person (whether contingent or otherwise) in
respect of letters of credit, bankers' acceptances, surety or other bonds, and
similar instruments; (d) all obligations of such Person to pay the deferred
purchase price more than one hundred
-2-
<PAGE>
twenty (120) days after the invoice date for Property or services, except trade
accounts payable arising in the ordinary course of business of such Person; (e)
all guaranties, endorsements (other than for collection or deposit in the
ordinary course of business), and other contingent obligations to purchase, to
provide funds for payment, to supply funds to invest in any Person, or otherwise
to assure a creditor against loss; and (f) all obligations secured by any Lien
on property owned by the Person, whether or not such obligations have been
assumed.
"Default" means any of the events specified in Section 8.01, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Default Rate" shall have the meaning assigned to such term in Section
2.04(b).
"Disbursement Agreement" means the Disbursement and Security Agreement,
dated as of December 15, 1988, among the Borrower, Prudential as lender, and
Midlantic Bank, as disbursement trustee, as the same may be amended, modified,
or supplemented from time to time.
"Environmental Laws" means any and all laws, statutes, ordinances, rules,
regulations, orders, or determinations of any Governmental Authority pertaining
to health or the environment in effect in any and all jurisdictions in which the
Borrower is conducting or at any time has conducted business, or where any
Property of the Borrower is located, or where any hazardous substances generated
by or disposed of by the Borrower is located, including without limitation, the
Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
the New Jersey Environmental Clean-Up Responsibility Act, and other similar
environmental conservation or protection laws. The terms "hazardous substance,"
"release" and "threatened release" have the meanings specified in CERCLA, and
the terms "solid waste" and "disposal" (or "disposed") have the meanings
specified in RCRA, provided, however, in the event either CERCLA or RCRA is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment with
respect to all provisions of this Agreement other than Article IV hereof,
provided further that, to the extent the laws of the state in which any Property
of the Borrower is located establish a meaning for "petroleum product",
"petroleum storage tank," "hazardous substance," "contaminants," "release,"
"solid waste" or "disposal" which is broader than that specified in either
CERCLA or RCRA, such broader meaning shall apply.
-3-
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute of similar import, together
with the regulations thereunder and published interpretations thereof, as in
effect from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business which is
a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower or is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower.
"Events of Default " means any of the events specified in Section 8.01;
provide that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, have been satisfied.
"Financial Statements" means the financial statements of the Borrower
described or referred to in Section 4.04.
"GAAP" means generally accepted accounting principles in the United States.
"Governmental Authority" includes the United States, the state, county,
parish, province, municipal, and political subdivisions in which any Property of
the Borrower is located or which exercises jurisdiction over any such Property,
and any court, agency, department, commission, board, bureau, or instrumentality
of any of them which exercises jurisdiction over any such Property.
"Governmental Requirement" shall mean any law, statute, code, ordinance,
order, rule, regulation, judgment, decree, injunction, franchise, permit,
certificate, license, authorization, or other direction or requirement
(including, without limitation, Environmental Laws, energy regulations and
occupational, safety and health standards or controls) of any Governmental
Authority.
"Highest Lawful Rate" shall mean the maximum nonusurious interest rate, if
any, that at any time or from time to time may be contracted for, taken,
reserved, charged, or received on the Loans or on other indebtedness under laws
applicable to the Lenders which are presently in effect or, to the extent
allowed by law, under such applicable laws which may hereafter be in effect and
which allow a higher maximum nonusurious interest rate than presently applicable
laws now allow.
"Home Office" means the principal office of the Bank, located at 1100
Louisiana Street, Houston, Texas 77002 or such other office as the Bank may
designate by written notice to the Borrower.
"Indebtedness" shall mean any and all amounts owing or to be owing by the
Borrower to the Bank in connection with the Note the Security Agreement, or this
-4-
<PAGE>
Agreement, and all renewals, extensions, replacements, amendments, and/or
rearrangements thereof
"Lien" means 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 title retention agreement), any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing.
"Loan" or "Loans" shall have the meanings assigned to such terms in
Section 2.01(a).
"Loan Document" means this Agreement, the Note, the Security Agreement,
the Autopay Agreement and each other document or instrument executed and
delivered in connection with this Agreement.
"Maturity Date" means December 19, 1997.
"Multiemployer Plan" shall mean a Plan defined as such in Section 3(37) of
ERISA to which contributions have been made by the Borrower or any ERISA
Affiliate and which is covered by Title IV of ERISA.
"Net Revenue" means for any consecutive twelve (12) months, the excess of
the gross revenue received by the Borrower pursuant to the Power Purchase
Agreements (or any additional contract to which the Borrower is a party for the
sale of any of the facility's electrical or steam output (other than any
Additional Asset Contracts)) for such period over (b) the costs incurred of
operating and maintaining the facility (other than costs relating to any
expansion of the facility as permitted under Section 12.8 of the Prudential Loan
Agreement) for such period (including all interest payments made on the
indebtedness described in Section 9.1(c) of the Prudential Loan Agreement and
all costs of fuel, property taxes, insurance, labor and maintenance and
repairs).
"Note" shall have the meaning assigned to such term in Section 2.06.
"Obligations" means the obligation of the Borrower:
(a) to pay the principal of and interest on the Note in accordance
with the terms thereof and to satisfy all of its other liabilities to the
Bank hereunder whether now existing or hereafter incurred, matured or
unmatured, direct or contingent, joint or several including any extensions,
modifications, or renewals thereof and substitutions therefor; and
-5-
<PAGE>
(b) to reimburse the bank, on demand, for all of the Bank's expenses
and costs, including the fees and expenses of its counsel, in connection
with the preparation, administration, amendment, modification, or
enforcement of this Agreement and the documents required hereunder,
including, without limitation, any proceeding brought or threatened to
enforce payment of any of the obligations referred to in the foregoing
paragraph (a).
"Other Taxes" shall have the meaning provided in Section 2.09(b).
"Partners" means Cogen Technologies NJ, Inc., a Delaware corporation, Enron
Cogeneration Five Company, a Delaware corporation, CEA Bayonne, Inc., a New
Jersey corporation, and Tevco/Mission Bayonne Partnership, a Delaware general
partnership.
"Permitted Liens" means:
(a) Liens permitted under Section 6.01;
(b) pledges or deposits made in the ordinary course of business to
secure payment of workmen's compensation, or to participate in any fund in
connection with workmen's compensation, unemployment insurance, old-age
pensions or other social security programs;
(c) good faith pledges or deposits made in the ordinary course of
business to secure performance of bids, tender, contracts (other than for
the repayment of borrowed money) or leases, or to secure statutory
obligations, or surety, appeal, indemnity, performance or other similar
bonds required in the ordinary course of business;
(d) encumbrances consisting of zoning restrictions, easements or other
restrictions on the use of real property, none of which materially impairs
the use of such property by the Borrower in the operation of its business,
and none of which is violated in any material respect by existing or
proposed structures or land use; and
(e) the following, if the validity or amount thereof is being
contested in good faith by appropriate and lawful proceedings, so long as
levy and execution thereof has been stayed, bonded or for which adequate
reserves have been set aside and continue to be so stayed, bonded or
reserved against, and they do not, in the aggregate, materially detract
from the value of the Property or materially impair the use thereof in the
operation of its business:
-6-
<PAGE>
(i) claims or liens for taxes, assessments or charges due and payable
and subject to interest or penalty;
(ii) claims, liens and encumbrance upon, and defects of title to, real
or personal property, including any attachment of personal or real property
or other legal process prior to adjudication of a dispute on the merits;
(iii) claims of liens of mechanics, materialmen, warehousemen,
carriers, or other like liens; and
(iv) adverse judgments on appeal.
"Person" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, firm or other entity, or a government or any political
subdivision or agency, department or instrumentality thereof
"PLan" shall mean an employee pension benefit or other plan established or
maintained by the Borrower or any ERISA Affiliate and which is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"Power Purchase Agreement" or "Power Purchase Agreement" means (a) one of
the agreements listed on Schedule 1.01A hereto, as such agreements may from
time to time be amended, supplemented or modified and (b) any agreement entered
into by the Borrower providing for the sale by the Borrower of electrical or
steam power with respect to Borrower's New Jersey cogeneration facility.
"Prime Rate" means the fluctuating rate of interest announced from time to
time by the Bank as its prime commercial lending rate. Such rate is set by the
Bank as a general reference rate of interest, taking into account such factors
as the Bank may deem appropriate, it being understood that many of the Bank's
commercial or other loans are priced in relation to such rate, that it is not
necessarily the lowest or best rate actually charged to any customer, and that
the Bank may make various commercial or other loans at rates of interest having
no relationship to such rate.
"Property" means any interest in any kind of property or asset, whether
real, personal, or mixed, or tangible or intangible. References to the
"Borrower's Properties", "Properties of the Borrower", or any other similar
expressions shall mean any Property owned by the Borrower as co-owner or owned
by the Borrower individually.
"Prudential" means The Prudential Insurance Company of America.
-7-
<PAGE>
"Prudential Loan Agreement" means the Bayonne Cogeneration Project Term
Loan Agreement, dated as of November 1, 1987, between Borrower, as borrower, and
Prudential, as lender, as amended by the First Amendment to the Term Loan
Agreement, dated as of July 31, 1996, and as the same may from time to time be
further amended, modified or supplemented.
"Qualified Account" means an Account that (a) has been identified to the
Bank's satisfaction, (b) is less than ninety (90) days outstanding from its
original date, (c) has been invoiced, and (d) meets all the following criteria
on its origination date and thereafter until collected and is in all other
respects reasonably satisfactory to the Bank:
(i) the Borrower is the sole owner of the Account and, except for the
security interest granted in accordance with the provisions of the
Prudential Loan Agreement and the security documents executed in accordance
with the terms thereof, has not sold, assigned, transferred, mortgaged, or
hypothecated it nor purported to release it from the Bank's security
interest, and, except for the security interest granted in accordance with
the provisions of the Prudential Loan Agreement and the security documents
executed in accordance with the terms thereof, the Account is not subject
to any claim, lien, or security interest or any Person, including, without
limitation, any Governmental Authority;
(ii) the Account is bona fide and legally enforceable and owing to the
Borrower for the sale of electrical or steam power in the ordinary course
of business and does not require any further act on the part of the
Borrower to make it owing by the account debtor, and the Borrower has
delivered to the Bank or, at the time of origination of the Account, if
required by the Bank, will deliver to the Bank, copies of invoices,
billings, shipping documents, and other documents evidencing the obligation
to pay the Account;
(iii) except for financing statements filed with respect to the
security interest granted in accordance with the provisions of the
Prudential Loan Agreement and the security documents executed in accordance
with the terms thereof, no financing statement covering the Account or its
proceeds is on file in any public office, except in favor of the Bank, and
neither the Borrower nor the Bank has received notice of any proposed
acquisition of any security interest therein, except as provided in the
Security Agreement;
(iv) the Account does not represent a conditional sale, consignment,
or other sale on a basis other than that of absolute sale in the ordinary
course of business;
(v) the Account is not subject to any defense, offset, counterclaim,
credit allowance, or adjustment except usual and customary prompt payment
-8-
<PAGE>
discounts, nor has the account debtor returned the goods or indicated any
dispute or complaint concerning them; provided that, if less than twenty
percent (20%) of the amount of an Account is disputed by the account
debtor, this criteria shall be deemed to be met to the extent of the
undisputed amount of the Account; and
(vi) the Borrower has not received any notice, nor has it any
knowledge, of any facts which adversely affect the credit of the account
debtor.
"Quarterly Coverage Ratio" means, for any consecutive twelve (12) month
period, the quotient obtained by dividing (a) the sum of the Net Revenue for
such period plus the amount, if any, on deposit in the Debt Service Reserve
Account (as defined in the Prudential Loan Agreement) as of the last day of such
period, by (b) the aggregate payments on account of principal of and interest
on the Term Note (as defined in the Prudential Loan Agreement) payable during
such period.
"Quarterly Date" means the last Business Day of each March, June,
September, and December.
"Revolving Credit Borrowing Base" means, at any time, an amount equal to
eighty percent (80%) of the aggregate amount receivable by Borrower under the
Qualified Accounts.
"Security Agreement" means the Security Agreement of even date herewith
delivered by the Borrower in favor of the Bank.
"Taxes" shall have the meaning provided in Section 2.09(a).
Section 1.02. Accounting Terms. All accounting terms not specifically
defined herein shall be interpreted and construed in accordance with, and
certificates of compliance with financial covenants shall be based on, GAAP
consistent with that applied in the preparation of the Financial Statements. All
determinations with respect to all accounting matters hereunder shall be made
and all financial data submitted pursuant to this Agreement shall be prepared in
accordance with such principles.
Section 1.03. Other Definitional Terms. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and Article, Section, Schedule and Exhibit references are to Articles
and Sections of and Schedules and Exhibits to this Agreement, unless
otherwise specified. The term "including" shall mean "including, without
limitation,".
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ARTICLE II
AMOUNT AND TERMS OF THE LOANS
Section 2.01. Commitments and Loans.
(a) Loans. Subject to the terms and conditions and relying on the
representations and warranties herein set forth, the Bank agrees to make
revolving credit loans (each a "Loan" and, collectively, the "Loans") to the
Borrower from time to time on any Business Day during the period from the date
hereof up to but not including the Maturity Date.
(b) Commitment. The Loans made pursuant hereto by the Bank shall not exceed
in aggregate principal amount outstanding at any one time the lesser of (i)
$5,000,000, as such amount may be reduced pursuant to Section 2.02 hereof (the
"Commitment"), and (ii) the Revolving Credit Borrowing Base. Within the
foregoing limits and subject to the conditions set out in Article III, the
Borrower may borrow, repay, prepay, and reborrow under this Section 2.01.
(c) Maturity Date. Upon the written request of the Borrower made not less
that thirty (30) nor more than sixty (60) days prior to the Maturity Date, as
the same may have previously been extended in accordance herewith, the Bank, in
its sole and absolute discretion, may extend the Maturity Date for an additional
period of one (1) year. Any such extension shall be conditioned upon, and become
effective only after the satisfaction of, the following conditions:
(i) no Default or Event of Default shall have occurred and be
continuing, and the Borrower shall have provided a certificate in the form
of Exhibit B hereto, executed by a duly authorized officer of the
Borrower's managing general partner, to such effect;
(ii) a Change of Control shall not have occurred; and
(iii) the Bank shall have received such additional consents,
approvals, certificates, opinions, or documents as it may reasonably
request
Section 2.02. Reduction of the Commitment. The Borrower shall have the
right, upon at least two (2) Business Days' written notice to the Bank, to
terminate in whole or in part the unused portion of the Commitment; provided
that each partial reduction shall be in the aggregate amount of not less than
$100,000 or an integral multiple in excess thereof After each such reduction,
the commitment fee provided for in Section 2.05 shall be calculated with respect
to the Commitment as so reduced.
Section 2.03. Borrowing. Upon fulfillment of the applicable conditions set
forth in Article III and subject to the terms of the Autopay Agreement, the Bank
will make Loans available to the Borrower in immediately available funds by
crediting the amount thereof to the Borrower's demand deposit account with the
Bank in accordance with the Autopay Agreement.
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Section 2.04. Interest.
(a) Base Rate. The Borrower shall pay interest to the Bank on the
outstanding and unpaid principal amount of the Loans, from the date of such Loan
until such principal amount shall be paid in full, at a rate per annum equal to
one half of one percent (1/2%) per annum below the Prime Rate in effect from
time to time (the "Base Rate"); provided that in no event shall the Base Rate
exceed the Highest Lawful Rate. Any change in the interest rate resulting from a
change in the Prime Rate shall become effective as of the opening of business on
the day on which such change in the Prime Rate shall become effective.
(b) Default Interest. Upon the occurrence and during the continuance of an
Event of Default, principal and, to the extent permitted by law, overdue
interest in respect of each Loan and all other amounts then due and payable
hereunder shall bear interest for each day at a rate per annum (the "Default
Rate") equal to the Base Rate plus three percent (3%), but in no event to exceed
the Highest Lawful Rate; provided, however, that after maturity (whether by
acceleration or otherwise) each Loan shall bear interest at a rate per annum.
equal to the Default Rate, but in no event to exceed the Highest Lawful Rate.
(c) Miscellaneous. Interest on each Loan shall accrue from and including
the date of such Loan to but excluding the date of payment in full thereof
Interest on each Loan shall be payable on the first Business Day of each
calendar month, commencing on the first of such days to occur after such Loan is
made, and on any prepayment on the amount prepaid, at maturity (whether by
acceleration or otherwise), and, after maturity, on demand.
Section 2.05. Fees. The Borrower agrees to pay to the Bank a commitment fee
on the average daily unused portion of the Commitment from the date of this
Agreement until the Maturity Date at the rate of one quarter of one percent
(1/4%) per annum. The fee is payable, in arrears, on the first day of each
month, commencing January 1, 1997, and on the Maturity Date.
Section 2.06. Note. All Loans shall be evidenced by, and repaid with
interest in accordance with, a single promissory note of the Borrower,
substantially in the form of Exhibit hereto, duly completed, in the principal
amount of $5,000,000, dated of even date herewith, payable to the Bank, and
maturing as to principal on the Maturity Date (the "Note"). The Bank is hereby
authorized by the Borrower to endorse on the schedule attached to the Note and
to enter into the Bank's computer record system the amount of each Loan and of
each payment of principal received by the Bank on account of the Loans, which
endorsement or entry, in the absence of manifest error, shall be conclusive as
to the outstanding balance of the Loans; provided, however, that the failure to
make such endorsement or entry with respect to any Loan or payment shall not
limit or otherwise affect the obligations of the Borrower under this Agreement
or the Note.
Section 2.07. Mandatory Prepayments. On the first day of each month, if the
Receivables Coverage Ratio (as determined under Section 7.03 hereof) is less
than 1.25 to 1.00, the Borrower shall prepay the Loans in an amount necessary to
increase the Receivables Coverage Ratio to at least 1.25 to 1.00.
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Section 2.08. Method of Payment; Computations.
(a) Without Setoff, Etc. Except as otherwise specifically provided herein,
all payments under the Notes and this Agreement shall be made by the Borrower
without defense, set-off, or counterclaim to the Bank not later than 2:00 p.m.
(Houston time) on the day when due in lawful money of the United States of
America at the Home Office in immediately available funds. The Borrower hereby
authorizes the Bank, if and to the extent payment is not made when due under the
Loan Documents, and if and to the extent the Security Agreement secures such
amount and to the extent permitted under the Letter Agreement date of even date
herewith among the Bank, the Borrower, and Prudential, to charge from time to
time against the account of the Borrower maintained with the Bank any amount so
due.
(b) Non-Business Day. Whenever any payment to be made under the Loan
Documents shall be stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of the payment of
interest and the commitment fee, as the case may be.
(c) Computations. All computations of interest and of commitment fees shall
be made by the Bank on the basis of a year of 360 days (unless such calculation
would result in a usurious rate, in which case interest shall be calculated on
the basis of a year of 365 or 366 days, as the case may be), in each case for
the actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest or commitment fees are payable.
Each determination by the Bank of an interest rate hereunder shall be final,
conclusive, and binding for all purposes, absent manifest error.
Section 2.09. Taxes.
(a) Payments Free and C1ear. Any and all payments by the Borrower hereunder
or under the Note shall be made, in accordance with Section 2.08, free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges, fees, duties or withholdings, and all liabilities
with respect thereto, excluding, in the case of the Bank, (1) taxes imposed on
its income, and franchise taxes imposed on it, by the jurisdiction under the
laws of which the Bank is organized or any political subdivision thereof and (2)
any taxes imposed by the United States of America by means of withholding at the
source if and to the extent that such taxes shall be in effect and shall be
applicable, on the date hereto to payments to be made to the Bank (all such
nonexcluded taxes, levies, imposts, deductions, charges, fees, duties,
withholdings and liabilities being hereinafter referred to as "Taxes"). If the
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder or under the Note to the Bank, (i) the sum payable shall
be increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.09) the Bank receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions, and
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
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(b) Other Taxes. In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made hereunder or under the Note
or from the execution, delivery or registration of, or otherwise with respect
to, this Agreement or the Note (hereinafter referred to as "Other Taxes").
(c) Indemnification. The Borrower, to the fullest extent permitted by law,
will indemnify the Bank for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 2.09) paid by the Bank and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto except as a result of the gross negligence or willful misconduct of the
Bank, whether or not such Taxes or Other Taxes were correctly or legally
asserted. This indemnification shall be made within thirty (30) days from the
date the Bank makes written demand therefor.
(d) Receipt. Within thirty (30) days after the date of any payment of
Taxes by or at the direction of the Borrower, the Borrower will furnish to the
Bank the original or a certified copy of a receipt evidencing payment thereof
(e) Survival. Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower contained
in this Section 2.09 shall survive the payment in full of principal and interest
hereunder and under the Note.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.01. Conditions Precedent to Initial Loan. The effectiveness of
this Agreement and the obligation of the Bank to make the initial Loan to the
Borrower is subject to satisfaction of the following conditions precedent that
the Bank shall have received on or before the date of such Loan (i) payment in
full by the Borrower of all obligations of the Borrower hereunder to the Bank
incurred prior to such initial Loan (including but not limited to the Borrower's
obligation to reimburse the fees and disbursements of counsel to the Bank) and
(ii) original (unless otherwise expressly indicated herein) copies of the
following documents, each dated as of the Closing Date, in form and substance
reasonably satisfactory to the Bank and its counsel:
(a) Note. The Note, duly executed by the Borrower.
(b) Credit Agreement. This Agreement, duly executed by the parties
thereto.
(c) Security Agreement. The Security Agreement, duly executed by
Borrower, together with: (i) acknowledgment copies of the Financing
Statements (UCC-1) duly filed under the Uniform Commercial Code of all
jurisdictions necessary or, in the opinion of the Bank, desirable to
perfect the security interest created by the Security Agreement; and
(ii) certified copies of Requests for Information (Form UCC-11)
identifying all of the Financing Statements on file with respect to the
Borrower in all jurisdictions referred to
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under (i), including the Financing Statement filed by the Bank against the
Borrower, indicating that no party, other than the Bank and Prudential, claims
an interest in any of the Collateral.
(d) Evidence of Action by the Borrower. Copies, certified by the Borrower's
managing general partner, of all action taken by the Borrower, including
resolutions of the Board of Directors of the Borrower's managing general
partner, authorizing the execution, delivery and performance of the Loan
Documents and each other document to be delivered pursuant to this Agreement.
(e) Incumbency Certificate. A certificate of the managing general partner
of the Borrower certifying the names and true signatures of the officers of the
Borrower's managing general partner (i) that are authorized to sign the Loan
Documents and any other documents to be delivered by the Borrower under this
Agreement and (ii) who will, until replaced by another officer or officers duly
authorized for that purpose, act as its representative for the purposes of
signing documents and giving notices and other communications in connection with
this Agreement and the transactions contemplated hereby. The Agent and the
Lenders may conclusively rely on such certificate until the Agent receives
notice in writing from the Borrower to the contrary.
(f) Borrower's Status. A copy, certified by the managing general partner of
the Borrower, of the Borrower's partnership agreement.
(g) Opinion of Counsel. Opinion from special Texas counsel for the
Borrower, in substantially the form of Exhibit D hereto.
(h) Compliance Certificate. A compliance certificate in substantially the
form of Exhibit B, reflecting that no Default or Event of Default has occurred
and is continuing.
(i) Autopay Agreement. The Autopay Agreement, substantially in the form
attached hereto as Exhibit E, duly executed by the parties thereto.
(j) Termination Statement. A Financing Statement Change Form (UCC-3),
executed by Midlantic National Bank and duly filed with the appropriate
Governmental Authorities, terminating any security interest of Midlantic
National Bank in the Collateral.
(k) Letter Agreement from Prudential. A letter agreement, substantially in
the form attached hereto as Exhibit F, executed by Prudential.
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Section 3.02. Conditions Precedent to All Loans. The obligation of the Bank
to make each Loan (including the initial Loan) shall be subject to the further
conditions precedent that on the date of such Loan:
(a) the following statements shall be true:
(i) the representations and warranties contained in Article IV of
this Agreement and in Article 3 of the Security Agreement are true,
correct and complete on and as of the date of such Loan as though made
on and as of such date, except as otherwise disclosed to the Bank in
writing from time to time, prior to the date of a Loan, with respect to
representations and warranties of the Borrower other than those set
forth in Section 4.01, 4.02, and 4.03.
(ii) no Default or Event of Default has occurred and is,
continuing, or would result from such Loan.
(b) The Bank shall have received all reports, certificates, and other
information required by Section 5.08.
(c) The Bank shall have received such other approvals, opinions, or
documents as the Bank may reasonably request, all in form and substance
reasonably satisfactory to the Bank.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and to make each Loan, the
Borrower represents and warrants to the Bank that (each representation and
warranty herein is given as of the date of this Agreement and shall be deemed
repeated and reaffirmed on the dates and in the manner provided in and subject
to Section 3.02).
Section 4.01. Formation, Good Standing, and Due Qualification. The Borrower
is a general partnership created and existing under the laws of the State of New
Jersey. The Borrower has the power and authority to own its assets and to
transact the business in which it is now engaged or proposed to be engaged in,
and is duly qualified and in good standing under the laws of each other
jurisdiction in which such qualification is required, except where the failure
to so qualify would not materially and adversely affect the business or
financial condition of the Borrower.
Section 4.02. Power and Authority. The execution, delivery, and performance
by the Borrower of the Loan Documents has been duly authorized by all necessary
partnership and legal action and do not and will not (a) require any consent or
approval of any of its partners which has not yet been obtained; (b) contravene
its partnership agreement; (c) violate any Governmental Requirement (including,
without limitation, Regulation G, T, X or U of the Board of Governors of
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the Federal Reserve System), judgment, determination, or award presently in
effect having applicability to it; (d) result in a breach of or constitute a
default in respect to any of its existing Debt or under any indenture or loan or
credit agreement or any other agreement, lease, or instrument to which it is a
party or by which it or its properties may be bound or affected; (e) result in,
or require, the creation or imposition of any Lien (other than pursuant to the
Security Agreement) upon or with respect to any of the properties now owned or
hereafter acquired by it; or (f) cause it to be in default under any such
Governmental Requirement, judgment, determination, or award or any such
indenture, agreement, lease, or instrument.
Section 4.03. Legally Enforceable Agreement. This Agreement, the Note, and
each of the other Loan Documents to which the Borrower is or will be a party,
when executed and delivered in accordance with this Agreement will be the legal,
valid, and binding obligations of the Borrower enforceable against the Borrower
in accordance with their respective terms.
Section 4.04. Financial Conditions.
(a) The balance sheet of the Borrower as at December 31, 1995, and the
related statements of income, partners' capital, and changes in financial
position of the Borrower for the fiscal year then ended, and the accompanying
footnotes, together with the opinion thereon, dated December 31, 1995, of Arthur
Andersen LLP, independent certified public accountants, and the interim balance
sheet of the Borrower as of June 30, 1996, and the related statement of income,
partners' capital and changes in financial position for the six (6) month period
then ended, copies of which have been furnished to the Bank, are complete and
correct and fairly present the financial condition of the Borrower as at such
dates and the results of the operations of the Borrower for the periods covered
by such statements, all in accordance with GAAP consistently applied (subject to
year-end adjustments and notes in the case of the interim financing statements).
(b) Since June 30, 1996, there has been no material adverse change in the
condition (financial or otherwise), business, or operations of the Borrower.
There are no liabilities of the Borrower, fixed or contingent, which are
material but are not reflected in the financial statements or in the notes
thereto, other than liabilities arising in the ordinary course of business since
June 30, 1996.
Section 4.05. Labor Disputes and Acts of God. Neither the business nor the
Properties of the Borrower are currently adversely affected in any material
respect by any fire, explosion, accident, strike, lockout or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God or of the public
enemy, or other casualty (whether or not covered by insurance).
Section 4.06. Other Agreements. Other than the Prudential Loan Agreement,
the security documents executed in connection therewith, and the Project
Documents referred to therein, the Borrower is not a party to any indenture,
loan, or credit agreement or to any lease or other material agreement or
instrument, or subject to any restriction which would reasonably be expected to
have a material and adverse effect on the business, Properties, assets,
operations, or condition, financial or otherwise, of the Borrower or the ability
of the Borrower to carry out its obligations under the Loan Documents. The
Borrower is not in material default in any respect in the performance,
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observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which it is
a party, including, in particular but without limiting the generality of the
foregoing, the Prudential Loan Agreement.
Section 4.07. Litigation. There is no pending or, to the best of the
Borrower's knowledge, threatened action or proceeding against or affecting the
Borrower before any court, governmental agency, or arbitrator, which has a
reasonable likelihood, in any one case or in the aggregate, of having a material
and adverse affect on the financial condition, operations, Properties, or
business of the Borrower or on the ability of the Borrower to perform its
obligations under the Loan Documents.
Section 4.08. No Defaults on Outstanding Judgments or Orders; Compliance
with Laws.
(a) The Borrower has satisfied all judgments, and the Borrower is not
in.default nor has any event or circumstance occurred which. but for the
expiration of any applicable grace period or the giving of notice, or both,
would constitute a default which in any respect would materially interfere with
the conduct of the business of the Borrower under any other material agreement
or other instrument to which it is a party or by which it is bound.
(b) The Borrower has not violated any Governmental Requirement or failed to
obtain any license, permit, franchise, or other governmental authorization
necessary for the ownership of any of its Properties or the conduct of its
respective business, which violation or failure would materially interfere with
the conduct of the business of the Borrower.
Section 4.09. Ownership and Liens. The Borrower has title to, or valid
leasehold interests in, all of its Properties, including the Properties
reflected in the Financial Statements (other than any Properties disposed of in
the ordinary course of business), and none of the Properties owned by the
Borrower is subject to any Lien, except such as may be permitted pursuant to
Section 6.01 of this Agreement.
Section 4.10. ERISA. The Borrower does not maintain any Plan.
Section 4.11. Operation of Business; Approvals. Except as set forth on
Schedule 4.11, the Borrower possesses all licenses, permits, franchises,
patents, copyrights, trademarks, and trade names, or rights thereto, with
respect to: (a) any restrictions, specifications or other requirements
pertaining to electrical and steam power that the Borrower generates and sells,
(b) the conduct of its business substantially as now conducted and as presently
proposed to be conducted, and (c) the use, maintenance and operation of the real
and personal Properties owned or leased by it in the conduct of its business,
except for such licenses, permits, franchises, patents, copyrights, trademarks,
or rights thereto, the failure to obtain or comply with any of which would not
materially and adversely affect the business or financial condition of the
Borrower. The Borrower is not in material violation of any valid rights of
others with respect to any of the foregoing.
Section 4.12. Taxes. The Borrower has filed all tax returns (federal,
state, and local) required to be filed and has paid all taxes, assessments, and
governmental charges and levies shown
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thereon to be due, including interest and penalties, except for such filings and
payments the failure to make any of which would not materially and adversely
affect the business or financial condition of the Borrower. The charges,
accruals, and reserves on the books of the Borrower in respect of taxes and
other governmental charges are, in the opinion of the Borrower, adequate. No tax
lien has been filed and, to the knowledge of the Borrower, no claim is being
asserted with respect to any such tax, fee or other charge, except for those
liens and claims being diligently contested in good faith by appropriate
proceedings and for which adequate reserves have been established.
Section 4.13. Loans. Schedule 4.1 is a complete and correct list of all
credit agreements, indentures, purchase agreements, guaranties, Capital Leases,
and other investments, agreements, and arrangements presently in effect
providing for or relating to extensions of credit (including agreements and
arrangements for the issuance of letters of credit or for acceptance financing)
in respect of which the Borrower is in any manner directly or contingently
obligated and under which a default would reasonably be expected to have a
material adverse affect on the business, operations or condition (financial or
otherwise) of the Borrower; and the maximum principal or face amounts of the
credit in question, which are outstanding and which can be outstanding, are
correctly stated, and all Liens of any nature given or agreed to be given as
security therefor are correctly described or indicated in such Schedule.
Section 4.14. Consents. Each consent, approval or authorization of or
filing, registration or qualification with, any Person required to be obtained
or effected by the Borrower in connection with the execution, delivery, or
performance of this Agreement, the other Loan Documents, or the under-takings
contemplated hereby or thereby or performance of any obligation hereunder or
thereunder has been duly obtained or effected, except such consents, approvals,
authorizations, filings, registrations or qualifications the failure to obtain
or effect would not materially and adversely affect the business or financial
condition of the Borrower.
Section 4.15. Environmental Protection. Except (i) as provided in Schedule
4.15 or (ii) as would not have a material and adverse effect on the business or
financial condition of the Borrower (or with respect to (c), (d), and (e) below,
where the failure to take such actions would not have a material and adverse
effect):
(a) No Property of the Borrower nor the operations conducted thereon
violate any Environmental Laws or any order or requirement of any court or
Governmental Authority to the extent pertaining to human health or the
environment, nor are there any conditions existing on or resulting from
operations conducted on or in connection with such Property that may give rise
on any on-site or off-site remedial obligations under any Environmental Laws;
(b) Without limitation of clause (a) above, no Property of the Borrower nor
the operations currently conducted thereon or by any prior owner or operator of
such Property or operation, are subject to any existing, pending, or (to the
knowledge of the Borrower) threatened action, suit, investigation, inquiry, or
proceeding by or before any court or Governmental Authority with respect to
Environmental Laws or to any remedial obligations under any Environmental Laws;
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(c) All notices, permits, licenses, or similar authorizations, if any,
required to be obtained or filed in connection with the operation or use of any
and all Property of the Borrower, including without limitation, treatment,
storage, disposal, or release of a petroleum product, hazardous substance or
solid waste into the environment, have been duly obtained or filed, and the
Borrower is in compliance with the terms and conditions of all such notices,
permits, licenses and similar authorizations;
(d) All hazardous substances and solid wastes generated at any and all
Property of the Borrower has in the past been transported, treated, and disposed
of in accordance with all applicable Environmental Laws and all such transport
carriers and treatment and disposal facilities have been and are operating in
compliance with all applicable Environmental Laws and, to the best of the
Borrower's knowledge, are not the subject of any existing, pending, or
threatened action, investigation, or inquiry by any Governmental Authority in
connection with any Environmental Laws;
(e) No petroleum product, hazardous substance, or solid waste has been
disposed of or otherwise released and there has been no threatened disposal or
release of any petroleum products, hazardous substances, or solid wastes on,
under or about any Property of the Borrower so as to pose an imminent and
substantial endangerment to public health or the environment; and
(f) To the knowledge of the Borrower, it has no liability for violation of
Environmental Laws in connection with any release or threatened release of any
petroleum product, hazardous substance, or solid waste into the environment.
Section 4.16. Prudential Loan Agreement. The representations and warranties
set forth in Section 6.5 (Governmental Actions), Section 6.9 (Interests in
Contracts), Section 6.11 (No Burdensome Restrictions), Sections 6.13 (a), (c),
and (d) (Public Utility Status), Section 6.16 (Investment Company Act), Section
6.19 (Power Purchase Agreements and Other Assigned Contracts) and Section 6.29
(Representations as to Partners - except as to PSVO Bayonne, Inc., which was
removed as a partner under the First Amendment to the Prudential Loan Agreement)
of the Prudential Loan Agreement, except to the extent any such representation
or warranty is specifically limited to an earlier date, are true, correct and
complete on and as of the date hereof as if set forth herein in full. The
Borrower is not in material default with respect to any provision of the
Prudential Loan Agreement, and no event which, with the giving of notice, lapse
of time or both, has occurred which would result in such a material default.
Section 4.17. Power Purchase Agreements; Bank Not A Public Utility.
(a) Each existing Power Purchase Agreement is in full force and effect and
no default or event which with the lapse of time, the giving of notice or both
would result in such a default, has occurred thereunder.
(b) The Bank, solely by reason of (i) the Borrower's ownership and
operation of its facilities, (ii) the making of the Loans, (iii) the securing of
the Loans by a Lien on the Borrower's
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Accounts, (iv) any other transaction contemplated by the Loan Documents, or (v)
the enforcement of any remedies available to the Bank under any of the Loan
Documents, will not be subject to regulation as an "electric utility," "electric
corporation," "electrical company," "public utility," "public utility holding
company," or similar entity under any existing Governmental Requirement.
Section 4.18. Use of Proceeds.
(a) The proceeds of the Loans shall be used by the Borrower only for short-
term working capital needs in connection with payments on a monthly basis to
PSE&G for utilities, other normal operating expenses of the Borrower, and
otherwise as the Bank, from time to time, may agree.
(b) The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying margin stock (within
the meaning of Regulations U or X of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any Loans hereunder will be
used, directly or indirectly, to buy or carry any margin stock.
Section 4.19. Location of Business and Offices. The Borrower's chief
executive offices are located at the address stated in Section 9.02 of this
Agreement.
Section 4.20. No Untrue Statements. No representation or warranty by the
Borrower contained herein or in any certificate or other document furnished by
the Borrower pursuant hereto contains, and no information, exhibit, schedule or
report (financial or otherwise) furnished by the Borrower or any Affiliate of
the Borrower in connection with the negotiation of this Agreement and the
transactions contemplated hereby or referred to herein contained, any untrue
statement of material fact or omits, or omitted, to state a material fact
necessary to make the statements contained herein and therein not misleading in
any material respect.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower agrees that, so long as any of the Commitments are in effect
and until payment in full of all Indebtedness hereunder, all interest thereon
and all other amounts payable hereunder:
Section 5.01. Maintenance of Existence. The Borrower will do or cause to be
done all things reasonably necessary to preserve and maintain its existence in
the jurisdiction of its formation, and qualify and, to the extent applicable,
remain qualified in each jurisdiction in which such qualification is required.
Section 5.02. Maintenance of Record. The Borrower will keep adequate
records and books of account, in which complete entries will be made in
accordance in all material respects with GAAP consistently applied, reflecting
all financial transactions of the Borrower.
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Section 5.03. Maintenance of Properties. The Borrower will do or cause to
be done all things reasonably necessary to maintain, keep, and preserve all of
its properties (tangible and intangible, real and personal) necessary or useful
in the proper conduct of its business in good working order and condition,
ordinary wear and tear excepted and except as the Borrower may otherwise
reasonably determine to be unnecessary to the conduct of its business, and pay
and discharge or cause to be paid and discharged when due, the cost of repairs
to or maintenance of the same, and pay or cause to be paid all rental or
mortgage payments due on such real estate.
Section 5.04. Conduct of Business. The Borrower will continue to engage in
the line of business as generally conducted by it on the date of this Agreement;
comply with all material agreements to which it is subject; shall conduct its
operations so that there shall not occur any discharges of hazardous or toxic
substances or materials in violation in any material respect of any applicable
Environmental Laws and if any such discharge shall occur, shall promptly
undertake to clean up and remove the same in accordance in all material respects
with applicable Environmental Laws; and shall take reasonable steps to inform
all appropriate employees who may handle any toxic or hazardous substances on
the Borrower's premises of appropriate methods for using and handling all such
materials.
Section 5.05. Maintenance of Insurance.
(a) The Borrower will maintain insurance with financially sound and
reputable insurance companies or associations in such amounts and covering such
risks as is required under the Prudential Loan Agreement, which insurance may
provide for reasonable deductibility from coverage thereof All such policies
shall name the Bank as an additional insured (in the case of liability
policies).
(b) The Borrower shall deliver to the Bank, upon the Bank's request, a
detailed list of insurance then in effect, stating the names of the insurance
companies, the amounts and rates of the insurance, dates of expiration thereof
and the properties and risks covered thereby, and shall (upon such request)
furnish the Bank with copies of such policies.
Section 5.06. Compliance With Laws. The Borrower will comply in all
respects with all applicable present and future Governmental Requirements,
including Environmental Laws, except where the failure to so comply would not
materially and adversely affect the business or financial condition of Borrower;
such compliance to include, without limitation, paying before the same become
delinquent all taxes, assessments, and governmental charges or levies imposed
upon it or upon its Property, except for such taxes as are being diligently
contested by appropriate proceedings and for which adequate reserves, in
accordance with GAAP, have been established.
Section 5.07. Right of Inspection. At any reasonable time and from time to
time, the Borrower will permit the Bank or any agent or representative thereof
to examine and make copies of and abstracts from the records and books of
account of, and visit the Properties of, the Borrower, and to discuss the
affairs, finances, and accounts of the Borrower with any of their respective
officers and directors and the Borrower's independent accountants.
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Section 5.08. Reporting Requirements. The Borrower will
furnish to the Bank:
(a) MONTHLY FINANCIAL REPORTS. As soon as available and in any event
within thirty (30) days after the end of each month, balance sheets of the
Borrower as of the end of such month, statement of income of the Borrower for
the period commencing at the end of the previous month and ending with the end
of such month, and a statement of partners' capital and change in financial
position of the Borrower for the portion of the fiscal year ended with the last
day of such month, all in reasonable detail and all prepared in accordance with
GAAP consistently applied and certified by the managing general partner of the
Borrower (subject to notes and year-end adjustments).
(b) BORROWING BASE CERTIFICATE, ETC. As soon as available and in any event
within fifteen (15) days after the end of each month, (i) a Borrowing Base
Certificate in the form of Exhibit C, executed by the chief financial officer or
controller of the Borrower's managing general partner, with the information
required therein completed to reflect the Revolving Credit Borrowing Base as of
the end of such fiscal month, and (ii) a monthly aging of Accounts plus a
certificate of the chief financial officer or controller of the Borrower's
managing general partner certifying as of the end of such month the aggregate
amount of the Accounts owned by the Borrower and the portion of such Accounts
which (A) is current, 30, 60, 90, 120, 180, and more than 180 days past due
(determined by reference to the original contractual payment terms and the
Borrower's cycle billing practices) and (B) does not qualify as Qualified
Accounts.
(c) ANNUAL FINANCIAL REPORTS. As soon as available and in any event within
one hundred twenty (120) days after the end of each fiscal year of the Borrower
deliver to the Bank the annual financial statements referred to in Section
8.1(a) of the Prudential Loan Agreement all prepared in accordance with GAAP
consistently applied and accompanied by an unqualified opinion thereon
acceptable to the Bank by Arthur Andersen & Co. or other independent accountants
selected by the Borrower and acceptable to the Bank.
(d) MANAGEMENT LETTERS. Promptly upon receipt thereof, copies of any
reports submitted to the Borrower by independent certified public accountants in
connection with examination of the financial statements of the Borrower made by
such accountants.
(e) COMPLIANCE CERTIFICATE. On each Quarterly Date, a Compliance
Certificate in the form of Exhibit B executed by an appropriate authorized
officer of the managing general partner of the Borrower (i) certifying that to
the best of his knowledge no Default or Event of Default has occurred and is
continuing, or if a Default or Event of Default has occurred and is continuing,
a statement as to the nature thereof and the action which is proposed to be
taken with respect thereto, and (ii) with computations demonstrating compliance
with the covenants contained in Article VII.
(f) ACCOUNTANT'S REPORTS. Simultaneously with the delivery of the annual
financial statements referred to in Section 5.08(c), a copy of the certificate
of the independent public accountants who audited such statements delivered with
respect to the Prudential Loan
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Agreement to the effect that, in making the examination necessary for the audit
of such statements, they have obtained no knowledge of any condition or event
which constitutes a default or event of default under the Prudential Loan
Agreement, or if such accountants shall have obtained knowledge of any such
condition or event, specify in such certificate each such condition or event of
which they have knowledge and the nature and status thereof.
(g) NOTICE OF LITIGATION. Promptly after the Borrower, through its managing
general partner, becomes aware of the commencement thereof, notice of all
actions, suits, and proceedings before any Governmental Authority affecting the
Borrower, which, if determined adversely to the Borrower, could have a material
and adverse effect on the condition (financial or otherwise), properties, or
operations of the Borrower.
(h) NOTICE OF DEFAULTS AND EVENTS OF DEFAULT. As soon as reasonably
possible after the Borrower, through its managing general partner, becomes aware
of, the occurrence of each Default or Event of Default, a written notice setting
forth the details of such Default or Event of Default and the action which is
proposed to be taken by the Borrower with respect thereto.
(i) REPORTS TO OTHER CREDITORS. Promptly after the furnishing thereof,
copies of any statement or report furnished to any other institutional lender
pursuant to the terms of any indenture, loan, or credit or similar agreement,
including each annual Operating Budget (as defined in the Prudential Loan
Agreement) and any other statement or report furnished or made under the
Prudential Loan Agreement, and not otherwise required to be furnished to the
Bank pursuant to any other clause of this Section 5.08.
(j) ENVIRONMENTAL EVENTS. The Borrower will promptly notify the Bank in
writing within three (3) Business Days of (i) any threatened action or
investigation by any Governmental Authority in connection with any Environmental
Laws, excluding routine testing and corrective action, (ii) any threatened
action or claim by any Person in connection with any loss or injury allegedly
resulting from the disposal or release of any petroleum product, hazardous
substance, or hazardous or solid waste or from any violation or alleged
violation of any Environmental Laws, (iii) the discovery of any occurrence or
condition on, under, or about any of Property of the Borrower (or properties
on, under or about such Properties) of which the Borrower becomes aware, which
may cause any, or any portion of, such Properties to be in violation or alleged
violation of any Environmental Laws; provided that, in each case, the Borrower
is not obligated to notify the Bank if the potential liability for such
threatened action, investigation, or claim or violation or alleged violation
would reasonably be expected to be less than or equal to $250,000 (as determined
in good faith by the Borrower).
(k) GENERAL INFORMATION. Such other information respecting the condition or
operations, financial or otherwise, of the Borrower as the Bank may from time to
time reasonably request.
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Section 5.09. Environmental Matters.
(a) The Borrower will establish and implement such procedures as may be
necessary to continuously determine and assure that any failure of the following
does not have a material and adverse effect on the condition (financial or
otherwise) of the Borrower: (i) all Property of the Borrower, and the operations
conducted thereon, are in compliance with and do not violate any Environmental
Laws, (ii) no solid wastes are disposed of or otherwise released on, under or
about any Property owned by any such party except in compliance with
Environmental Laws, and (iii) no hazardous substance will be released on, under
or about any such Property in a quantity equal to or exceeding that quantity
which requires reporting pursuant to Section 103 of CERCLA.
(b) The Borrower will promptly and diligently investigate and pursue
remediation of any environmental contamination existing as of the Closing Date
or which arises after such date to the extent such contamination requires
remediation under applicable Environmental Laws, except for such matters the
failure to remediate any of which will not materially and adversely affect the
business or financial condition of the Borrower.
Section 5.10. Further Assurances. The Borrower will cure promptly any
defects in the creation and issuance of the Note and the execution and delivery
of the Loan Documents, including this Agreement. The Borrower at its expense
will promptly execute and deliver, or cause to be executed and delivered, to the
Bank upon request all such other and further documents, agreements, and
instruments in compliance with or accomplishment of the covenants and agreements
of the Borrower in the Loan Documents, including this Agreement, or to further
evidence and more fully describe the collateral intended as security for the
Note, or to correct any omissions in the Loan Documents, or more fully state the
security obligations set out herein or in any of the Loan Documents, or to
perfect, protect, or preserve any liens created pursuant to any of the Loan
Documents, or to make any recordings, to file any notices, or obtain any
consents, all as may be necessary or appropriate in connection therewith.
Section 5.11. Performance of Obligation. The Borrower will pay the Note
according to the reading, tenor, and effect thereof, and the Borrower will do
and perform every act and discharge all of the obligations provided to be
performed and discharged by the Borrower under the Loan Documents, including
this Agreement, at the time or times and in the manner specified.
Section 5.12. Taxes and Other Liens. The Borrower will pay and discharge
promptly all taxes, assessments, and governmental charges or levies imposed upon
the Borrower or upon the income or any Property of the Borrower, as well as all
claims of any kind (including claims for labor, materials, supplies and rent)
which, if unpaid, might become a Lien upon any or all of the Property of the
Borrower; provided, however, that the Borrower shall not be required to pay any
such tax, assessment, charge, levy, or claim if the amount, applicability or
validity thereof shall currently be contested in good faith by appropriate
proceedings diligently conducted by or on behalf of the Borrower, and if the
Borrower shall have set up reserves therefor adequate under GAAP.
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ARTICLE VI
NEGATIVE COVENANTS
The Borrower agrees that, so long as any of the Commitments are in effect
and until payment in full of the Indebtedness hereunder, all interest thereon
and all other amounts payable hereunder:
Section 6.01. Liens. The Borrower will not, without the prior written
consent of the Bank, create, incur, assume, or suffer to exist any Lien upon or
with respect to any of its Properties, assets or revenues, now owned or
hereafter acquired, except Permitted Liens and:
(a) Liens securing payment of the Indebtedness;
(b) Liens for taxes or assessments or other government charges or levies
if not yet due and payable or, if due and payable, if they are being contested
in good faith by appropriate proceedings and for which appropriate reserves are
maintained;
(c) Liens imposed by law, such as mechanics' materialmen's, landlords' and
warehousemen's, and carriers' Liens, and other similar Liens, securing
obligations incurred in the ordinary course of business which are not past due
for more than forty-five (45) days or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been
established;
(d) Liens under workmen's compensation, unemployment insurance, social
security, or similar legislation;
(e) Liens, deposits, or pledges to secure the performance of bids, tenders,
contracts (other than contracts for the payment of money), leases (permitted
under the terms of this Agreement), public or statutory obligations, surety,
stay, appeal, indemnity, performance or other similar bonds, or other similar
obligations arising in the ordinary course of business;
(f) Liens, including renewals and extensions thereof, described on Schedule
6.01, but not the extension of any such Lien to other Property;
(g) judgment and other similar Liens arising in connection with court
proceedings, provided (i) appropriate reserves are established and maintained,
(ii) the execution or other enforcement of such Liens is effectively stayed and
(iii) the claims secured thereby are being contested in good faith and by
appropriate proceedings;
(h) easements, rights-of-way, restrictions, and other similar encumbrances
which, in the aggregate, do not materially interfere with the occupation, use,
and enjoyment by the Borrower of the Property encumbered thereby in the normal
course of its business or materially impair the value of the Property subject
thereto;
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(i) purchase-money Liens on any Property hereafter acquired or the
assumption of any Lien on Property existing at the time of such acquisition, or
a Lien incurred in connection with any conditional sale or other title retention
agreement or a Capital Lease; provided that
(i) each such Lien shall attach only to the Property as acquired and
fixed improvements thereon;
(ii) the Debt secured by all such Liens shall not exceed, in the
aggregate, $1,000,000 at any time outstanding; and
(iii) the obligation secured by such Lien is permitted by the provisions
of Section 6.02 and the related expenditure is permitted under Section 7.02; and
(j) such other Liens as are created by or permitted under the Prudential
Loan Agreement and the security documents executed therewith or as to which the
Bank expressly consents in writing.
Section 6.02. Debt. The Borrower will not, without the prior written
consent of the Bank, create, incur, assume, or suffer to exist any Debt, except:
(a) the Note or other Indebtedness;
(b) Debt, including renewals, extensions and refinancings thereof,
described in Schedule 6.02;
(c) Debt of the Borrower subordinated, on terms satisfactory to the Bank,
to the Borrower's obligations under this Agreement and the Note;
(d) Accounts payable to trade creditors for goods or services which are not
aged more than one hundred twenty (120) days from billing date and current
operating liabilities (other than for borrowed money) which are not more than
one hundred twenty (120) days past due, in each case incurred in the ordinary
course of business and paid within the specified time, unless contested in good
faith;
(e) Debt in respect of letters of credit issued for the account of the
Borrower in an aggregate outstanding face amount at any time of up to
$4,600,000;
(f) such other Debt as is permitted under the Prudential Loan Agreement or
as to which the Bank expressly consents to in writing; and
(g) Debt of the Borrower secured by purchase-money Liens permitted by
Section 6.01(i) and j).
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Section 6.03. Mergers, Etc. The Borrower will not, without the prior
written consent of the Bank, change its name, or merge or consolidate with, or
sell, assign, lease, or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to any Person.
Section 6.04. Leases. The Borrower will not, without the prior written
consent of the Bank, create, incur, assume, or suffer to exist any obligation as
lessee for the rental or hire of any real or personal property, except: (a)
Capital Leases permitted by Section 6.01; (b) leases existing on the date of
this Agreement and any extensions or renewals thereof; and (c) leases (other
than Capital Leases) which do not in the aggregate require the Borrower to make
payments (including taxes, insurance, maintenance, and similar expense which
the Borrower is required to pay under the terms of any lease) in any fiscal year
of the Borrower in excess of $250,000.
Section 6.05. Sales and Leasebacks. The Borrower will not, without the
prior written consent of the Bank enter into any arrangements, directly or
indirectly, whereby the Borrower shall sell, transfer, or otherwise dispose of
any real or personal property to any Person, and whereby the Borrower shall
thereafter rent or lease the same or similar property, or any part thereof,
which the Borrower intends to use for substantially the same purpose or purposes
as the property sold or transferred.
Section 6.06. Distributions; Prepayment of Debts.
(a) Except to the extent expressly permitted under the Prudential Loan
Agreement, the Borrower will not, without the prior written consent of the Bank,
declare or pay any distributions; or make any distribution of assets to its
partners as such whether in cash, assets, or obligations of the Borrower; or
allocate or otherwise set apart any sum for the payment of any distribution on,
or for the purchase, redemption, or retirement of, any partnership interests; or
make any other distribution by reduction of capital or otherwise in respect of
any partnership interests; provided, however, that nothing contained herein
shall prohibit or restrict the Borrower from making any distribution in respect
of any partnership interests, or declaring or paying any distribution, whether
of income or by way of return or reduction of capitaL whether in cash, assets,
obligations or in any other form, or by way of redemption or repurchase or
retirement of any partnership interests, to the extent that any such action,
distribution, repurchase, redemption, return of capital or other activity would
be permitted under the Prudential Loan Agreement.
(b) The Borrower will not, without the prior written consent of the Bank,
prepay, retire, redeem or otherwise acquire for value any Debt (other than the
Note) in amounts greater or at times earlier than required by agreements
existing on or after the date hereof or amend or modify in any manner the
subordination, prepayment or payment terms of any Debt which would reasonably be
expected to materially and adversely effect the interests of the Bank hereunder
or under any other Loan Document.
Section 6.07. Guarantees, Etc. The Borrower will not without the prior
written consent of the Bank, assume, guarantee, endorse, or otherwise be or
become directly or contingently responsible or liable (including, but not
limited to, an agreement to purchase any obligation, stock, or to supply
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or advance any funds, or to maintain or cause such Person to maintain a minimum
working capital or net worth, or otherwise to assure the creditors of any Person
against loss) for obligations of any Person, except (a) guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transaction in the ordinary course of business and (b) other contingent
obligations expressly permitted by the Prudential Loan Agreement.
Section 6.08. Amendments, Etc., to Prudential Loan Documents. The Borrower
will not, without the express prior written consent of the Bank (such consent
not to be unreasonably withheld), amend, modify, supplement, or otherwise alter
any provision of the Prudential Loan Agreement, if such action would adversely
affect the Bank's interest in the Collateral. Even if such amendment,
modification, supplement or other alteration does not adversely affect the
Bank's interest in the Collateral and does not therefore require the prior
written consent of the Bank, the Borrower shall provide to the Bank a written
copy of the amendment, modification, supplement or other alteration within
thirty (30) days after its effective date. No amendment, modification,
supplement or other alteration of the Prudential Loan Agreement subsequent to
the date hereof shall amend, modify, supplement, or alter any Negative Covenant
or Financial Covenant of the Borrower contained herein.
Section 6.09. Transaction With Affiliates. Except to the extent permitted
under Section 6.06 hereof or under the Prudential Loan Agreement, the Borrower
will not, without the prior written consent of the Bank, enter into any
transaction, including, without limitation, the purchase, sale, or exchange of
Property or the rendering of any service, with any Affiliate, except in the
ordinary course of and pursuant to the reasonable requirements of the Borrower's
business and upon fair and reasonable terms no less favorable to the Borrower
than would obtain in a comparable arm's-length transaction with a Person not an
Affiliate.
Section 6.10. ERISA. The Borrower will not without the prior written
consent of the Bank, adopt any Plan.
Section 6.11. Nature of Business. The Borrower will not, without the prior
written consent of the Bank, allow any material change to be made in the
character of its business as carried on at the Closing Date.
Section 6.12. Environmental Matter . The Borrower will not permit any of
its Property to be in violation of or do anything or permit anything to be done
which will subject any such Property to any fines, penalties, assessments,
citations, orders, or remedial obligations in excess of $250,000.00 in the
aggregate, during any twelve (12) month period, under any Environmental Laws,
assuming disclosure to the applicable Governmental Authority of all relevant
facts, conditions, and circumstances, if any, pertaining to such Property.
Section 6.13. Negative Pledge Agreements. The Borrower will not create,
incur, assume or suffer to exist any contract, agreement, or understanding
(other than this Agreement and the Loan Documents) which in any way prohibits or
restricts the granting, conveying, creation, or imposition of any Lien on any of
its Property or which requires the consent of or notice to other Persons in
connection therewith.
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Section 6.14. Proceeds of Notes. The Borrower will not permit the proceeds
of the Notes to be used for any purpose other than those permitted by Section
4.18.
ARTICLE VII
FINANCIAL COVENANTS
The Borrower agrees that, so long as any of the Commitments are in
effect and until payment in full of the Indebtedness hereunder, all interest
thereon and all other amounts payable hereunder:
Section 7.01. Quarterly Coverage Ratio. As determined on each Quarterly
Date, for the immediately preceding twelve (12) month period, the Quarterly
Coverage Ratio shall be greater than or equal to 1.5 to 1.0.
Section 7.02. Capital Expenditures. The Borrower will not make any
expenditures in excess of $50,000 for fixed or capital assets which are not
expressly permitted under the Prudential Loan Agreement and set forth in an
applicable Operating Budget (as defined in the Prudential Loan Agreement).
Section 7.03. Receivables Coverage Ratio. The Borrower will maintain at all
times a ratio of Qualified Accounts to the aggregate amount of the Loans
outstanding of at least 1.25 to 1.00.
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.01. Events of Default. If any of the following events ("Events of
Default") shall occur and be continuing:
(a) the Borrower should fail to pay the principal of, or interest on, the
Note, or any amount of a commitment fee, as and when due and payable and such
nonpayment shall continue for a period of five (5) days or more; or
(b) any representation, warranty, or certification made or deemed made by
the Borrower in this Agreement (subject to Section 3.02 herein) or any Loan
Document or which is contained in any certificate, document, opinion, or
financial or other statement furnished at any time under or in connection with
any Loan Document shall prove to have been incorrect in any material respect on
or as of the date made or deemed made; provided, however, that if such
representation or warranty can be made true and correct in all material respects
and all consequences thereof can be cured in all material respects, such event
shall not be an Event of Default unless such representation or warranty shall
continue to be false or misleading in any material respect or any consequence
thereof shall not be cured in all
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material respects to the satisfaction of the Bank within thirty (30) days after
written notice from the Bank to the Borrower; or
(c) the Borrower shall fail to perform or observe in any material respect
any term, covenant, or agreement contained in any Loan Document (other than the
Note) beyond the applicable cure period as set forth therein and, in each case,
in the event such term, covenant or agreement does not itself contain a grace
period, such failure shall continue unremedied for a period of thirty (30) days
after knowledge thereof by the Borrower, and provided that such grace period
shall be extended for up to sixty (60) additional days if such default is
curable and the Borrower is diligently and in good faith attempting to cure; or
(d) the Borrower shall (i) fail to pay any amount due under any
indebtedness for borrowed money (other than the Note) of the Borrower or any
interest or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), or (ii) fail to perform or
observe any term, covenant, or condition on its part to be performed or observed
under any agreement or instrument relating to any such indebtedness, when
required to be performed or observed, if such failure to perform or observe
results in the acceleration after the giving of notice or passage of time, or
both, of the maturity of such indebtedness; or any such indebtedness shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity thereof,
or
(e) the Borrower (i) shall generally not, or shall be unable to, or shall
admit in writing its inability to pay its debts as such debts become due; or
(ii) shall make an assignment for the benefits of creditors, petition or apply
to any tribunal for the appointment of a custodian, receiver, or trustee for it
or a substantial part of its assets; or (iii) shall commence any proceeding
under any bankruptcy, reorganization, arrangements, readjustment of debt,
dissolution, or liquidation law or statute of any jurisdiction, whether now or
hereafter in effect; or (iv) shall have any such petition or application filed
or any such proceeding commenced against it in which an order for relief is
entered or adjudication or appointment is made and which remains undismissed.
for a period of sixty (60) days or more; or (v) or by any act or omission shall
indicate its consent to, approval of, or acquiescence in any such petition,
application, or proceeding, or order for relief, or the appointment of a
custodian, receiver, or trustee for all or any substantial part of its
properties; or (vi) shall suffer any such custodianship, receivership, or
trusteeship to continue undischarged for a period of sixty (60) days or more; or
(f) one or more judgments, decrees, or orders for the payment of money in
excess of $2,000,000 in the aggregate shall be rendered against the Borrower,
and such judgments, decrees, or orders shall continue unsatisfied and in effect
for a period of thirty (30) consecutive days without being vacated, discharged,
satisfied, or stayed or bonded pending appeal; or
(g) the Security Agreement, at any time after its execution and delivery
and for any reason, shall cease: (i) to create a valid and perfected first
priority security interest
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(except for Permitted Liens) in and to the Collateral or (ii) to be in full
force and effect or shall be declared null and void; or the validity or
enforceability thereof shall be contested by the Borrower, or the Borrower shall
deny it has any further liability or obligation thereunder; or
(h) the occurrence and continuation of any event of default under the
Prudential Loan Agreement beyond any applicable period of grace or under any
Power Purchase Agreement,
then, (A) if such event is an Event of Default with respect to the Borrower
specified in Section 8.01(e), the Commitment shall automatically and immediately
terminate and the Loans hereunder (with accrued interest and fees thereon) and
all other amounts owing under or with respect to this Agreement and the Note,
whether direct or contingent, shall immediately become due and payable, and
(B) if such event is any other Event of Default, the Bank may, by notice to the
Borrower, (i) declare the Commitment and its obligation to make Loans to be
terminated, whereupon the same shall forthwith terminate and (ii) declare the
outstanding Note, all interest thereon, and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Notes, all such
interest, and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest, or further notice of any kind, all of
which are hereby expressly waived by the Borrower.
Section 8.02. Non-Recourse Nature of Liability of Partners. Notwithstanding
anything to the contrary contained in this Agreement or in any other Loan
Document, no recourse under or upon any obligation contained in this Agreement
shall be had against the partners of the Borrower or any partner, stockholder,
director, officer or employee thereof, and the Bank expressly waives and
releases all right to assert liability under this Agreement, the Note or any
other Loan Document against, or to satisfy any claim arising hereunder or
thereunder against, any such Person out of any assets of any such Person other
than the interest of any such Person in the Collateral; provided, however, that
nothing in this Section 8.02 shall be deemed to release a partner of the
Borrower from liability for its fraudulent actions or from any of its
obligations or liabilities under any agreement, document, instrument or
certificate executed by such partner in its individual capacity in connection
with the transactions contemplated by this Agreement and the other Loan
Documents.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Amendments, Etc. No amendment, modification, termination,
or waiver of any provision of any Loan Document to which the Borrower is a
party, nor consent to any departure by the Borrower from any Loan Document to
which it is a party, shall in any event be effective unless the same shall be in
writing and signed by the Bank, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
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Section 9.02. Notices, Etc. All notices and other communications provided
for under this Agreement and under the other Loan Documents to which the
Borrower is a party shall be in writing (including telegraphic communication)
and mailed, telegraphed or telecopied, or delivered, if to the Borrower, at its
address at 1600 Smith Street, Suite 4300, Houston, Texas 77002, Attention:
Richard A. Lydecker, Jr., and if to the Bank, at its address at 1100 Louisiana,
Houston, Texas 77002, Attention: Holden Burrow, or, as to each party, at such
other address as shall be designated by such party in a written notice to the
other party complying as to delivery with the terms of this Section 9.02. All
notices and other communications required under the terms and provisions of this
Agreement shall be in writing and shall become effective when delivered by hand
or by telex, telecopier, established overnight courier, or registered or
certified mail, postage prepaid (or when receipt for such attempted delivery is
rejected by the addressee), addressed to the recipient at its address specified
above.
Section 9.03. No Waiver; Remedies. No failure on the part of the Bank to
exercise, and no delay in exercising, any right, power, or remedy under any Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any right under any Loan Documents preclude any other or further
exercise thereof or the exercise of any other right. The remedies provided in
the Loan Documents are cumulative and not exclusive of any remedies provided by
law.
Section 9.04. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights under any Loan Document to which the Borrower is a party without
the prior written consent of the Bank.
Section 9.05. Payment of Expenses, Indemnities, Etc. The Borrower agrees
to:
(a) pay (i) all costs and expenses in connection with the preparation,
execution, delivery, filing, recording, and administration of any of the Loan
Documents, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Bank, and local counsel who may be retained by said
counsel, with respect thereto and with respect to advising the Bank as to its
rights and responsibilities under any of the Loan Documents and (ii) all such
costs and expenses, if any, in connection with any amendment, modification,
supplement or enforcement of any of the Loan Documents, and to the fullest
extent permitted by applicable law, pay any and all stamp and other taxes and
fees payable or determined to be payable in connection with the execution,
delivery, filing, and recording of any of the Loan Documents and the other
documents to be delivered under any such Loan Documents, and agrees to save the
Bank harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and fees.
(b) INDEMNIFY THE BANK AND ITS AFFILIATES AND EACH OF THEIR OFFICERS,
DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS, ATTORNEYS, ACCOUNTANTS, AND
EXPERTS ("INDEMNIFIED PARTIES") FROM, HOLD EACH OF THEM HARMLESS AGAINST AND
PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF THEM FOR THE INDEMNITY MATTERS
WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF THEM (WHETHER OR
NOT ANY OF THEM IS DESIGNATED A PARTY THERETO) AS A RESULT OF,
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ARISING OUT OF OR IN ANY WAY RELATED TO (I) ANY ACTUAL OR PROPOSED USE BY THE
BORROWER OF THE PROCEEDS OF ANY OF THE LOANS, (II) THE EXECUTION, DELIVERY, AND
PERFORMANCE OF THIS AGREEMENT, THE NOTE, AND THE OTHER LOAN DOCUMENTS, (III) THE
OPERATIONS OF THE BUSINESS OF THE BORROWER, (IV) THE FAILURE OF THE BORROWER TO
COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH
ANY GOVERNMENTAL REQUIREMENT, (V) ANY INACCURACY OF ANY REPRESENTATION OR ANY
BREACH OF ANY WARRANTY OF THE BORROWER SET FORTH IN THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS, OR (VI) ANY OTHER ASPECT OF THIS AGREEMENT, THE NOTE, AND THE
LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL AND ALL OTHER EXPENSES INCURRED IN CONNECTION WITH
INVESTIGATING, DEFENDING OR PREPARING TO DEFEND ANY SUCH ACTION, SUIT,
PROCEEDING (INCLUDING ANY INVESTIGATIONS, LITIGATION, OR INQUIRIES), OR CLAIM;
AND
(c) INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE INDEMNIFIED PARTIES
FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST RECOVERY ACTIONS,
ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES, AND LIABILITIES TO WHICH ANY SUCH
PERSON MAY BECOME SUBJECT (I) UNDER ANY ENVIRONMENTAL LAW APPLICABLE TO THE
BORROWER OR ANY OF ITS PROPERTIES, INCLUDING WITHOUT LIMITATION, THE TREATMENT
OR DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF ITS PROPERTIES, (II) AS A RESULT
OF THE BREACH OR NON-COMPLIANCE BY THE BORROWER WITH ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER, (III) DUE TO PAST OWNERSHIP BY THE BORROWER OF ANY
OF ITS PROPERTIES OR PAST ACTIVITY ON ANY OF ITS PROPERTIES OR PAST ACTIVITY ON
ANY OF ITS PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME,
COULD RESULT IN PRESENT LIABILITY, (IV) THE PRESENCE, USE, RELEASE, STORAGE,
TREATMENT DISPOSAL OF HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED
OR OPERATED BY THE BORROWER, OR (V) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY
CONDITION IN CONNECTION WITH THIS AGREEMENT, THE NOTES, OR ANY OTHER LOAN
DOCUMENT; PROVIDED, HOWEVER, NO INDEMNITY SHALL BE AFFORDED UNDER THIS SECTION
9.05(C). IN RESPECT OF ANY PROPERTY FOR ANY OCCURRENCE ARISING FROM THE ACTS OR
OMISSIONS OF THE BANK DURING THE PERIOD AFTER WHICH IT, ITS SUCCESSORS, OR ITS
ASSIGNS SHALL HAVE OBTAINED POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE
OR DEED IN LIEU OF FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE).
(d) No Indemnified Party may settle any claim to be indemnified without the
consent of the indemnitor, such consent not to be unreasonably withheld;
provided, that the indemnitor may not reasonably withhold consent to any
settlement that an Indemnified Party proposes, if the indemnitor does not have
the financial ability to pay all its obligations outstanding and asserted
against the indemnitor at that time, including the reasonably estimated maximum
potential liability of the Indemnified Party as determined by counsel of such
indemnitor and as agreed to by counsel to the Indemnified Party to be
indemnified pursuant to this Section 9.05.
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(e) In the case of any indemnification hereunder, the Bank shall give
notice to the Borrower of any such claim or demand being made against the
Indemnified Party, and the Borrower shall have the non-exclusive right to join
in the defense against any such claim or demand; provided that if the Borrower
provides a defense, the Indemnified Party shall bear its own cost of defense
unless there is a conflict between the Borrower and such Indemnified Party.
(f) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES
NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER
WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN
OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE
INDEMNIFIED PARTIES OR BY REASON OF STRICTER LIABILITY IMPOSED WITHOUT FAULT ON
ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. To THE EXTENT THAT AN INDEMNIFIED
PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILFUL
MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL CONTINUE BUT
SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED TO HAVE OCCURRED BY
REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR WILFUL MISCONDUCT OF THE
INDEMNIFIED PARTY.
(g) The Borrower's obligations under this Section 9.05 shall survive any
termination of this Agreement and the payment of the Note and shall continue
thereafter in full force and effect.
(h) The Borrower shall pay any amounts determined to be finally due under
this Section 9.05 within thirty (30) days of the receipt by the Borrower of
notice of the amount due.
Section 9.06. Right of Setoff. Upon the occurrence and during the
continuance of any Event of Default, the Bank is hereby authorized (to the
extent permitted under the Letter Agreement dated as of December 19, 1996 among
Bank, the Borrower and Prudential) at any time and from time to time, without
notice to the Borrower (any such notice being expressly waived by the Borrower),
to set off and apply any and all deposits (general or special, time or demand,
provisional or final) to the extent they constitute Collateral against any and
all of the obligations of the Borrower now or hereafter existing under this
Agreement, the Note, or any other Loan Document, irrespective of whether or not
the Bank shall have made any demand under this Agreement or the Note or such
other Loan Document and although such obligations may be unmatured. The Bank
agrees promptly to notify the Borrower after any such setoff and application;
provided that the failure to give such notice shall not affect the validity of
such setoff and application. The rights of the Bank under this Section 9.06 are
in addition to other rights and remedies (including, without limitation, other
rights of setoff) which the Bank may have.
Section 9.07. Governing Law. This Agreement and the Note shall be governed
by, and construed in accordance with, the laws of the State of Texas, without
regard to principles of conflicts of law.
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Section 9.08. Severability of Provisions. Any provision of any Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
Section 9.09. Heading . Article and Section headings in the Loan Documents
are included in such Loan Documents for the convenience of reference only and
shall not constitute a part of the applicable Loan Documents for any other
purpose.
Section 9.10. Consent to Jurisdiction. THE BORROWER HEREBY IRREVOCABLY
AGREES THAT ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY
LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS, OR THE UNITED
STATES OF AMERICA FOR THE STATE OF TEXAS, AS THE BANK MAY ELECT. BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY IRREVOCABLY ACCEPTS AND
SUBMITS GENERALLY AND UNCONDITIONALLY, FOR ITSELF AND WITH RESPECT TO ITS
PROPERTY, TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH ACTION OR
PROCEEDING, AND HEREBY WAIVES, IN THE CASE OF ANY SUCH ACTION OR PROCEEDING
BROUGHT IN THE COURTS OF THE STATE OF TEXAS, OR OF THE UNITED STATES OF AMERICA
FOR THE STATE OF TEXAS, DEFENSES BASED ON JURISDICTION, VENUE, FORUM NON
CONVENIENS AND, IN CONNECTION WITH OR BASED UPON ANY ACTION OR PROCEEDING
INITIATED BY THE BORROWER, LIS ALIBI PENDENS, AND HEREBY IRREVOCABLY DESIGNATES,
APPOINTS AND EMPOWERS THE CORPORATION TRUST COMPANY, WHOSE PRESENT NEW JERSEY
ADDRESS IS THE CORPORATION TRUST COMPANY, 2828 WEST STATE STREET, TRENTON, NEW
JERSEY 08608, AS ITS AUTHORIZED AGENT TO RECEIVE, FOR AND ON BEHALF OF THE
BORROWER AND ITS PROPERTY, SERVICE OF PROCESS IN THE STATE OF TEXAS, WHEN AND AS
SUCH LEGAL ACTIONS OR PROCEEDINGS MAY BE BROUGHT IN THE COURTS OF THE STATE OF
TEXAS, OR OF THE UNITED STATES OF AMERICA FOR THE STATE OF TEXAS, AND SUCH
SERVICE OF PROCESS SHALL BE DEEMED COMPLETED UPON THE DATE OF DELIVERY THEREOF
TO SUCH AGENT WHETHER OR NOT SUCH AGENT GIVES NOTICE THEREOF TO THE BORROWER, OR
UPON THE EARLIEST OF ANY OTHER DATE PERMITTED BY APPLICABLE LAW. IT IS
UNDERSTOOD THAT A COPY OF SAID PROCESS SERVED ON SUCH AGENT WELL BE PROMPTLY
FORWARDED TO THE BORROWER AT ITS ADDRESS SET FORTH HEREIN, BUT THE FAILURE OF
THE BORROWER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF
SAID PROCESS ON SAID AGENT AS THE AGENT OF THE BORROWER. THE BORROWER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF THE COPIES THEREOF BY
CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH
HEREIN, SUCH SERVICE TO BECOME EFFECTIVE UPON THE EARLIER OF (I) THE DATE FIVE
DAYS AFTER SUCH MAILING OR (II) ANY EARLIER DATE PERMITTED BY APPLICABLE LAW.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE BANK
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TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY
OTHER JURISDICTION OR TO SERVE PROCESS IN ANY OTHER JURISDICTION OR TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW. THE BORROWER FURTHER
AGREES THAT FINAL JUDGMENT AGAINST IT IN ANY SUCH ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN ANY OTHER JURISDICTION WITHIN THE UNITED STATES OF AMERICA BY SUIT
ON THE JUDGMENT, A CERTIFIED OR EXEMPLIFIED COPY OF WHICH SHALL BE CONCLUSIVE
EVIDENCE OF THE FACT AND OF THE AMOUNT OF ITS INDEBTEDNESS.
Section 9.11. Waiver of Jury Trial.
(a) TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED,
THE BORROWER HEREBY WAIVES, AND COVENANTS THAT IT WELL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF
OR BASED UPON THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE SUBJECT MATTER
THEREOF OR ANY BANK OBLIGATION OR IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE BANK OR THE BORROWER IN CONNECTION WITH ANY OF
THE ABOVE, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE. THE BORROWER ACKNOWLEDGES THAT IT HAS
BEEN INFORMED BY THE BANK THAT THE PROVISIONS OF THIS SECTION 9.11 CONSTITUTE A
MATERIAL INDUCEMENT UPON WHICH THE BANK HAS RELIED, IS RELYING AND WILL RELY IN
ENTERING INTO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
(b) The Bank or the Borrower may file an original counterpart or a copy of
this Section with any court as written evidence of the consent of the Borrower
to the waiver of its right to trial by jury.
Section 9.12. No Oral Agreements. THIS WRITTEN AGREEMENT, THE NOTE, AND THE
OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
Section 9.13. Interest. It is the intention of the parties hereto that the
Bank shall conform strictly to usury laws applicable to it. Accordingly, if the
transactions contemplated hereby would be usurious as to the Bank under laws
applicable to it (including the laws of the United States of America and the
State of Texas or any other jurisdiction whose laws may be mandatorily
applicable to the Bank notwithstanding the other provisions of this Agreement),
then, in that event,
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notwithstanding anything to the contrary in the Note, this Agreement, or in any
other Loan Document or agreement entered into in connection with or as security
for the Note, it is agreed as follows: (i) the aggregate of all consideration
which constitutes interest under law applicable to the Bank that is contracted
for, taken, reserved, charged, or received by the Bank under the Note, this
Agreement, or under any of the other Loan Documents or agreements or otherwise
in connection with the Note shall under no circumstances exceed the maximum
amount allowed by such applicable law, and any excess shall be canceled
automatically and if theretofore paid shall be credited by the Bank on the
principal amount of the Indebtedness (or, to the extent that the principal
amount of the Indebtedness shall have been or would thereby be paid in full,
refunded by the Bank to the Borrower); and (ii) in the event that the maturity
of the Note is accelerated by reason of an election of the holder thereof
resulting from any Event of Default under this Agreement or otherwise, or in the
event of any required or permitted prepayment, then such consideration that
constitutes interest under law applicable to the Bank may never include more
than the maximum amount allowed by such applicable law, and excess interest, if
any, provided for in this Agreement or otherwise shall be canceled automatically
by the Bank as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by the Bank on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by the Bank to the
Borrower). All sums paid or agreed to be paid to the Bank for the use,
forbearance or detention of sums due hereunder shall, to the extent permitted by
law applicable to the Bank, be amortized, prorated, allocated and spread in
equal parts throughout the full term of the Loans evidenced by the Note until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law. If
at any time and from time to time (i) the amount of interest payable to the Bank
on any date shall be computed at the Highest Lawful Rate applicable to the Bank
pursuant to this Section 9.13 and (ii) in respect of any subsequent interest
computation period the amount of interest otherwise payable to the Bank would be
less than the amount of interest payable to the Bank computed at the Highest
Lawful Rate applicable to the Bank, then the amount of interest payable to the
Bank in respect of such subsequent interest computation period shall continue to
be computed at the lEghest Lawful Rate applicable to the Bank until the total
amount of interest payable to the Bank shall equal the total amount of interest
which would have been payable to the Bank if the total amount of interest had
been computed without giving effect to this Section.
For the purpose of determining the Highest Lawful Rate, the Bank hereby
elects to determine the applicable rate ceiling under Article 5069-1.04 of the
Texas Revised Civil Statutes by the indicated (weekly) rate ceiling from time to
time in effect.
Section 9.14. BINDING ARBITRATION.
(A) ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING
BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THE NOTE OR THE LOAN
DOCUMENTS, INCLUDING ANY CLAIM OR CONTROVERSY OF ANY KIND BASED ON OR ARISING IN
TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL
ARBITRATION ACT (OR IF NOT APPLICABLE, APPLICABLE STATE LAW), THE RULES OF
PRACTICE AND PROCEDURE FOR THE ARBITRATION OF
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COMMERCIAL DISPUTES OR JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC.
("J.A.M.S.") AND THE RULES SET FORTH IN SECTION 9.14(B) BELOW. IN THE EVENT OF
ANY INCONSISTENCY, THE RULES SET FORTH IN SECTION 9.14(B) BELOW SHALL CONTROL
JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION. ANY PARTY TO THE NOTES OR THE LOAN DOCUMENTS MAY BRING AN ACTION,
INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY
CONTROVERSY OR CLAIM TO WHICH EITHER THE NOTE OR ANY LOAN DOCUMENT APPLIES IN
ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
(B) THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF HOUSTON, TEXAS AND
ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR. IF J.A.M.S. IS UNABLE
OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN
ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED
WITHIN NINETY (90) DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR
SHALL, ONLY UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF
SUCH HEARING FOR AN ADDITIONAL SIXTY (60) DAYS.
(C) NOTHING IN THIS AGREEMENT SHALL BE DEEMED TO (i) LIMIT THE
APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE OR
ANY WAIVERS CONTAINED IN THE NOTE OR THE LOAN DOCUMENTS; (ii) BE A WAIVER BY THE
BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. (S) 91 OR ANY SUBSTANTIALLY
EQUIVALENT STATE LAW; OR (iii) LIMIT THE RIGHT OF THE BANK (A) TO EXERCISE SELF
HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, (B) TO FORECLOSE AGAINST ANY
COLLATERAL, WHETHER REAL OR PERSONAL PROPERTY, OR (C) TO OBTAIN FROM A COURT
PROVISIONAL OR ANCILLARY REMEDIES SUCH AS, BUT NOT LIMITED TO, INJUNCTIVE
RELIEF, WRIT OF POSSESSION, OR THE APPOINTMENT OF A RECEIVER. THE BANK MAY
EXERCISE SUCH SELF HELP RIGHTS, FORECLOSURE UPON SUCH COLLATERAL, OR OBTAIN SUCH
PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY
ARBITRATTON PROCEEDING BROUGHT PURSUANT TO THE NOTE OR THE LOAN DOCUMENTS.
NEITHER THE EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF
AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE
A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN SUCH ACTION, TO
ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH
REMEDIES.
(D) THE PROVISIONS OF THIS SECTION 9.14 SHALL SURVIVE ANY TERMINATION,
AMENDMENT, OR EXPIRATION OF THE DOCUMENTS EVIDENCING THE TRANSACTIONS. EACH
PARTY AGREES TO KEEP ALL
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DISPUTES AND ARBITRATION PROCEEDINGS STRICTLY CONFIDENTIAL, EXCEPT FOR
DISCLOSURES OF INFORMATION REQUIRED IN THE ORDINARY COURSE OF BUSINESS OF THE
PARTIES OR BY APPLICABLE LAW OR REGULATION.
Section 9.15. EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS
OF THIS AGREEMENT, THE NOTE, AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT
READ THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF
THE TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN
REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE
NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF
THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY
ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING
THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO
AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF
ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE
BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE
PROVISION IS NOT "CONSPICUOUS."
Section 9.16. Cumulative Rights. Rights and remedies of the Bank under the
Note, this Agreement and each other Loan Document shall be cumulative, and the
exercise or partial exercise of any such right or remedy shall not preclude the
exercise of any other right or remedy.
Section 9.17. Singular and Plural. Words used herein in the singular,
where the context so permits, shall be deemed to include the plural and vice
versa. The definitions of words in the singular herein shall apply to such words
when used in the plural where the context so permits and vice versa.
Section 9.18. Exhibits. The exhibits attached to this Agreement are
incorporated herein and shall be considered a part of this Agreement for the
purposes stated herein, except that in the event of any conflict between any of
the provisions of such exhibits and the provisions of this Agreement, the
provisions of this Agreement shall prevail.
Section 9.19. Satisfaction Requirements. If any agreement, certificate,
instrument, or other writing, or any action taken or to be taken, is by the
terms of this Agreement required to be satisfactory to any party, the
determination of such satisfaction shall be made by such party in its sole and
exclusive judgment exercised reasonably and in good faith.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
COGEN TECHNOLOGIES NJ VENTURE
By: Cogen Technologies NJ, Inc.
as Managing General Partner
By: /s/ RICHARD A. LYDECKER, JR.
------------------------------------
Name: Richard A. Lydecker Jr.
Title: Vice President and
Chief Financial Officer
SOUTHWEST BANK OF TEXAS, N.A.
By: /s/ HOLDEN BURROW
------------------------------------
Name: Holden Burrow
Title: Banking Officer
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FIRST AMENDMENT TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT is made and entered into
effective as of the 19th day of December, 1997 (this "Amendment") between COGEN
TECHNOLOGIES NJ VENTURE, a New Jersey general partnership (the "Borrower") and
SOUTHWEST BANK OF TEXAS, N.A. a national banking association (the "Bank").
RECITALS
A. The Borrower and the Bank previously entered into that certain Revolving
Credit Loan Agreement dated as of December 19, 1996 (the "Agreement pursuant to
which the Bank agreed to provide revolving credit loans to the Borrower upon the
terms and conditions as provided therein.
B. The Borrower and the Bank now desire to extend the Maturity Date of the
Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration and the mutual benefits, covenants and agreements herein
expressed, the parties hereto now agree as follows:
1. All capitalized terms used in this Amendment and not otherwise defined
herein shall have the meanings ascribed to such terms in the Agreement.
2. The definitions of "Agreement" and "Maturity Date" in Section 1.01 of
the Agreement are hereby amended to read as follows:
"Agreement" shall mean this Revolving Credit Loan Agreement, as amended by
the First Amendment dated as of December 19, 1997 as the same may be further
amended or supplemented from time to time.
"Maturity Date" shall mean December 18, 1998.
3. Section 1.01 of the Agreement is hereby supplemented, where
alphabetically appropriate, with the addition of the following definitions:
"First Amendment" shall mean that certain First Amendment to Credit
Agreement dated effective as of December 19, 1997 between the Borrower and the
Bank.
"Termination Date" shall mean Maturity Date.
<PAGE>
4. Section 5.08(e) of the Agreement is hereby deleted in its entirety, and
the following is substituted therefor:
"(e) Compliance Certificate. As soon as available and in any event within
twenty (20) days after the end of each calendar quarter, a Compliance
Certificate in the form of Exhibit B executed by an appropriate authorized
officer of the managing general partner of the Borrower (i) certifying that
to the best of his knowledge no Default or Event of Default has occurred
and is continuing, or if a Default or Event or Default has occurred and is
continuing, a statement as to the nature thereof and the action which is
proposed to be taken with respect thereto, and (ii) with computations
demonstrating compliance with the covenants contained in Article VII."
5. Section 9.13 of the Agreement is hereby amended by deleting the second
paragraph thereof, and the following is substituted therefor:
"For the purpose of determining the Highest Lawful Rate, the Bank hereby
elects to determine the applicable rate ceiling under Article 5069-ID of the
Texas Revised Civil Statutes by the indicated (weekly) rate ceiling from time to
time in effect."
6. The Borrower represents and warrants to the Bank that:
a. The liens and security interests created by the Security Agreement
for the benefit of the Bank are perfected, valid and subsisting;
b. Each and every representation and warranty set forth in the
Agreement and/or the other Loan Documents is true and correct in
all material respects as of the date of this First Amendment, or
if any such representation and warranty relates to a specific
date, as of such date;
c. (i) The execution, delivery and performance of this First
Amendment are within the corporate power and authority of the
Borrower and have been duly authorized by appropriate proceedings
and (ii) this First Amendment constitutes a legal, valid and
binding obligation of the Borrower, enforceable in accordance with
its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the rights
of creditors generally and general principles of equity.
d. As of the effective date of this First Amendment, no Event of
Default or event which with notice or lapse of time, or both,
would become an Event of Default has occurred and is continuing.
7. The Bank hereby waives any non-compliance with the terms and provisions
of Section 6.01 of the Agreement with respect to the lien of MidAtlantic
National Bank for sixty (60) days from the date hereof.
2
<PAGE>
8. Except as expressly provided herein, the Agreement and the other
instruments and agreements referred to herein or in the Agreement are not
amended, modified or affected by this First Amendment, and all such documents
are and shall remain in full force and effect from the date of this First
Amendment forward, except as specifically amended by this First Amendment.
9. On and after the date on which this First Amendment becomes effective,
the terms "hereof", "herein", "hereunder" and terms of like import, when used in
the Agreement shall, except where the context otherwise requires, refer to the
Agreement, as amended by this First Amendment.
10. THE AGREEMENT, THIS AMENDMENT, THE NOTE, THE SECURITY AGREEMENT, THE
AUTOPAY AGREEMENT AND EACH OTHER DOCUMENT OR INSTRUMENT EXECUTED IN CONNECTION
WITH THE AGREEMENT REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN OR ORAL
AGREEMENTS BETWEEN THE PARTIES.
[SIGNATURES BEGIN NEXT PAGE]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed effective as of the date first above written.
BORROWER: COGEN TECHNOLOGIES NJ VENTURE
By: Cogen Technologies NJ, Inc.
as Managing General Partner
By: /s/ Sharleen L. Walkoviak
-------------------------------
Name: Sharleen L. Walkoviak
Title: Treasurer
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BANK: SOUTHWEST BANK OF TEXAS, N.A.
By: /s/ Yale Smith
-------------------------------
Name: Yale Smith
Title: SVP
5
<PAGE>
AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
OF
COGEN TECHNOLOGIES NJ VENTURE
THIS AGREEMENT made and entered into as of the 25th day of August,
1986, by and among COGEN TECHNOLOGIES NJ, INC., a Delaware corporation
("Cogen"), BAYONNE, INC., a New Jersey corporation ("CEA"), PSVO BAYONNE, INC.,
a Delaware corporation ("PSVO") and TRANSCO COGENERATION COMPANY, a Delaware
corporation ("TCC") (collectively referred to herein as the "Venturers" and
individually referred to as a "Venturer");
WITNESSETH:
WHEREAS, under date of February 21, 1986, Cogen, CEA and Northern
Cogeneration Five Company (predecessor to ECFC), executed a Joint Venture
Agreement of Cogen Technologies NJ Venture (the "Prior J/V Agreement"), along
with a letter agreement specifying certain understandings among such parties
relative to the Prior J/V Agreement, and
WHEREAS, the parties desire to amend and restate the Prior J/V
Agreement, and
WHEREAS, the Venturers have agreed and do hereby agree to amend and
restate the Prior J/V Agreement, and to form a joint venture under the laws of
the State of New Jersey for the purpose of constructing, owning and operating a
cogeneration facility on land at or near Bayonne, New Jersey.
NOW, THEREFORE, for and in consideration of the premises and the
payments and services to be made or rendered as described herein, the Venturers
do hereby agree, each with the other, as follows:
DEFINITIONS
The following definitions shall be applicable to the terms set forth
below as used in this Agreement:
(1) "Affiliate" means any individual, corporation, partnership, trust
or other entity controlling, controlled by or under direct or indirect common
control with any Venturer.
(2) "Agreement" means this Amended and Restated Joint Venture
Agreement of Cogen Technologies NJ Venture, as the same
<PAGE>
may be amended or modified from time to time in accordance with the terms
hereof.
(3) "Available Cash" means, at the time of determination, all cash
received by the Venture from any source and not required for the Venture's
current business operations or for the establishment of reasonable reserves (the
amount of such reserves to be determined from time to time by Majority Vote of
the Venturers).
(4) "Capital Contributions" means all sums and the agreed fair market
value of the contract rights and other property which the Venturers have
contributed to the capital of the Venture as reflected in Article 4 hereof
(together with any contributions of cash or property subsequently made by the
Venturers as authorized herein).
(5) "Code" means the Internal Revenue Code of 1954, as amended and in
effect on the effective date hereof and, to the extent applicable, as
subsequently amended.
(6) "Construction/Term Loan" means the construction and term loan or
loans contemplated to be obtained by the Venture as more fully provided for in
Section 4.6 hereof.
(7) "Conversion Dates" means the First Conversion Date and Second
Conversion Date.
(8) "Distributive Share" means the interest of a Venturer in the
profits and losses of the Venture, stated as a percentage and, for all
Venturers, aggregating one hundred percent (100%), exclusive of the unpaid
balance of any loans from time to time made by a Venturer to the Venture or
another Venturer.
(9) "Electric Power Sale Agreement" means that certain Agreement for
Purchase of Electric Power Between Cogen Technologies NJ, Inc. and Jersey
Central Power & Light Company, dated October 29, 1985, as may be amended from
time to time.
(10) "First Conversion Date" means the first day of the month following
the month during which the Venturers, other than Cogen, shall have received
distributions of Available Cash from the Venture in an aggregate amount equal
to the Capital Contributions made by such Venturers plus an Internal Rate of
Return thereon equal to 23%.
(11) "Internal Rate of Return" means an after tax rate of return
described in Exhibit A attached hereto and made a part hereof. For all purposes
of this Agreement, Internal Rate
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<PAGE>
of Return shall be computed on the basis of maximum statutory federal and New
Jersey corporate income tax rates and on the basis of federal and New Jersey
income tax laws in effect from time to time. The Internal Rate of Return shall
apply only with respect to contribitions actually made, and from and after
the date such contributions are made, with any recapture of investment tax
credit resulting from the occurrence of a Conversion Date treated as the
making of an additional contribution to the Venture.
(12) "Kidder Peabody Agreement" means that certain agreement dated
February 13, 1986, by and between Cogen and Kidder Peabody & Co., Incorporated,
providing for the performance by Kidder Peabody & Co., Incorporated, of certain
services for Cogen and/or the Venture, and for the payment to Kidder Peabody &
Co., Incorporated of certain commissions therefor.
(13) "Lease" means that certain Lease Agreement dated May 22, 1986, by
and between Bayonne Industries, Inc. and IMTT-Bayonne, as "Lessor," and Cogen,
as "Lessee," covering certain tracts or parcels of land situated in Bayonne,
New Jersey and being described on Exhibit B attached hereto and made a part
hereof, or such other tracts as may be approved by Majority Vote of the
Venturers.
(14) "Liquidator" means the party or parties actually conducting the
liquidation of the Venture in accordance with Section 14.7 hereof.
(15) "Majority Vote of the Venturers" means a vote of the members of
the Managing Committee representing in excess of 50% of the votes which the
members are entitled to cast. The term "Majority Vote" when used with respect to
a class not including all Venturers, means a vote representing in excess of 50%
of the votes which the members of such class on the Managing Committee are
entitled to cast, weighted, in the case of ECFC, CEA, PSVO and TCC, in the
manner hereinafter provided in Section 7.3 hereof.
(16) "Manager" means the individual or firm employed or retained by
the Managing Venturer to oversee and supervise the day to day operation and
maintenance of the Project, subject to the control of the Managing Venturer.
(17) "Managing Committee" means a committee composed of seven
individuals, in which three members are appointed by Cogen, and one member is
appointed by each other Venturer.
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<PAGE>
(18) "Managing Venturer" means Cogen or such future Managing Venturer
which shall be designated as such by the Venturers in accordance with the terms
hereof.
(19) "Management Fee" means an amount equal to one and one-half percent
(1-1/2%) of gross revenues from the Project received by the Venture each month.
(20) "Partnership Act" means the Uniform Partnership Act as adopted and
amended in the State of New Jersey.
(21) "Post-First Conversion Date Distributive Share" means the
Distributive Share of the Venturers from and after the occurrence of the First
Conversion Date until the occurrence of the Second Conversion Date as set forth
in Section 3.2 hereof.
(22) "Post-Second Conversion Date Distributive Share" means the
Distributive Share of the Venturers from and after the occurrence of the Second
Conversion Date, as set forth in Section 3.3 hereof.
(23) "Pre-First Conversion Date Distributive Share" means the
Distributive Share of the Venturers prior to the occurrence of the First
Conversion Date, as set forth in Section 3.1 hereof.
(24) "Project" means the cogeneration facility to be constructed, owned
and operated by the Venture at or near Bayonne, New Jersey.
(25) "Second Conversion Date" means the first day of the month
following the month during which the Venturers, other than Cogen, shall have
received distributions of Available Cash from the Venture (inclusive of
distributions made prior to and including the First Conversion Date) in an
aggregate amount equal to the Capital Contribution made by such Venturers plus
an Internal Rate of Return thereon equal to 30%.
(26) "Steam Producing Facilities" means the boilers and other
facilities covered by the Steam Producing Facility Agreements.
(27) "Steam Producing Facility Agreements" means, collectively, the
following agreements:
(a) Purchase and Sale Agreement dated May 22, 1986, between Bayonne
Industries, Inc. and IMTT-Bayonne, as "Sellers," and Cogen, as "Buyer".
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<PAGE>
(b) Bill of Sale dated May 22, 1986, from Bayonne Industries, Inc. and
IMTT-Bayonne to Cogen.
(c) Promissory Note dated May 22, 1986, from Cogen to Bayonne
Industries, Inc. in the original principal amount of $2,600,000.00.
(d) Promissory Note dated May 22, 1986, from Cogen to Bayonne
Industries, Inc. in the original principal amount of $600,000.00.
(e) Security Agreement dated May 22, 1986, between Cogen and Bayonne
Industries, Inc.
(f) Easement dated May 22, 1986, from Bayonne Industries, Inc. and
IMTT-Bayonne to Cogen.
(g) Steam Producing Facilities Lease Agreement dated May 22, 1986
between Cogen, as lessor, and IMTT-Bayonne, as lessee.
(h) Option Agreement dated May 22, 1986 between Bayonne Industries,
Inc. and Cogen.
(28) "Steam Sale Agreement" means that certain Agreement Between Cogen
Technologies NJ, Inc. ("Seller") and IMTT-Bayonne ("Buyer") for the Sale of
Steam and Electricity From a Cogeneration Plant, dated June 13, 1985, as amended
by Amendment dated May 22, 1986, between such parties, and as may be amended
from time to time.
(29) "System Supply Agreement" means an agreement contemplated to be
executed by and between the Venture and a contractor, under which the contractor
agrees to provide and install on the site for the Project, all improvements,
equipment and appurtenances constituting the Project (including start-up and
testing), said agreement to be in such form as may be approved by the Managing
Venturer (after consultation with the Managing Committee).
(30) "2/3 Vote of the Venturers" means a vote of the members of the
Managing Committee representing at least 66-2/3% of the votes which the members
thereof are entitled to cast, such vote to be weighted in the manner
contemplated under Section 7.3 hereof.
(31) "Venture" means the joint venture entered into and formed by the
Venturers pursuant to this Agreement and the Partnership Act.
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<PAGE>
(32) "Venture Loan" means any loan made by a Venturer to the Venture,
as permitted under Section 7.4 hereof, except such term shall not refer to the
Construction/Term Loan should such loan be made by a Venturer or an Affiliate
of a Venturer.
(33) "Wheeling Agreement" means any agreement by and between Cogen,
or if executed after the date hereof, the Venture, and Public Service Electric &
Gas Company, regarding the provision of transmission and interconnection
services.
ARTICLE 1
FORMATION OF JOINT VENTURE
1.1. The Prior J/V Agreement is hereby amended and restated in its
entirety. The Venturers hereby enter into and form a joint venture under the
laws of the State of New Jersey for the limited purposes and upon the terms and
provisions set out herein.
1.2. The name of the Venture shall be "Cogen Technologies NJ Venture".
The Venturers shall execute all assumed or fictitious name certificates and take
all other action required by law to comply with the Partnership Act and the
assumed name act, fictitious name act or similar statute in effect in each
jurisdiction or political subdivision in which the Venture proposes to do
business.
1.3. The rights and obligations of the Venturers and the
administration, dissolution and termination of the Venture shall be governed by,
and this Agreement shall be construed in accordance with, the laws of the State
of New Jersey, including the Partnership Act.
1.4. The purpose of the Venture shall be limited strictly to (i)
acquiring, constructing, owning, maintaining, operating, repairing, improving,
rebuilding, altering, replacing, leasing, selling, mortgaging, hypothecating or
otherwise using and dealing with the Project and the Steam Producing Facilities,
(ii) producing and selling electricity and steam from the Project and the Steam
Producing Facilities, and (iii) engaging in any and all activities related or
incident thereto, including, without limitation, the acquisition, ownership,
improvement, operation, sale, lease, mortgage, hypothecation or other use of or
dealing with all types and kinds of property.
1.5. The principal office of the Venture shall be the principal
office, from time to time, of the Managing Venturer, but the Venture may have
such other place or places of business
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<PAGE>
as the Venturers may from time to time determine to be necessary or appropriate
to carry on the business of the Venture.
ARTICLE 2
TERM
The term of the Venture shall be for a period of thirty (30) years
commencing as of the date hereof and ending thirty (30) years thereafter unless
dissolved and liquidated at an earlier date pursuant to the provisions of
Article 14 hereof. The term may be extended as often as may be deemed necessary
or desirable by unanimous approval of the members of the Managing Committee.
ARTICLE 3
DISTRIBUTIVE SHARES OF VENTURERS
3.1. The Pre-First Conversion Date Distributive Shares of the
Venturers are as follows:
Venturer Distributive Share
-------- ------------------
Cogen 15.00%
ECFC 42.50%
CEA 29.75%
PSVO 8.50%
TCC 4.25%
TOTAL 100.00%
3.2 The Post-First Conversion Date Distributive Shares of the
Venturers are as follows:
Venturer Distribution Share
-------- ------------------
Cogen 50.00%
ECFC 25.00%
CEA 17.50%
PSVO 5.00%
TCC 2.50%
TOTAL 100.00%
3.3 The Post-Second Conversion Date Distributive Shares of the
Venturers are as follows:
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Venturer Distributive Share
-------- ------------------
Cogen 85.00%
ECFC 7.50%
CEA 5.25%
PSVO 1.50%
TCC 0.75%
TOTAL 100.00%
ARTICLE 4
CAPITAL CONTRIBUTIONS AND FINANCING
4.1. A capital account shall be established and maintained by the
Venture for each Venturer. The initial entries in said capital account, based on
the initial cash Capital Contributions of the Venturers to the Venture and the
agreed fair market value of certain contract rights and other property
contributed to the Venture by Cogen (all such initial cash Capital Contibutions,
except for $25,581.19 of the sum included below for PSVO, having been made prior
to or as of June 30, 1986) are as follows:
Venturer Capital Contribution
-------- --------------------
Cogen $1,000,000.00
ECFC $ 877,905.99
CEA $ 614,534.19
PSVO $ 175,581.19
TCC $ 87,790.59
TOTAL $2,755,811.96
Except as hereinafter set forth in this,Section 4.1, such initial
Capital Contributions have been made to the Venture, and except for the
contribution by Cogen, have been made in cash. The Venture has paid to Cogen the
sum of $975,000 to reimburse Cogen for legal, engineering, environmental,
general and administrative costs incurred prior to December 31, 1985 in
connection with the Project. Such reimbursement to Cogen will not be deemed a
return of capital to Cogen. It is acknowledged that PSVO, as of the effective
date hereof, has not contributed $25,581.19 of the sum listed above as its
initial capital contribution. PSVO agrees to contribute such sum promptly upon
execution of the agreements with the PSVO Affiliates as contemplated under
Section 12.10(f) hereof (and, as of such date to contribute all other amounts
which PSVO would have been required to contribute prior to such
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<PAGE>
date had PSVO actually participated as a venturer prior to such date).
4.2. It is agreed by the Venturers that the fair market value of the
Lease and other contracts referred to in Article VII hereof which have been
cortributed to the Venture by Cogen is $1,000,000.00 and constitutes Cogen's
Capital Contribution to the Venture.
4.3. After the initial Capital Contributions as set forth in Section
4.1 above have been made, the Venturers (other than Cogen) hereby agree to make
additional Capital Contributions in cash on an as-needed basis, as called for by
the Managing Venturer and as may be approved by Majority Vote of the Venturers,
for development costs of the Project, such contributions, when added to the
contributions referred to in Section 4.1 above, not to exceed $3,500,000. Such
contributions referred to in the immediately preceding sentence shall not exceed
an aggregate amount of $200,000. per month. In addition to the foregoing, the
Venturers (other than Cogen) hereby agree to make additional Capital
Contributions in cash, such additional Capital Contributions to be made
approximately as and when draws are made on the Construction/Term Loan and to be
in the ratio of 25% for such contributions and 75% for such draws on such loan.
The draw-down budget for the Construction Loan shall be approved by 2/3 Vote of
the Venturers. Any call for Capital Contributions in excess of 10% of the
amount contemplated under the draw budget (in order to maintain such 25/75
ratio), shall be subject to approval by 2/3 Vote of the Venturers. All
additional Capital Contributions shall be paid in the ratio of ECFC-50%; CEA-
35%, PSVO-10% and TCC-5%. Each Venturer shall pay its share of each such
additional Capital Contribution within ten (10) days after call therefor by the
Managing Venturer.
4.4. The contributions contemplated under Sections 4.1 and 4.3
hereof shall be in a total amount equal to (a) an amount necessary to pay the
$3,000,000 indemnity, if necessary, referred to in Section 4.6 hereof and (ii)
at least 25% of the total cost of organization of the Venture, plus construction
and start-up costs of the Project, including working capital reserves reasonably
contemplated to enable generation of positive cash flow from the Project (herein
such costs referred to in this subsection (ii) being called "Project Costs");
provided, however, without the approval of all Venturers, the total Project
Costs (including the $3,500,000 in development costs referred to in Section 4.3
hereof) shall not exceed $130,000,000.
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<PAGE>
4.5. A Venturer's capital account shall be credited with the amounts of
such Venturer's initial Capital Contribution, together with the amount of cash
or the fair market value of property (net of liabilities secured by such
property and assumed by the Venture or to which such property is subject)
subsequently contributed, including those contemplated under Section 4-3
above, and shall be credited or charged as the case may be, with such
Venturer's Distributive Share of Venture profit or loss each month determined
pursuant to Article 6 below. The Managing Committee must unanimously approve any
property, other than cash, and the fair market value thereof, which may be
contributed to the Venture under Section 4.3 hereof. The amount of cash and the
fair market value of property (net of liabilities secured by such property and
assumed by the Venturers or to which such property is subject) distributed to
Venturers shall be charged against their respective capital accounts. The
respective capital accounts of the Venturers shall not bear interest. The
capital of the Venture shall not be withdrawn except as provided herein.
Notwithstanding the foregoing, without the prior written consent of all
Venturers, no Venturer, except as provided in Section 4.3, shall be entitled to
make further or additional Capital Contributions (as opposed to loans) to the
Venture.
4.6. As soon as practicable after the date hereof, the Managing
Committee shall endeavor to obtain the Construction/Term Loan. The
Construction/Term Loan shall be a loan or loans to the Venture, which, except as
set forth in the next succeeding sentence hereof, shall be non-recourse to the
Venturers, in an amount not to exceed 75% of the cost of construction of the
Project secured by assets of the Venture and shall be on terms approved by a 2/3
Vote of the Venturers. (It is understood and agreed, however, that the
Construction/ Term Loan may be a limited recourse obligation of the Venturer's
to the extent of an amount equal to 25% of the total Project Costs, plus an
amount not to exceed $3,000,000 for indemnity of the Lender against
environmental liabilities). It is contemplated that the Construction/Term Loan
will be in an amount sufficient, when added to the Capital Contributions of the
Venturers, to provide all of the financing necessary for the construction,
start-up and operational requirements of the Project as described in Exhibit C
hereto, including reserves for working capital. The documents evidencing and
securing the Construction/Term Loan, upon approval by 2/3 Vote of the Venturers,
may be executed by the Managing Venturer on behalf, and as the act and deed, of
the Venture. If loan commitments or agreements for the Construction/Term Loan(s)
from a lender or lenders acceptable to the Venture containing terms approved by
2/3 Vote of the Venturers are not obtained by the Venture on
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or before 120 days after the date hereof (it being understood that such
commitment(s) may contain conditions, among other things, for the obtaining of
all necessary licenses and permits for the Project), the Venture shall be
liquidated and dissolved in accordance with the terms of Article 14 hereof,
unless the Venturers otherwise agree by 2/3 Vote of the Venturers.
4.7. In addition to all other rights and remedies the Venture may have
hereunder or at law or in equity to enforce payment by each Venturer obligated
under Section 4.3 above to make additional Capital Contributions, the Venture
shall have the rights and remedies set forth in this Section 4.7. If any such
Venturer shall fail to make all such contributions required of such Venturer,
then, in the event such default shall not be cured within thirty (30) days after
notice shall have been given to such defaulting Venturer by the Venture or any
other Venturei not then in default, such defaulting Venturer, at the option of
the non-defaulting Venturers, as determined by Majority Vote of the Venturers
(other than the defaulting Venturer), shall be expelled from the Venture by
notice given to such defaulting Venturer. Upon expulsion, the interest owned by
the defaulting Venturer shall be deemed transferred to and owned by the other
Venturers on a proportionate basis in accordance with the then-existing
respective Distributive Shares of such other Venturers, or on such other basis
as shall be agreed upon among the acquiring Venturers. The expelled Venturer
shall be entitled to be paid for such interest an amount equal to 25% of the
"Agreed Value" of the interest (as defined in Article 13 hereof), and the
payment thereof to the expelled Venturer shall be made in the same manner as
contemplated under Section 13.3(b) hereof. Such expulsion shall be automatic
upon the giving of notice thereof to the defaulting Venturer, but upon request
of the Venture or any of the non-defaulting Venturers, the defaulting Venturer
agrees to execute any document reasonably requested evidencing the fact that
such defaulting Venturer shall thereafter own no interest in the Venture, but
whether such defaulting Venturer shall execute any such document shall have no
effect on the effectiveness of such expulsion which shall be automatic. it is
understood, stipulated and agreed that it is crucial that the respective
Venturers fund the Capital Contributions they have agreed to make hereunder, and
that the failure of any Venturer to make such required Capital Contpibutions
shall cause the Venture to be damaged in an amount which may be speculative and
not susceptible to precise calculation. Thus, the Venturers agree that the
relinquishment of the defaulting Venturer's interest in the Venture for the
payment to such defaulting Venturer of the sum payable under this Section 4.7
upon expulsion of such defaulting Venturer is not a penalty but is in the nature
df liquidated damages to the Venture.
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4.8. Notwithstanding the terms of Section 4.7, Section 12.10 or any
other provision of this Agreement, no Venturer shall acquire any portion of the
interest of the defaulting Venturer to the extent such acquisition would cause
the Project to lose its status as a "Qualifying Cogeneration Facility," as
defined in the Public Utility Regulatory Policies Act (16 U.S.C.
(S)796(18)(D) and regulations promulgated and cases decided thereunder
(hereinafter called "PURPA"), and if any transfer herein provided for would
cause such loss of such status, any portion of the interest in excess of that
permitted under PURPA prior to loss of such status, shall be owned by the other
Venturers in proportion to their respective then-existing Distributive Shares.
ARTICLE 5
DISTRIBUTIONS
5.1. Subject to the provisions of Section 14.6 below (and the terms of
any loan documents executed by the Venture which may provide to the contrary),
Available Cash shall be distributed monthly to the Venturers. The total amount
and time of any such distribution shall be determined by the Managing Committee
having due regard for the foreseeable cash needs of the Venture. Before the
First Conversion Date, Available Cash shall be distributed among the Venturers
in accordance with their respective Pre-First Conversion Date Distributive
Shares; after the First Conversion Date, but prior to the Second Conversion
Date, Available Cash shall be distributed among the Venturers in accordance with
their respective Post-First Conversion Date Distributive Shares. After the
Second Conversion Date, Available Cash shall be distributed among the
Venturers in accordance with their respective Post-Second Conversion Date
Distributive Shares. The Managing Committee may rely upon the opinion of a
nationally recognized independent public accounting firm retained by the Venture
from time to time with respect to all matters (including disputes with respect
thereto) relating to computations and determinations required to be made under
this Article 5 and under Article 6. In the event it shall have been determined
by, such accounting firm that a particular Conversion Date shall have occurred,
but thereafter such firm shall determine that due to challenge by the
Internal Revenue Service or other taxing authority such Conversion Date should
not have occurred, thereafter Available Cash shall be distributed in accordance
with the Distributive Shares existing prior to the occurrence of such Conversion
Date until, in fact, sufficient Available Cash shall have been distributed
to cause the actual occurrence of the Conversion Date in question, and
thereafter
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in accordance with the terms of the third and fourth sentences of this Section
5.1.
5.2. In the event there shall be distributed to any Venturer (whether
upon liquidation of the Venture or otherwise) any property of the Venture
other than cash, such property shall first be deemed sold by the Venture at
its fair market value (as established by 2/3 Vote of the Venturers), and any
deemed gain or loss shall be posted to the capital accounts of the Venturers in
the same manner as loss or gain from an actual sale of such property.
ARTICLE 6
ALLOCATIONS OF INCOME, GAIN, LOSS,
DEDUCTION AND CREDIT
6.1. All Venture income, gains, losses, deductions and credits shall
be computed on a federal income tax basis. Except as provided in Sections 6.2,
6.3, 6.4 and 6.6:
(a) For each Venture fiscal year which ends prior to the First
Conversion Date, Venture income, gains, losses, deductions and credits shall
be allocated among the Venturers in accordance with their Pre-First
Conversion Date Distributive Shares;
(b) For each Venture fiscal year which begins after the First
Conversion Date and which ends prior to the Second Conversion Date, Venture
income, gains, losses, deductions and credits shall be allocated among the
Venturers in accordance with their Post-First Conversion Date Distributive
Shares;
(c) For each Venture fiscal year which begins after the Second
Conversion Date, Venture income, gains, losses, deductions and credits shall
be allocated among the Venturers in accordance with their Post-Second
Conversion Date Distributive Shares;
(d) for each venture fiscal year beginning prior to the First
Conversion Date and ending after the First Conversion Date, Venture income,
gains, losses and deductions for the days up to but not including the First
Conversion Date (and credits on assets actually placed in service during
such period) shall be allocated in accordance with subsection 6.1(a) hereof,
Venture income, gains, losses and deductions for the remaining days up to
but not including the Second Conversion Date (and credits on assets actually
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placed in service during such period) shall be allocated in accordance
with subsection 6.1(b) hereof and Venture income, gains, losses and
deduction for the remaining days, if any (and credits on assets actually
placed in service during such period), shall be allocated in accordance with
subsection 6.1(c) hereof; and
(e) For each Venture fiscal year beginning after the First Conversion
Date and ending after the Second Conversion Date, Venture income, gains,
losses and deductions for the days up to but not including the Second
Conversion Date (and credits on assets actually placed in service during
such period) shall be allocated in accordance with subsection 6.1(b) hereof,
and Venture income, gains, losses and deductions for the remaining days (and
credits on assets actually placed in service during such period) shall be
allocated in accordance with subsection 6.1(c) hereof.
6.2. Notwithstanding the provisions of Section 6.1, Venture gain from
the sale, exchange, abandonment, foreclosure or other disposition (other than by
lease) of any Venture property shall be allocated among the Venturers as
follows:
(a) First, gain shall be allocated to each of the Venturers having a
negative balance in its capital account to the extent and in the ratio that
such Venturers have negative balances in their capital accounts as adjusted
to date;
(b) Second, the remaining gain, if any, shall be allocated as follows:
(i) If the First Conversion Date has not occurred:
(A) First, if any Venturers' capital accounts (as adjusted
for prior allocations) do not have a credit balance equal to or
greater than the cash which would have to be distributed to such
Venturers in order to cause the First Conversion Date to occur,
gain shall next be allocated in the ratio of the Pre-First
Conversion Date Distributive Shares to such Venturers in an amount
necessary to cause the capital accounts of the Venturers (other
than Cogen) to have a credit balance equal to the cash which would
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have to be distributed to them in order to cause the First
Conversion Date to occur;
(B) Second, if any Venturers' capital accounts (as adjusted
for prior allocations) do not have credit balances equal to or
greater than the cash which would have to be distributed to such
Venturers in order to cause the Second Conversion Date to occur,
gain shall next be allocated in the ratio of the Post-First
Conversion Date Distributive Shares to such Venturers in an amount
or amounts necessary to cause such capital accounts of the
Venturers (other than Cogen) to have credit balances equal to the
cash which would have to be distributed to them in order to cause
the Second Conversion Date to occur;
(C) Third, gain (if any) in excess of the gain allocated in
(B) above, shall be allocated to the Venturers, in such amounts as
will result in the ratio between the aggregate balances in the
capital accounts of the Venturers (including any adjustment for
the allocations pursuant to the foregoing provisions but reduced
by the amount of cash that must be distributed to the Venturers to
cause the First and Second Conversion Dates to occur) being equal
to their Post-Second Conversion Date Distributive Shares unless
after the allocation in (B) above each Venturer's capital account
has a zero balance (in which case no gain shall be allocated under
this subsection (C); and
(D) Fourth, any gain not allocated pursuant to (A), (B) and
(C) shall be allocated among the Partners in accordance with their
Post-Second Conversion Date Distributive Shares.
(ii) If the First Conversion Date has occurred and the Second
Conversion Date has not occurred:
(A) First, if any Venturers do not have credit balances equal
to or greater than the cash which would have to be
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distributed to the venturers in order to cause the Second
Conversion Date to occur, gain shall be allocated in the ratio of
the Post-First Conversion Date Distributive Shares to such
Venturers in an amount or amounts necessary to cause the capital
accounts of the Venturers (other than Cogen) to have credit
balances equal to the cash which would have to be distributed to
them in order to cause the Second Conversion Date to occur;
(B) Second, gain (if any) in excess of the gain allocated in
(A) above, shall be allocated to the Venturers, in such amounts as
will result in the ratio between the aggregate balances in the
capital accounts of the Venturers (including any adjustment for
the allocations pursuant to the foregoing provisions but reduced
by the amount of cash that must be distributed to the Venturers to
cause the Second Conversion Date to occur) being equal to their
Post-Second Conversion Date Distributive Shares unless after the
allocation under (A) above, each Venture's capital account has a
zero balance case no gain shall be allocated under this
subsection (B); and
(C) Third, any gain not allocated pursuant to (A) and (B)
shall be allocated among the Venturers in accordance with their
Post-Second Conversion Date Distributive Shares.
(iii) If the Second Conversion Date has occurred:
(A) First, gain shall be allocated to the Venturers, in such
amounts as will result in the ratio between the aggregate balances
in the capital accounts of the Venturers being equal to their
Post-Second Conversion Date Distributive Shares unless each
capital account has a zero balance (in which case no gain shall be
allocated under this subsection (A)); and
(B) Second, any gain not allocated pursuant to (A) shall be
allocated among the
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Venturers in accordance with their Post-Second Conversion
Distributive Shares.
To the extent consistent with the above allocations, any gain on the sale or
other disposition of depreciable Venture assets which is recaptured as
ordinary income shall be allocated among the Venturers in the same ratio as the
depreciation deductions giving rise to such gain were allocated, but in no event
to any Venturer in excess of the total gain allocable to such Venturer under
Section 6.2.
6.3 Notwithstanding the provisions of Section 6.1, Venture loss from
the sale, exchange, abandonment, foreclosure or other disposition (other than by
lease) of any Venture property shall be allocated among the Venturers in
accordance with the terms of Section 6.1 above, except that to the extent
such allocation would cause any Venturer to have a negative balance in its
capital account, at a time when other Venturers have a positive balance in their
capital accounts, loss shall be allocated to the Venturers with such positive
balances in the ratio thereof. Any remaining loss shall be allocated in
accordance with the terms of Section 6.1 hereof.
6.4. Any gain or loss computed on a federal income tax basis which is
in excess of the gain or loss computed on the basis of the Venture's assets
contained in its books and records which is a result of crediting Cogen's
capital account with the fair market value of the Lease and other properties
contributed to the Ventuire by Cogen Pursuant to Section 4.1 hereof, rather than
the federal income tax basis thereof, shall be allocated solely to Cogen. In the
event of (i) a future contribution of property with a variation between its fair
market value and federal income tax basis at the date of contribution, the tax
consequences attributable to such variation shall be allocated in accordance
with section 704(c) of the Code, or (ii) a distribution to a Venturer, other
than in connection with the dissolution and liquidation of the Venture, of
Venture assets with a variation between their fair market value and federal
income tax basis, this Agreement shall be amended to the extent in the opinion
of tax counsel for the Venture it is necessary to comply with sections 704(b)
and 704(c) of the Code.
6.5. All references to income, gains, losses and deductions shall
include income and gain exempt from tax, expenditures described in section
705(a)(2)(B) of the Code, expenses described in section 709 of the Code other
than amounts with respect to which an election is made under section 709(b),
disallowed losses under sections 267(a)(1) or
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707(b) of, the Code and basis adjustments to section 38 property under section
48(q) of the Code.
6.6. Income, gain, loss, deduction or credit attributable to any
Venture interest which has been transferred shall be allocated between the
transferred and the transferee pursuant to any method allowable under Section
706 of the Code, which is acceptable to transferor, transferee and the Managing
Venturer, or in the absence of agreement, as follows:
(a) For the months prior to the transfer, to the transferor.
(b) For the months subsequent to the transfer, to the transferee.
(c) For the month of the transfer, to the transferee if the transfer
occurs on or before the 15th day of such month and to the transferor if
occurring thereafter.
ARTICLE 7
CONSTRUCTION, OPERATION AND
MANAGEMENT OF THE PROJECT AND
THE VENTURE
7.1. As soon as possible after the execution hereof, the Venture shall
obtain the Construction/Term Loan as provided in Section 4.6 hereof. Upon and
subject to obtaining the Construction/Term Loan, the Venture shall cause the
Project to be constructed generally in accordance with Exhibit C hereto. All
property (including, without limitation, the Project) acquired, by purchase or
otherwise, on account of the Venture shall be the property of the Venture. Title
to all property of the Venture shall be held in the name of the Venture.
ContemDoraneously with the execution hereof, Cogen shall (and by these presents
does hereby) assign and convey to the Venture all of Cogen's rights, titles and
interests in and to the Lease, the Electric Power Sale Agreement, the Steam Sale
Agreement, the Steam Producing Facility Agreements (and the assets covered
thereby) the Wheeling Agreement, the Kidder Peabody Agreement, the System Supply
Agreement (if such respective agreements shall have been executed by Cogen prior
to the date hereof) and all other interests it may have, if any, in respect of
the Project. Cogen nereby warrants that none of such agreements have been
encumbered (except pursuant to the terms of the Steam Producing Facility
Agreements), and that such agreements represent all the agreements it has
entered into relating to the Project prior to the date hereof.
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The Venture shall (and does hereby) assume all obligations of Cogen accruing
thereunder from and after the date of such agreements (and to the extent Cogen
may have actually payments under any such agreements, agrees to reimburse Cogen
promptly upon demand by Cogen for such payments made). The Managing Venturer
shall endeavor to consummate a steam sale agreement with Exxon Company U.S.A.,
or such other purchaser(s) as shall be acceptable to the Venture, as soon as
possible after the date hereof.
7.2. The overall management and control of the business and affairs of
the Venture shall be vested in the Managing Venturer, except to the extent
reserved unto the Venturers as set forth in Sections 7.5, 7.6 and 7.7 below. No
assignee shall participate in the management, liquidation or winding up of the
Venture unless such assignee is admitted,to the Venture as a substitute
or additional. Venturer pursuant to Section 12.5 below. The Managing
Committee, by unanimous vote of all members other than those appointed by the
Managing Venturer and subject to the terms of Section 17.10 hereof, may remove
the Managing Venturer due to willful malfeasance of its duties hereunder or
willful breach by the Managing Venturer of the terms of this Agreement or of its
fiduciary duties (provided the Managing Venturer shall not have cured such
malfeasance or breach within ninety (90) days after notice is given to the
Managing Venturer detailing with particularity the alleged malfeasance and/or
breach). If Cogen shall be removed as the Managing Venturer, Cogen shall elect
by notice to the other Venturers within ten (10) days after such removal either
to (i) sell its interest in the Venture to the other Venturers or (ii) keep such
interest but have no further representatives on the Managing Committee (in which
latter event Cogen shall remain liable for any damages incurred by the Venture
due to the occurrence of any event referred to in the immediately preceding
sentence hereof). Should Cogen elect to sell its interest, it shall be sold for
a purchase price payable in the manner contemplated under Section 13.3(b)
hereof, in an amount equal to the "Agreed Value" of such interest (as defined in
Section 13.3(ai hereof, except that for purposes of the calculation of Agreed
Value in such instance, the reference in Section 13.3(a)(iv) to "Section 13.1,"
shall be deemed to read "Section 7.2."). Such interest shall be acquired by the
other Venturers in such percentages as such other Venturers may agree, and in
the absence of agreement (and subject to the limitation set forth in Section
4.8) in proportion to their respective then-existing Distributive Shares. If
Cogen elects to thus sell such interest, the other Venturers promptly thereafter
shall change the name of the Venture so as not to include the name "Cogen"
therein. If Cogen elects not to sell its interest in the Venture, it shall not
be entitled to
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appoint any further representatives to the Managing Committee, and the voting
rights previously held by Cogen's representatives to the Managing Committee
shall be deemed owned by the other Venturers in proportion to their respective
then-existing Distributive Shares.
7.3. All decisions of the Managing Committee shall be made by
Majority Vote of the Venturers, except when the terms of this Agreement or
applicable law specifically require the consent by a larger vote or by all the
Venturers. Each member of the Management Committee appointed by Cogen shall have
one vote on matters to be voted on by the Managing Committee. The other four
members of the Managing Commictee (being the members appointed by the other four
Venturers) shall have three total votes. The percentage of such three votes
which each such other member shall be entitled to cast shall be
represented by a fraction, the numerator of which shall be the Distributive
Share at that time of the Venturer which shall have appointed such member, and
the denominator of which shall be the then Distributive Share of all Venturers
(exclusive of Cogen). Each Venturer shall have the right, from time to time, to
replace its representative(s) or any of them on the Managing Committee, upon
the giving of written notice thereof to the remaining Venturers. The Managing
Committee shall meet not less often than semiannually or at such intervals and
at such location or locations as may be agreed upon by the Managing Committee
and shall adopt such procedures for calling and conducting meetings as shall be
approved by Majority Vote of the Venturers. The Managing Venturer shall be
entitled to appoint the Chairman of the Managing Committee. The Chairman of the
Managing Committee shall be responsible for calling and conducting the meetings
of the Managing Committee, such meetings to be called on the Chairman's motion
or upon request by members of the Managing Committee representing at least 50%
of the Venturers.
7.4. In the event receipts from the Venture's business are insufficient
to meet the cash needs of the Venture for operating expenses, debt service or
any other current expense, then, if possible, the Venture will, from time to
time (and subject to the requirements of then existing loan agreements of the
Venture), borrow from third-party lenders the funds needed to cover such
deficiencies, in which event and after approval of such borrowing by a 2/3 Vote
of the Venturers, the Managing Venturer shall execute all documents required to
obtain such loans; provided, however, such loans shall be secured solely by the
assets of the Venture and will not require any personal liability of, or
guarantees by, any Venturer or Venturers. If, however, sufficient loan funds are
unavailable on reasonable terms from third-party lenders, then each of the
Venturers shall have an option to make loans
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("Venture Loans") to the Venture in such respective amounts as such Venturers
may agree, or in the absence of an agreement, in the proportionate amount
(measured by the relation of each such Venturer's then-existing Distributive
Share to 100% of the Distributive Shares owned by all such Venturers which elect
to make such Venture Loans) of the, cash needed by the Venture. Each Venture
Loan shall bear interest at a per annum rate of interest equal to the "prime
rate announced from time to time by Chase Manhattan Bank, N.A., New York, New
York, plus 3% (said Venture Loan interest rate changing as and when such prime
rate shall change). Each Venture Loan, prior to final maturity, shall be paid
solely from Available Cash; however, notwithstanding anything in this Agreement
appearing to the contrary, all Venture Loans, including interest thereon, shall
be paid in full from Available Cash before any additional distributions of
Available Cash are made to the Venture, and shall be finally due and
payable, if not sooner paid, 25 years after the date such Venture Loan(s) were
made. Venture Loans shall be non-recourse to the Venturers, payable as aforesaid
solely from Available Cash, but shall be secured by a mortgage lien on the
Project, expressly subordinate to all then or thereafter existing liens of third
parties on the Project if at such final maturity date, such Venture Loan(s)
shall not be paid in full, the holder thereof shall be entitled to foreclose
upon said subordinate mortgage lien, but in no event shall any Venturer be
liable for any deficiency resulting after such foreclosure. The Managing
Venturer shall issue a notification to the Venturers in the Managing Venturer's
reasonable discretion when Venture Loans are needed by the Venture and upon the
issuance of such a notification, each Venturer which elects to make a Venture
Loan shall notify the Managing Venturer within ten (10) days thereafter, and
shall make its Venture Loan within twenty (20) days after the date of such
notification. Unless approved by 2/3 Vote of the Venturers, a notification by
the Managing Venturer requesting Venture Loans shall be made only at such times
as may be reasonably necessary to meet the cash needs of the Venture. in each
notification, the Managing Venturer shall designate the purpose or purposes for
which the proceeds of the Venture Loans will be used. The proceeds from all
Venture Loans shall be used solely for the purposes set out in the notification.
All Venture Loans made pursuant to a given notification shall be repaid on a
proportionate basis, regardless of when made, and shall be repaid in full
before any Venture Loans made pursuant to a subsequent notification are prepaid.
The Venture Loans contemplated under this Section 7.4 are not the
Construction/Term Loan contemplated under this Agreement, and the provisions of
this Section 7.4 shall not apply to the Construction/Term Loan even if made by
one or more of the Venturers or their Affiliates. All Venture Loans shall be
and
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hereby are expressly subordinated to the Construction/Term Loan and any other
loan made to the Venture by third parties other tha, Affiliates of the
Venturers. In the event receipts from the Venture's business are insufficient to
meet cash needs for operating expenses, debt services and other current expense
and the Venture is unable to obtain acceptable third-party loans and Venture
Loans are not made in an amount sufficient to cover such deficit, the Venture
shall be dissolved and liquidated pursuant to Article 14 hereof.
7.5. No Venturer shall, without the written consent of all of the other
Venturers (acting through their respective members of the Managing Committee),
do any of the following:
(a) assign the Venture's property in trust for creditors or on the
assignee's promise to pay the debts of the Venture;
(b) dispose of the goodwill of the Venture;
(c) do any other act which will make it impossible to carry on the
ordinary business of the Venture, except a sale of the Project pursuant to
Article 16;
(d) willfully and knowingly (i) violate any law or (ii) cause the
Project to lose its status as a "Qualifying Cogeneration Facility," as
defined in PURPA;
(e) pledge or transfer or allow or cause to become encumbered in any
manner its interest in the Venture, except as permitted in Article 12
hereof;
(f) do any other act for which unanimity is required by the other
provisions of this Agreement or applicable law;
(g) do any act which will cause another Venturer to incur a personal
liability for indebtedness for borrowed money of the Venture;
(h) alter the purpose of the Venture;
(i) extend the term of this Agreement;
(j) cause the Venture to merge with or acquire any other business;
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(k) sell or otherwise transfer all or substantially all assets of the
Venture in any one transaction or in any period of 12 months, or
(1) change the distribution or allocation provisions of this Agreement
or otherwise amend this Agreement.
7.6. No Venturer shall, unless approved by 2/3 Vote of the Venturers,
do any of the following:
(a) enter into any commitment for or execute any closing documents
for the Construction/Term Loan;
(b) make, execute or deliver for the Venture a bond, mortgage, deed of
trust, guaranty, indemnity bond, security bond or accommodation paper or
accommodation endorsement;
(c) borrow money in the Venture's name or use the Venture's property as
collateral;
(d) assign, transfer, pledge or release any claim or debt in excess of
$100,000 to the Venture except upon payment in full;
(e) convey or contract to convey any Venture real property;
(f) execute (or amend) any contract obligating the Venture to expend
in excess of $500,000 during the contemplated life of the contract (unless
such expenditure in excess of such sum shall have been contemplated in a
previously approved budget) or obligating the Venture to perform services or
sell products which services or products have a value of in excess of
$500,000; or
(g) establish annual budgets.
7.7. No Venturer shall, unless approved by a Majority Vote of the
Venturers, do any of the following:
(a) employ, retain, dismiss or discharge the Manager;
(b) execute (or amend) any contract obligating the Venture to expend in
excess of $50,000 during the contemplated life of the contract (unless such
expenditure in excess of such sum shall have been
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approved pursuant to a previously approved budget) or obligating the Venture to
perform services or sell products which services or products have a value of in
excess of $50,000; or
(c) assign, transfer, pledge or release any claim or debt in excess of
$10,000 to the Venture except upon payment in full.
7.8. The Managing Committee may appoint such committees and agents in
connection with the operation of the Venture and its business as it may deem
necessary or desirable, but no such committee or agent may perform any act for
which consent of the Venturers is required by this Agreement without such
consent. However, it is agreed that the Managing Venturer shall be delegated the
duties hereinafter set forth (and such additional duties as shall from time
to time be agreeable to the Managing Committee and the Managirig Venturer). The
Managing Venturer (or its assigns) shall be paid the Management Fee on a monthly
basis for its services hereunder. (Mention is hereby made that the Managing
Venturer has assigned to Robert C. McNair and his assigns the right to such
Management Fee so long as Cogen shall serve as the Managing Venturer hereunder.)
The Managing Venturer shall be entitled to contract with third parties for the
performance of, and delegate to third parties, all or any part of the duties of
the Managing Venturer hereunder. The Managing Venturer, subject to approval as
to selection by the Managing Committee, shall employ, and from its own funds
shall pay, the salary of the Manager. Likewise, the Managing Venturer shall pay
from its own funds for routine accounting and legal services of the Venture (not
including fees for litigation or fees incurred incident to formation of the
Venture and the negotiation and preparation of agreements and performance of
services incident to development, construction and financing of the Project),
for the wages, salaries and overhead of the Managing Venturer's staff, and
normal travel expenses of representatives of the Managing Venturer in performing
the services of the Managing Venturer hereunder. All other costs, however,
reasonably incurred by the Managing Venturer in connection with the Project
shall be reimbursed by the Venture. The Managing Venturer shall provide the
management necessary to implement or cause to be implemented the decisions
approved by the Managing Committee (in instances in which Managing Committee
approval is required hereunder) and to conduct or cause to be conducted the
ordinary day to day affairs of the Venture in accordance with and as limited by
this Agreement and any budget approved by the Venturers. The Managing Venturer
shall provide all services required of it hereunder without any additional cost
to the Venture, other than the Management Fee (and reimbursement of
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costs as set forth above) and shall procure such additional extraordinary
services as may be required by the venture at Venture expense subject to a
budget approved by the Venturers. The Managing Venturer shall make all
decisions, execute all agreements and documents, and take all other actions in
behalf of the Venture, without the necessity of approval tnereof by the
Venturers, except to the extent the approval of all, a Majority Vote of the
Venturers or a 2/3 Vote of the Venturers is required under any other provision
of this Agreement. Without limiting the foregoing, the Managing Venturer shall
perform, in a timely manner, all the following management duties on behalf of
the Venture:
(1) Employ and supervise the Manager who shall coordinate and supervise
the development and operation of the Project.
(2) Act as a representative of the Venture to administer and supervise
construction of the Project and to certify payments due under the terms of
any contract and coordinate the issuance of any completion certificate and
the correction of any deficiencies in the work.
(3) Provide financial services necessary to the Venture, including,
without limitation, the preparation of an annual budget for approval by the
Venturers, and obtaining preparation of necessary cash flow statements and
statements of sources and application of funds.
(4) Obtain services necessary to maintain all books and records of the
Venture for accounting and tax purposes.
(5) Conduct marketing necessary and incident to the Project and submit
periodic reports to the Venturers, and conduct necessary government,
customer, supplier and public relations.
(6) Negotiate, execute and amend contracts relating to the Project, any
such contract or amendment thereto to be subject to the approval of a
Majority Vote of the Venturers if it shall obligate the Venture to expend in
excess of $50,000, or to perform services or sell products with a value of
in excess of such amount, during the contemplated life of the contract, or
to approval of 2/3 Vote of the Venturers if it shall obligate the Venture to
expend in excess of $500,000, or to perform services or sell
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products with a value of in excess of such amount, during the contemplated
life of the contract, unless, in any instance, such expenditure has been
contemplated in a previously approved budget.
(7) Conduct the day to day management of the Project.
(8) Obtain such insurance, at Venture expense, as may be required by any
contract agreed to by the Venture, or otherwise, as may be approved by the
Venturers with respect to the Project.
(9) Render for taxation and pay, at Venture expense, all ad valorem
taxes, assessments and ofher impositions applicable to the Project and any
other assets of the Venture.
(10) Provide for collection of all sums due to the Venture and otherwise
enforce the obligations of all parties with regard to any contract or other
arrangement entered into by the Venture.
(11) Perform all other normal business functions and otherwise operate and
manage the business and affairs of the Venture in accordance with and as
limited by the terms of this Agreement.
(12) As from time to time determined by the Managing Venturer to be in the
best interest of the Venture, submit to arbitration or similar proceeding
any Venture claims as against a third party not a Venturer or an Affiliate
or liability allegedly owed to the Venture by a third party not a Venturer
or Affiliate.
(13) Select the system supplier for the Project, and, after consultation
with the Managing Committee, enter into the System Supply Agreement.
7.9. The Venture will maintain such bank accounts as the Venturers may
deem necessary, for the deposit of Venture funds and for the proper segregation
thereof into such separate accounts as the Venturers may deem appropriate. All
withdrawals from any such bank account shall be made by the Managing Venturer or
the duly authorized agent or agents of the Managing Venturer. Venture funds
shall not be commingled with those of any other person. Any excess funds not
needed for operating costs which are being held by the Venture prior to
distribution as Available Cash to the Venturers shall be
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invested in demand deposits, money market accounts, certificates of deposit and
other liquid assets as are approved by the Managing Committee from time to
time.
7.10. The Venture shall not indemnify any Venturer for payments made or
liabilities incurred while acting outside the scope of that Venturer s actual
authority. Each Venturer shall be personally liable to the Venture for any
liabilities incurred by the Venture by reason of that Venturer's acting outside
the scope of such Venturer's actual authority. The Venture shall indemnifv,
however, any Venturer for payments made or liabilities incurred while acting
within the scope of that Venturer's actual authority.
ARTICLE 8
LOANS TO THE VENTURE
--------------------
Except for Venture Loans contemplated under Section 7.4, no Venturer
shall be entitled to make loans to the Venture. No Venture Loan shall increase
the Capital Contribution of a Venturer to the Venture or entitle such Venturer
to any increase in such Venturer's Distributive Share. Nothing herein set forth
shall preclude, however, any Venturer or any Affiliate of a Venturer, from
making the Construction/Term Loan to the Venture if approved by 2/3 Vote of the
Venturers.
ARTICLE 9
BOOKS, RECORDS AND TAX MATTERS
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9.1. Proper and complete records and books of account shall be kept by
the Managing Venturer in which shall be entered fully and accurately all
transactions and other matters relative to the Venture's business as are usually
entered into records and books of account maintained by persons engaged in
businesses of like character.
9.2. Each Venturer and/or such Venturer's duly authorized
representative, at such Venturer's expense, shall have the riaht, power and
authority to examine, inspect, copy and audit, at any and all reasonable times,
the-books, records and accounts of the Venture.
9.3. The books and records of the Venture shall be at all times
maintained at the principal office of the Managing Venturer, or at such other
place as the Venturers may determine from time to time.
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9.4. The venture shall be treated as a partnership for federal and all
state tax purposes. The Managing Venturer shall cause the Venture to prepare and
file on or before the due date annually a United States Partnership Return of
Income and any necessary state tax returns. Within ninety (90) days after the
end of each calendar year, the Managing Venturer shall send each person who was
a holder of an interest in the Venture at any time during the calendar year then
ended (including any assignee permitted hereunder, whether or not a substituted
Venturer) all Venture tax information as shall be necessary for the preparation
by such holder of its federal, state or local income tax return. Furtner, the
Managing Venturer will furnish to the Venturers copies of all federal, state and
local income tax returns or information returns, if any, which the Venture is
required to file. The Managing Venturer is hereby designated the "Tax Matters
Partner" of the Venture, and as such, shall be entitled to make all necessary
filings with the Internal Revenue Service. All tax returns filed and all tax
elections made by the venture shall be subject to approval by 2/3 Vote of the
Venturers.
9.5. Within ninety (90) days after the end of each fiscal year, the
Managing Venturer shall send to each person who was a Venturer in the Venture at
any time during the fiscal year then ended (i) a balance sheet as of the end of
the fiscal year and statements of income, Venturers' equity and changes in
financial position for such fiscal year, and a statement of source and
application of funds for such fiscal year, all of which shall be prepared on
an accrual basis in accordance with generally accepted accounting principles,
consistently applied (ii) a report summarizing the fees and other remuneration
paid by the Venture for such fiscal year to the Managing Venturer or any
Affiliate, and (iii) a statement showing each Venturer's share of the Available
Cash and their distributions, net income, net loss, and other relevant fiscal
items of the Venture for such fiscal year. The financial information to be
furnished under (i) through (iii) above will be audited by a nationally
recognized independent certified public accounting firm, selected from time to
time by a Majority Vote of the Venturers. The financial information to be
furnished under (i) above will also be furnished by the Managing Venturer to
each Venturer monthly on an unaudited basis within 20 days after the end of each
month other than the last month of the fiscal year.
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ARTICLE 10
FISCAL YEAR AND BASIS FOR ACCOUNTING
10.1. The fiscal year of the Venture shall be the calendar year or as
otherwise may be designated by the Managing Committee.
10.2. Except to the extent otherwise specifically provided herein, the
Venture shall operate and keep its books and records on an accrual basis in
accordance with generally accepted accounting principles, consistently applied.
ARTICLE 11
LIABILITIES OF VENTURERS INDEMNITY
11.1. None of the Venturers shall be responsible or liable for any
indebtedness or obligation of any other Venturer incurred either before or after
the execution of this Agreement, except separately as to those joint
responsibilities, liabilities, indebtednesses or obligations incurred or assumed
pursuant to the terms of this Agreement.
11.2. As among the Venturers, it is agreed that each Venturer shall be
responsible for the liabilities of the Venture only in proportion to such
Venturer's Distributive Share existing as of the time such liability is
incurred; provided that nothing herein shall be construed to enlarge the extent
of liability in excess of any limitations which may be specified in the
instruments creating or evidencing such liability. A liability shall be deemed
incurred under the immediately preceding sentence at such time as the event or
events giving rise to such liability shall have occurred, except that in respect
of contractual liability, such liability shall be deemed incurred at the time
payment or performance is required under such contract. Nothing in this Section
11.2 shall be deemed to require any personal obligation on the part of any
Venturer to pay to any Venturer any amount in respect of all or any portion of
the Construction/Term Loan.
11.1. Subject to the provisions of Section 11.4 below, the members of
the Managing Committee shall, at their own expense, devote such time to the
Venture business as the members of the Managing Committee shall deem to be
necessary to manage and supervise the Venture business and affairs in an
efficient manner.
11.4. Subject to the terms of Section 7.5(d) hereof, this Agreement
sha11 not preclude or limit, in any respect, the
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right of a Venturer or any Affiliate or any officer, director, shareholder,
trustee or beneficiary of a Venturer or any Affiliate to engage or invest in any
business activity of any nature or description, including those which may be the
same as or s1milar to the Venture's business and in direct or indirect
competition therewith. Any such activity may be engaged in independently or with
others, and may include, but not be limited to, the ownership and/or operation
of a cogeneration facility for such Venturer's or any such Affiliate's,
officer's, director's, shareholder's, trustee's or beneficiary's own account or
the account of others, including any partnership or other entity organized by
a Venturer or any such Affiliate, officer, director, trustee or beneficiary.
Neither the Venture nor any Venturer shall have any right, by virtue of this
Agreement or the partnership relationship created hereby, in or to such other
ventures or activities, or to the income or proceeds derived therefrom, by any
other Venturer and the pursuit of such ventures, even if competitive with the
business of the Venture, shall not be deemed wrongful or improper. Any Venturer
or any Affiliate or any officer, director, shareholder, trustee or beneficiary
of any Venturer or any Affiliate shall have the right to take for his or its own
account (individually or as a trustee) or to recommend to others any investment
opportunity.
11.5. Each Venturer hereby indemnifies the Venture and the Venturers
for all loss, cost and expense incurred by the Venture or such other Venturers
by virtue of such indemnifying Venturer taking action outside the scope of its
authority hereunder, and from any loss, cost or expense resulting from such
indemnifying Venturer willfully and knowingly (i) violating any law or (ii)
causing the Project to lose its status as a "Qualifying Cogeneration Facility,"
as defined in PURPA.
ARTICLE 12
DISPOSITION OF A VENTURER'S VENTURE INTEREST
12.1. A Venturer shall not, without the unanimous consent of the
members of the Managing Committee, which consent shall not be unreasonably
withheld, directly or indirectly, sell, assign, transfer, mortgage, pledge,
grant a security interest in, hypothecate, or in any manner dispose of all or
any portion of such Venturer's interest in the Venture (herein collectively
called a "Disposition") other than as follows:
(a) In the case of any Venturer which in the future may be a trust, to
any beneficiary of such Venturer which is a trust, to any trust created for
the benefit of the beneficiary or beneficiaries of
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such Venturer, or to any successor trustee or trustees of such Venturer; or
(b) Subject to the terms of Section 7.5(d) hereof, to any corporation
which at the time of such transfer is, and which after such transfer will
continue to contro1, be controlled by or be under common control with the
transferring Venturer, provided, however, should such corporation at any
time cease to control or be controlled by or be under common control with
the transferring Venturer as provided above or should such corporation
dissolve and attempt to distribute or otherwise transfer the Venturer
interest held by such corporation except as expressly permitted by this
Article 12, such event shall be deemed a material breach of this Agreement;
unless such interest shall first be offered to the other Venturers as
hereinafter provided. Any attempted Disposition in violation of the foregoing
provisions of this Section 12.1 shall be void and of no force or effect.
Notwithstanding anything herein appearing to the contrary, if the other
Venturers shall refuse to accept any such offer, then the Disposition may be
made to the third party in question, provided there shall be compliance with the
terms of Section 12.6 hereof. In such event (if the Disposition involves a sale,
assignment or transfer of title to such interest, as opposed to a mortgage or
pledge thereof or the granting of a security interest therein), the transferee
shall be deemed a transferee of such interest under Section 12.3, unless such
transferee is admitted as a substitute or additional Venturer under Section
12.5.
12.2. If any Venturer desires to sell, assign, transfer or otherwise
dispose of all or any part of its interest in the Venture (except as permitted
under Section 12.1(a) and (b) above), such Venturer (the "Selling Venturer")
shall first offer such interest for sale to the other Venturers, at the same
price and upon the same terms as are provided in any bona fide written offer
received by the Selling Venturer which it is prepared to accept, in accordance
with the following provisions of this Section 12.2.
(a) The Selling Venturer shall deliver an Offering Notice (hereinafter
defined) to the other Venturers. Within 30 days from the receipt of the
Offering Notice of the Selling Venturer, the other Venturers shall deliver a
Reply Notice to the Selling Venturer. If by their Reply Notice the other
Venturers accept the offer of the Selling Venturer, such Reply Notice shall
constitute an agreement
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binding on the Selling Venturer and the Venturers to convey and acquire the
offered interest at the price and upon the terms stated in the Offering Notice
of the Selling Venturer.
(b) If the other Venturers do not accept the offer of the Selling Venturer
pursuant to the foregoing provisions of this Section 12.2, the Selling Venturer
shall be released and discharged, except as hereinafter stated, from any further
obligation to offer to sell the interest to the Venturers and shall be entitled
under the terms of this Agreement to convey the offered interest to the
purchaser at the price and upon the terms stated in the Offering Notice given by
the Selling Venturer pursuant to this Section 12.2, but only if (i) such such
conveyance shall be completed within a period of six months from the date of
delivery of the Offering Notice to the other Venturers and (ii) the purchaser,
before such conveyance, shall have entered into an agreement with the other
Venturers (satisfactory in form and substance to such other Venturers) whereby
such purchaser assumes all obligations of the Selling Venturer under this
Agreement and agrees to be bound by all of the provisions of this Agreement. If
the Selling Venturer does not complete such a conveyance within such six-month
period, all the provisions of this Agreement, including the provisions of this
Section 12.2, shall apply to any future conveyance or offer for conveyance of
the interest in the Venture so offered by the Selling Venturer, including a
conveyance to such purchaser.
(c) "Offering Notice" means a notice from a Venturer specifying the portion
of such Venturer's interest in the Venture the offering Venturer desires to
convey, the identity of the party from whom the offering Venturer has received a
bona fide written offer for the acquisition of such interest, and the monetary
price set forth in the offer received by the offering Venturer, together with
all of the terms and conditions thereof, and offering such interest to the other
Venturers, to which notice there shall be attached a copy of the offer received
by the offering Venturer.
(d) "Reply Notice" means a notice from any Venturer receiving an Offering
Notice stating whether such Venturer accepts or rejects the offer made by an
Offering Notice.
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(e) Whenever any Venturer is required to offer its interest to the
other Venturers pursuant to this Section, such offer shall be deemed to be
made to the other Venturers both pro rata in accordance with their then
existing respective Distributive Shares, at the time of the offer, or in
such other proportions as the other Venturers may agree upon among
themselves. Except as may otherwise be agreed among the other Venturers,
each of the other Venturers shall have the right to acquire that proportion
of the interest being offered by the Selling Venturer which the then-
existing Distributive Share owned by such Venturer bears to the total then-
existing Distributive Shares owned by all of the other Venturers electing to
accept the offer.
(f) At the time of delivery of each Offering Notice and each Reply
Notice delivered pursuant hereto, a copy thereof shall be delivered to each
person to whom the interest covered thereby may thereafter be required to be
offered pursuant to this Section.
(g) A Reply Notice which accepts an offer made by an Offering Notice
must accept such offer as to the entire interest in the Venture offered by
the Offering Notice. If any Venturer receives an Offering Notice and fails
to deliver a Reply Notice to the offering Venturer within 30 days from the
receipt of such Offering Notice, the party who fails to so deliver a Reply
Notice shall be deemed conclusively to have delivered a Reply Notice stating
that such party does not accept the offer made by such Offering Notice.
(h) Each transaction of conveyance of an interest in the Venture
pursuant hereto which has been accepted by a Venturer shall be closed at
such time and place as shall be agreed upon by the parties thereto, or, if
no such agreement is reached, at the principal office of the Venture on the
thirtieth day following the date of delivery of the last Reply Notice given
in connection with such transaction or, if such date shall not be a business
day, on the first business day thereafter during normal business hours.
12.3. A transferee of any interest in the Venture, whether or not
permitted under Section 12.1 or 12.2 above, shall have no right in the
management of the Venture unless such transferee is either substituted as a
Venturer or unless such transferee was a Venturer immediately prior to such
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transfer. A transferee permitted under Section 12.1 or 12.2 who was not a
Venturer immediately prior to such transfer and who is not, as of the date of
such transfer, admitted to the Venture as a Venturer, (i) shall be entitled to
share in the profits and shall bear the losses of the Venture in accordance with
the Distributive Share so transferred, (ii) shall be responsible for the
liabilities of the Venture attributable to such Distributive Share, and (iii)
shall be entitled to receive that which its transferor would have been entitled
to receive with respect to such transferred interest on dissolution of the
Venture had no such transfer been made. A transferee which is substituted as a
Venturer for the transferring Venturer shall be entitled to appoint the same
number of members to the Managing Committee as the transferring Venturer was
entitled to appoint immediately preceding the transfer. If any Venturer shall
dispose of its entier interest hereunder but its transferee is not admitted as a
Venturer, the transferring Venturer shall no longer have any members on the
Managing Committee, and the votes which such member(s) of such transferring
Venturer had on the Management Committee shall be deemed owned on a
proportionate basis by, if the transferring Venturer is Cogen, the other
Venturers in to their relation then-existing Distributive Shares, or if the
transferring Venturer is other than Cogen, by the other Venturers, exclusive of
Cogen, in relation to their then-existing Distributive Shares. If a Venturer
shall dispose of less than its entire interest, unless all Venturers shall agree
to the contrary, the transferee shall not be entitled to appoint any members to
the Managing Committee, but instead, the member(s) the transferring Venturer
theretofore was entitled to appoint shall continue to be appointed by the
transferor. In no event shall Cogen be entitled to appoint in excess of three
(3) members to the Managing Committee, even if Cogen shall acquire additional
ownership interests in the Venture.
12.4. Following the date of transfer by a Venturer of all of its
venture interest, the transferor shall have no further interest in the Venture
nor shall it be entitled to participate in the management of the Venture.
12.5. No new party not now a Venturer shall be invited to participate
in the Venture nor admitted to the Venture (as a substituted or additional
Venturer) without the written consent of all the Venturers, which consent shall
not be unreasonably withheld. Any new party which may be admitted to the Venture
as a substituted or additional Venturer pursuant to this Section 12.5 shall be
required to assent, by written agreement, to the terms and conditions of this
Agreement as a condition precedent to such party's admission to the Venture. The
admission of a new party to the Venture may also be subject
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to such other and further conditions, including, without limitation, the
contribution of additional capital to the Venture, as the Venturers, by
unanimous consent, may determine. Upon the admission of a new party to the
Venture, each Venturer's Distributive Share shall be adjusted as shall be agreed
upon by all the Venturers, including the newly admitted Venturer.
12.6. Anything contained herein to the contrary notwithstanding, no
Venturer may assign or otherwise transfer the whole or any part of such
Venturer's interest in the Venture, and no attempted or purported transfer or
assignment of a Venture interest (whether or not such assignee or transferee
becomes a substituted Venturer) shall be effective if it prejudices or affects,
or would prejudice or affect, the continuity of the Venture for the purposes of
Section 708 of the Code. The Managing Venturer and/or the Managing Committee is
expressly authorized to enforce this provision by notifying the Venturers that
all transfers or assignments will be suspended for a period of up to twelve (12)
months whenever interests totaling 45% or more in interest of the Venture shall
have been effectively transferred in any twelve (12) month period. Prior to any
such transfer or assignment becoming effective, any Venturer may require an
opinion of counsel to the effect that, except as may result from any basis
adjustment made pursuant to Section 17.12 below, the transfer or assignment will
not cause adverse tax consequences to the Venture or any of the nontransferring
Venturers. Further, prior to any transfer or assignment being effective, the
Venture shall obtain an opinion of counsel to the effect that the transfer or
assignment will not cause the Project to lose its status as a "Qualifying
Cogeneration Facility," as defined in PURPA. The transferor or assignor shall be
responsible for paying all counsel's fees for the opinions contemplated under
this Section 12.6. Moreover, no transfer or assignment shall be made if as a
result thereof the Venture shall be in default under any license, lease,
mortgage or other contract as to which the Venture is then bound.
12.7. Upon the effectiveness of an assignment of interest under this
Article 12, the Venturers shall, if consent to admit such transferee as a
substituted Venturer is obtained pursuant to Section 12.5, execute, file and
record with the appropriate governmental agencies such documents (including
amendments to this Agreement) as are required to accomplish the substitution of
the transferee as a substituted Venturer. The Venture shall treat a person who
becomes a substituted Venturer pursuant to the provisions of this Article 12 as
the substituted Venturer with respect to the interest assigned from the date
such assignment is effective under this Article 12,
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notwithstanding the time consumed in preparing and filing the necessary
documents with governmental agencies necessary to effectuate the substitution.
12.8. Any sale or transfer, directly or indirectly, of any equity
interest in any venturer which is a corporation which results in a chahge in
control of such Venturer from that existing on the date hereof shall be deemed
to be a sale or transfer of such Venturer's interest in the Venture and, in the
absence of compliance with this Article 12, any such change of control shall be
deemed a material breach of this Agreement by such Venturer. For purposes
hereof, a change in control shall be deemed to have occurred at such time as the
owners of 51% or more of the voting securities of such Venturer shall be
persons other than the stockholders of such Venturer on the date hereof or
spouses or descendents of such stockholders. This Section 12.8 shall not apply
to the transfer of voting securities of any corporation whose stock is traded on
a national stock exchange.
12.9. In the event any Venturer desires to mortgage, pledge, grant a
security interest in, or hypothecate all or any portion of its interest in the
Venture, such Venturer shall first offer the other Venturers the opportunity of
providing the financing contemplated by such mortgage, pledge, grant of a
security interest or hypothecation by complying with the same procedures, and
with the same results and effects as are provided for in Sections 12.1 and 12.2.
12.10(a) If at any time the Project shall cease to be a Qualifying
Cogeneration Facility (as defined in PURPA), each Venturer (other than Cogen)
(herein called the "Selling Venturer") shall have the right, exercisable within
thirty (30) days after such Selling Venturer shall have received written notice
of such cessation from the Managing Venturer (which notice the Managing Venturer
hereby agrees to promptly deliver upon its receipt of (a) final governmental
determination, or (b) an undisputed opinion of counsel, to that effect), upon
the giving of notice (the "Exercise Notice") to each of the other Venturers, to
cause either (i) the other Venturers (including Cogen) who shall not have
elected to exercise the right to sell as set forth in this subparagraph (a), or
such of them as shall agree thereto, as more fully set forth in subparagraph (c)
below, or (ii) Cogen (said applicable entity or entities under (i) or (ii) being
herein called the "Purchasing Party") to purchase the Selling Venturer's right,
title and interest as a Venturer in the Venture (the "Subject Interest"),
including, without limitation, all of the Selling Venturer's Distributive Share,
for a purchase price equal to the Agreed Value (as defined in Section 13.3
hereof) thereof, payable as provided in
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subparagraph (b) below. Such purchase shall occur on the business day (the
"Purchase Date"), designated in writing by the Selling Venturer, occurring not
less tnan 20 days nor more than 30 days after the Agreed Value is determined in
accordance with Section 13.3 hereof.
(b) The purchase price provided for in subparagraph (a) above shall be
paid on the Purchase Date by the execution and delivery by the Purchasing Party
of a promissory note acceptable in form to the Selling Venturer or its designee,
(such designee, if any, to be set forth in the Exercise Notice), payable to the
Selling Venturer or such designee (i) in the principal amount of the Agreed
Value of the Subject Interest, (ii) bearing interest payable monthly at the
prime rate referred to in Section 7.4 hereof and at the rate provided in such
Section 7.4 hereof for Venture Loans for any period of time during which any
amount is due and unpaid under such note, and (iii) payable solely from the
Subject Interest and amounts distributed to the Purchasing Party by the Venture
with respect thereto. On the Purchase Date, to secure the payment of amounts
payable pursuant to such note, the Purchasing Party shall execute and deliver to
the Selling Venturer or its designee as aforesaid a security agreement in form
and substance reasonably satisfactory to the Selling Venturer or such designee
assigning to the Selling Venturer or such designee as security the Subject
Interest and all amounts distributable with respect thereto.
(c) At such time as the Exercise Notice is delivered to the Venturers
pursuant to subparagraph (a), the respective Venturers shall have an option on a
proportionate basis (as measured by the then-existing Distributive Shares of
such Venturers) to participate in the acquisition of the Subject Interest, or in
such other sharing arrangement as such other Venturers may agree. In the event
no other Venturer or Venturers shall desire to acquire such interest, Cogen
agrees to acquire such interest. Each Venturer shall make its election whether
or not to participate in such purchase by notification to all other Venturers
of such election within ten (10) days after delivery of the Exercise Notice to
such Venturer. If no Venturers elect to participate in such purchase within such
period, Cogen shall alone acquire the Subject Interest. Such purchase by Cogen,
however, shall in no event subject Cogen to any obligations it does not
currently have hereunder, including, without limitation, any obligation to make
any additional Capital Contributions.
(d) Upon the occurrence of any sale under this Section 12.10, all
distributions and the rights and privileges attributable to, the Subject
Interest wi11 accrue and all
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distributions will be paid in the same manner as would have existed had the
Selling venturer not disposed of its interest pursuant to the terms of this
Section 12.10, and the Subject Interest shall be subject to reduction on the
respective Conversion Dates contemplated hereunder.
(e) The terms of this Section 12.10 shall supersede any other provision
of this Joint Venture Agreement appearing to the contrary, including, without
limitation, the rights of first refusal and prohibition against encumbrances
provisions set forth herein.
12.11. As mentioned in Section 17.18 hereof, the Venture is currently
conducting negotiations with Affiliates of PSVO relative to a construction
loan, a term loan commitment, system supply agreements and an operations and
maintenance agreement for the Project. The execution of this Agreement by
PSVO is contingent upon, and shall not be deemed effective until, the execution
of such other agreements. In the event all such agreements are not consummated
between such Affiliates and the Venture by December 31, 1986, the interest
herein contemplated to be owned by PSVO shall be deemed owned by the Venture
(and shall be disposed of, or ultimately granted to ECFC, CEA (or both) in
accordance with the procedures contemplated under the letter agreement executed
contemporaneously with the Prior J/V Agreement and referred to in the first
"Whereas" clause on page 1 hereof.) PSVO in such event shall not be entitled to
a refund of the $150,000.00 which it previously paid to the Venture. In this
regard, it is acknowledged that such sum of $150,000.00 was heretofore
contributed to the Venture under an agreement which contemplated that PSVO (or
its Affiliates) would have a specified period of time in which to determine
whether to participate in the Venture, and if it timely elected to do so, such
sum would be credited as a Capital Contribution by PSVO or its Affiliates but
otherwise would be paid to the Venture as consideration for such option to
participate. It is acknowledged that PSVO did not timely elect to participate,
but nonetheless is being given credit for such $150,000.00 provided all such
agreements between the Venture and such Affiliates of PSVO are actually
executed.
ARTICLE 13
OPTION TO PURCHASE
13.1. In the event that:
(a) A Venturer or its transferee commits a material breach of this
Agreement (other than a breach
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of the obligation to make the capital contributions required hereunder, which
latter breach shall be governed by Section 4.7 hereof) which is not cured within
ninety (90) days after written notice, stating with particularity the
nature of the material breach, is given by any Venturer to the defaulting
Venturer or transferee in accordance with Section 15.1 hereof, and subject to
the terms of Section 17.10 hereof;
(b) A Venturer or its transferee is deemed to have become bankrupt
pursuant to the definition of "bankruptcy" set forth in Section 14.1 hereof;
(c) A sale is made or attempted under execution, levy or other legal
process of any Venturer's or transferee's interest in the Venture (except
incident to a foreclosure of a mortgage or security interest in such
interest after such mortgage or security interest shall have been made as
permitted under Article 12 hereof) and such sale or attempted sale is not
voided or stayed within thirty (30) days thereafter;
(d) Any Venturer's or transferee's interest in the Venture is subjected
or attempted to be subjected to a charging order pursuant to the laws of any
state having jurisdiction, and such charging order or proceeding is not
voided or stayed within thirty (30) days thereafter; or
(e) Any Venturer or transferee wrongfully or in contravention of this
Agreement causes or attempts to cause a dissolution of the Venture,
then the Venturer or transferee committing such material breach, taking such
action, against whom such action is taken, or whose interest in the Venture is
so affected, shall be obligated to offer and sell all its interest in the
Venture owned or held by such Venturer or transferee at the price, upon the
terms, and in the manner set forth hereinafter in this Article 13.
13.2. Any Venturer or transferee (hereinafter called the "Offering
Party") required to offer and sell its interest in the Venture pursuant to the
terms and provisions of Section 13.1 shall first make an offer to sell such
interest to the other Venturers (excluding the Offering Party). The other
Venturers shall have the first option to purchase such offered interest in the
Venture at the price and upon the terms hereinafter set forth; provided such
option must be exercised by giving notice to the Offering Party within thirty
(30) days
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of receipt by the other Venturers of such offer to sell by the Offering Party.
In the event more than one of the other Venturers elect to purchase the
remaining interest of the Offering Party in Lhe Venture, they shall purchase the
remaining interest in the same proportions as the Distributive Share of each
bears to the total Distributive Shares owned by all Venturers so electing,
unless otherwise agreed by the other Venturers electing to purchase such
interest. To be effective, the other Venturers must elect to purchase all
(100%) of the offered interest. The Venturers electing to purchase all of the
Offering Party's Venture interest are hereinafter called the "Purchasing
Parties."
13.3. The purchase price of any Venture interest subject to an option
granted by this Article 13 and the terms on which such purchase price shall be
paid shall be determined as follows:
(a) The purchase price for the Offering Party's interest in the Venture
shall be the "Agreed Value" thereof, as of the last day of the month preceding
the month in which the event giving rise to the option occurred. The "Agreed
Value" of an Offering Party's Venture interest shall be computed as follows,
and is hereby defined to mean the greater of $1.00 or the amount which is
computed as follows:
(i) Add (a) the book value (computed in accordance with generally
accepted accounting principles, consistently applied) of all tangible
assets of the Venture (exclusive of the Project and all fixtures and
improvements connected therewith, but including all products in process,
Project products and inventory), as carried on the books of the Venture,
plus (b) the appraised value of the Project and all fixtuxes and
improvements connected therewith, as established by appraisal in accordance
with Section 17.11 hereof;
(ii) Deduct from the aforesaid total referred to in (i) above the sum of
all liabilities of the Venture (including, without limitation, the unpaid
balance of the Construction/Term Loan and Venture Loans);
(iii) Multiply the aforesaid remainder by the Offering Party's then
existing Distributive Share;
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(iv) Deduct therefrom all damages incurred by the Venture due to the
occurrence of any event referred to in Section 13.1 hereof; and
(v) The remainder thus obtained, shall be the "Agreed Value" of the
Venture interest of the Offering Party.
In determining the "Agreed Value", no value shall be placed on the goodwill or
name of the Venture.
(b) The closing of the purchase of the Offering Party's interest in the
Venture shall take place at the principal office of the Venture on the first
regular business day following the expiration of thirty (30) calendar days
following the date the Offering Party and the Purchasing Parties receive written
notice of the Agreed Value of said interest as determined in accordance with the
provisions of this Agreement, or at such other time and place as may be
mutually agreed upon by the Offering Party and the Purchasing Parties. At the
closing, the Purchasing Parties shall each pay their respective shares of the
purchase price by payment of cash or immediately available funds and/or delivery
of notes as hereinafter provided, and the Offering Party shall convey and assign
its interest in the Venture (other than with respect to Venture Loans owing to
such Venturer) by executing and delivering to the Purchasing Parties such
assignments, bills of sale, releases and other instruments of assignment and
conveyance as the Purchasing Parties may reasonably require, which assignments
and conveyances shall be with general warranty of title and free and clear of
any and all liens, mortgages, security interests, claims and encumbrances, other
than the terms and provisions of this Agreement and those encumbrances incurred
by all Venturers in connection with the Venture's business (and shall quitclaim
all its right, title and interest in and to Venture assets). All such
instruments shall be in recordable form if requested by any Purchasing Party.
The purchase price for the Offering Party's interest in the Venture shall, at
the respective options of the Purchasing Parties, be payable (i) in cash or
immediately available funds or (ii) ten percent (10%) in cash or immediately
available funds and the balance in accordance with separate promissory notes to
be respectively executed by such Purchasing Parties not electing to pay cash in
amounts equal to their
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respective shares of the purchase price, as makers, bearing interest on the
unpaid principal balance thereof at the rate per annum equal to the lesser of
the "Prime Rate" or the "Maximum Rate" (hereinafter defined), payable in five
(5) equal annual installments of principal (plus accrued interest), with the
first such installment being due one year after the date of closing and each
subsequent installment being due on each anniversary date of closing thereafter.
Any change in the interest rate on the note resulting from a change in the Prime
Rate shall become effective upon the announcement thereof by Chase Manhattan
Bank, N.A. The "Prime Rate" hereunder shall mean a per annum rate of interest
equal to the "prime rate" as announced from time to time by Chase Manhattan
Bank, N.A., New York, New York (but never less than such rate as is necessary to
avoid imputation of interest to the payee under the Code or applicable
regulations). The "Maximum Rate" shall be the maximum lawful rate of interest
which under applicable law (hereinabove defined) may be charged on the
promissory note (provided if there is no maximum lawful rate or interest under
applicable law, the Maximum Rate shall equal 18% per annum). All past due
principal and accrued interest on the promissory note shall bear interest at the
Maximum Rate. Such promissory note may be prepaid in full or in part at any
time without penalty; and the indebtedness evidenced by said promissory note
shall be secured by a security interest in the respective Venture interest
purchased and all proceeds of and from such interest. The holder of such
security interest shall have all rights and remedies of a secured party under
the Uniform Commercial Code, as adopted and amended in the State of New Jersey.
If there shall be more than one Purchasing Party, then such Purchasing Parties
who do not elect to pay cash shall give separate notes in payment of the
respective interests so sold; provided that no Purchasing Party shall be
obligated on any note given by any other Purchasing Party, each respective note
shall be secured only by the respective interest purchased with such note and
there shall be no cross-default or cross-collateralization provisions in any of
said notes. As a portion of the purchase price for the interest so sold, each
Purchasing Party shall assume the payment of all indebtedness (other than non-
recourse or non-personal liability indebtedness) attributable to the respective
interest so acquired by such Purchasing Party.
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13.4. Payments made to a Venturer or other selling party pursuant to
Section 13.3 shall be in full and complete satisfaction of all such party's
property rights as a Venturer or transferee, including its interest in the
Venture and all its rights in venture property and profits, but not including
its rights against the Venture for repayment of Venture Loans made by such
Venturer to the Venture.
ARTICLE 14
DISSOLUTION AND LIQUIDATION
14.1. The Venture shall be dissolved upon the first of the following
to occur:
(a) The expiration of the term of the Venture pursuant to Article 2
hereof,
(b) The unanimous agreement of the Venturers to dissolve,
(c) The receipt by the Venture of the final payment due on the sales
price of the Project or the Venture business following the Venture's sale
thereof,
(d) The dissolution, bankruptcy, retirement, resignation or expulsion
of any Venturer,
(e) The happening of the contingency contemplated in the last sentence
of Section 7.4 hereof,
(f) December 31, 1986, if by such date all material contracts (not
including licenses and permits) necessary to the financing, construction and
operation of the Project shall not have been executed, or
(g) Any other event which causes a dissolution of a general partnership
under the Partnership Act.
Each Venturer agrees that dissolution of the Venture by any event or from any
cause other than bankruptcy or other than as set forth in subsections (a), (b),
(c), (e), (f) or (g) of this Section 14.1, whether voluntary or involuntary,
shall be wrongful and in contravention of this Agreement. For purposes of this
Agreement, the "bankruptcy" of a Venturer shall be deemed to have occurred upon
the happening of any of the following:
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(i) The filing of an application by the Venturer for, or a consent to,
the appointment of a trustee or receiver of such Venturer's interest in the
Venture or of all or substantially all of such Venturer's assets;
(ii) The filing by the Venturer of a voluntary petition in bankruptcy
or the filing of a pleading in any court of record admitting in writing
such Venturer's inability to pay such Venturer's debts as they come due;
(iii) The making by the Venturer of a general assignment for the
benefit of creditors;
(iv) The filing by the Venturer of an answer admitting the material
allegations of, or such Venturer's consenting to, or defaulting in
answering a bankruptcy petition filed against such Venturer in any
bankruptcy proceeding; or
(v) The entry of an order, judgment or decree by any court of competent
jurisdiction adjudicating the Venturer a bankrupt or appointing a trustee or
receiver of such Venturer's interest in the Venture or of all or
substantially all of such Venturer's assets, and such order, judgment or
decree continuing unstayed and in effect for a period of ninety (90) days
after such entry.
14.2. After any dissolution of the Venture, the remaining Venturers
shall review the situation and determine whether notice of dissolution should be
given to creditors and other persons who have had dealings with the Venture
during the two years prior to dissolution and, if so, to whom and in what
manner.
14.3. The capital accounts shall be posted as of the date of
dissolution. No value shall be assigned to goodwill or to the Venture's name.
Assets not sold shall be valued as provided in Section 5.2 hereof and any deemed
gain or loss therefrom shall be allocated to the Venturers in accordance with
the terms of Article 6.
14.4. If dissolution of the Venture occurs because of any event or
cause in contravention of this Agreement or deemed to be in contravention of
this Agreement by the terms hereof (or any event contemplated under Section
14.1(g) above), the Venturers remaining, after exclusion of those Venturers (or
their representatives), if any, on account of whom the dissolution occurred,
shall have the right by unanimous
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agreement among them to continue the Venture's business under the same name,
by themselves or with any other person or persons they may elect.
14.5. If, after any dissolution, the remaining Venturers (herein called
the "Continuing Venturers") elect to continue the Venture's business pursuant
to Section 14.4, the Continuing Venturers (except in the case of expulsion of a
Venturer, in which event the interest of the expelled Venturer, at the option of
the Continuing Venturers, shall be acquired by the Continuing Venturers in
accordance with the terms of Section 4.8 hereof) shall purchase the interest in
the Venture of any non-continuing Venturer at the price and upon the terms
specified in Section 13.3, just as if such Venture interest was subject to the
purchase option as provided in Article 13; provided that such purchase price
shall be reduced by any damages suffered by the Continuing Venturers by reason
of such wrongful dissolution. The Continuing Venturers shall record in the
proper records of the County and/or State in which the Project is located an
amendment to this Joint Venture Agreement reflecting such continuation among
the remaining Venturers, and shall file an amended assumed or fictitious name
certificate to evidence the names of the respective Venturers doing business
under the name of the Venture. The Continuing Venturers shall have and hereby
are granted, an irrevocable power of attorney, to execute and file such amended
assumed or fictitious name certificate.
14.6. Upon dissolution, if the Venture's business is not continued, it
shall be wound up and liquidated as rapidly as business circumstances will
permit. The assets shall be applied to the following uses in the following
order:
(a) To pay or provide for all amounts owing by the Venture to creditors
other than Venturers, and for expenses of winding up;
(b) To pay or provide for all amounts owing to Venturers for Venture
Loans;
(c) To pay or provide for all other amounts owing by the Venture to the
Venturers other than for capital and profits; and
(d) To pay each Venturer the credit balance, if any, in its closing
capital account.
If funds are insufficient to repay all sums owing in respect of each category of
payment specified in the foregoing subsections, then the available funds shall
be applied to
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discharge all the sums owing in respect of as many of said categories as is
possible (commencing with and pursuing the order of priority aforesaid) until
the first category is reached; to which sufficient funds are not available
for completed satisfaction. As to such category, the remaining funds, shall be
distributed proportionately to the Venturers in accordance with the ratio of
their respective claims in such category unless the category involved is
subsection 14.6(d), in which event, such distributions shall be made in the
ratio of then-credit balances in the Venturer's respective capital accounts, as
reduced by all prior allocations and distributions. If in any case prior to
payment under Section 14.6(d), the capital account balances of one or more
Venturers are positive, but one or more capital account balances are negative
(reflect a deficit), the Venturers whose capital account balances are
negative shall pay to the Venture the amount of such negative balance to the
extent of such positive capital account balances.
14.7. If dissolution occurs because of the bankruptcy of a Venturer or
any act of a Venturer in contravention of this Agreement or deemed to be in
contravention of this Agreement by the terms hereof, then the Venturers who did
not cause such dissolution shall have the authority to wind up and liquidate the
business of the Venture. If dissolution occurs by reason of any of the events
set forth in subsections (a), (b), (c), (e) or (f) of Section 14.1, then all of
the Venturers jointly shall have the authority to wind up and liquidate the
business of the Venture. The Venturers, with the authority hereunder to wind up
the business and conduct the liquidation of the Venture (being hereinafter
together called the "Liquidator") shall have all powers conferred upon the
Venturers under the terms of this Agreement to the extent necessary or desirable
in the good faith judgment of the Liquidator to complete the liquidation of the
Venture as provided for herein, including, without limiting the generality of
the foregoing, the following specific powers:
(a) The power to continue to manage and operate any business of the
Venture during the period of such liquidation, including also the power to
make and enter into natural gas purchase agreements, steam and/or electrical
sales agreements and leases or rental contracts covering properties of the
Venture which may extend beyond the period of liquidation; provided,
however, that the Liquidator shall not have the power to create any personal
obligation on any of the Venturers under any such contracts or agreements
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(b) The power to make sales and incident thereto to make deeds, bills
of sale, assignments and transfers of assets and properties of the Venture.
(c) The power to borrow funds as, in the good faith judgment of the
Liquidator, may be reasonably required to pay debts and obligations for
which the Venture is liable and operating expenses of the Venture, and to
grant mortgages, security agreements, pledges and collateral assignments
upon and encumbering any of the Venture properties as security for repayment
of such loans or as security for payment of any other indebtedness of the
Venture; provided, however, that the Liquidator shall not have the power to
create any personal obligation on any of the Venturers to repay such loans
or indebtedness other than out of available proceeds of foreclosure or sale
of the properties or assets as to which a lien or mortgage is granted as
security for payment thereof.
(d) The power to settle, compromise or adjust any claims asserted to
be owing by or to the Venture, and the right to file, prosecute or defend
lawsuits and legal proceedings in connection with any such matters.
(e) The power to make deeds, bills of sale, assignments and transfers
to the respective Venturers and their successors in interest incident to
final distribution of the remaining properties of the venture (if any) as
provided for herein.
All decisions of the Liquidator shall be made by a Majority Vote of the
Venturers comprising the Liquidator. If, under the above provisions, properties
of the Venture are distributed in kind to the respective Venturers and/or their
successors in interest subject to liens or mortgages securing indebtedness of
the Venture, and if thereafter one or more of such Venturers or their successors
in interest shall pay more of such secured indebtedness than the pro rata share
thereof attributable to the undivided interest in such properties thus
distributed to or acquired by it, it shall be subrogated to and entitled to
enforce such liens or mortgages as against the interest of such of the other
Venturers or their successors in interest who have not paid their full pro rata
share of such secured indebtedness to secure repayment to it to the extent of
the deficiency in the proportionate payments attributable to their undivided
interests which should have been made by such other Venturers or their
successors in interest.
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ARTICLE 15
NOTICE
------
15.1. All notices or requests provided for or permitted to be given
pursuant to this Agreement must be in writing and shall only be effective if
given or served by depositing the same in the United States mail, addressed to
the person to be notified, postpaid, and certified with return receipt
requested or by delivering such notice in person to such person against receipt
thereof. Notices given or served pursuant hereto shall be effective upon receipt
by the person to be notified. All notices shall be addressed to the Venturers at
the following respective addresses:
Cogen Technologies NJ, Inc.
14614 Falling Creek Drive, Suite 212
Houston, Texas 77008
Attn: Robert C. McNair
Enron Cogeneration Five Company
3 Riverway
Houston, Texas 77056
Attn: Robert C. Kelly, President
CEA Bayonne, Inc.
c/o Community Energy Alternatives Incorporated
1200 E. Ridgewood Avenue
Ridgewood, New Jersey 07450
Attn: Arthur S. Nislick
PSVO Bayonne, Inc.
Building 2, Room 737
One River Road
Schenectady, New York 12345
Transco Cogeneration Company
2800 Post Oak Boulevard
P. 0. Box 1396
Houston, Texas 77056
Attn: President
By giving to the other Venturers at least five (5) days written notice
thereof in the manner hereinabove provided, the Venturers and their respective
transferees and assigns shall have the right from time to time and at any time
during the term of this Agreement to change their respective addresses and each
shall have the right to specify as its address any other address.
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ARTICLE 16
SALE OF PROJECT
---------------
The Venturers agree that in the event any one of the Venturers shall
receive a bona fide offer from any third party to purchase the Project, and
the Managing Committee by 2/3 Vote of the Venturers agrees to accept such
offer, then all the Venturers shall be obligated to accept such offer, subject
to the prior and preferential right and option of each Venturer, in the
proportion its then-existing Distributive Share bears to the total Distributive
Shares of all Venturers so electing, to acquire the Project on the same terms
and conditions as are set forth in such bona fide third party offer. Such
preferential right and option shall terminate thirty (30) days after receipt by
the Venturer, of written notice of such offer, which notice shall be accompanied
by a copy of such offer and all of the terms and conditions thereof and may
be exercised by hand delivery, telegram (confirmed in writing) or by depositing
such election in the United States Mail, certified, postage prepaid, prior to
the termination of such preferential right and option. In the event an offer is
so accepted, all of the parties hereto shall be bound thereby, and in
furtherance thereof shall execute all necessary instruments and documents and do
all things required to contract for and/or effectuate the sale of the Project
pursuant to such offer.
ARTICLE 17
MISCELLANEOUS
-------------
17.1. The parties hereby acknowledge that in entering into this
Agreement they have contracted with reference to the laws of the State of New
Jersey and the terms and provisions of this Agreement shall be interpreted and
construed under the laws of the State of New Jersey except in such cases and to
such extent as the laws of another jurisdiction shall necessarily control.
17.2. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, and their respective heirs, executors, legal
representatives, successors and assigns. Whenever in this Agreement, a reference
to any party is made, such reference shall be deemed to include a reference to
the heirs, executors, legal representatives, successors and assigns of such
party; however, this Section 17.2 does not constitute a consent to any
assignment, transfer or other disposition of a Venture interest or to the
substitution of any assignee or transferee as a substituted
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Venturer herein other than pursuant to and in accordance with the other
provisions of this Agreement.
17.3. Any agreement to pay an amount and any assumption of liability
herein contained, express or implied, shall be only for the benefit of the
Venture and the Venturers and their respective heirs, executors, legal
representatives, successors and assigns, and such agreements and assumption
shall not inure to the benefit of the obligees of any Indebtedness or any other
party, whomsoever, it being the intention of the parties hereto that no one
shall be deemed a third party beneficiary of this Agreement.
17.4. This Agreement may be amended from time to time by written
instrument signed by all of the Venturers. Any such amendment shall be
designated on its face as an amendment to this Agreement and shall be appended
to each and every counterpart to this Agreement.
17.5. This Agreement may be rescinded, at any time, by the unanimous
written consent of the Venturers.
17.6. This Agreement may be executed in multiple originals. It shall
not be necessary in proving the fact of the existence of this Agreement, its
binding effect, or the contents of any provision hereof to produce more than one
executed original.
17.7. This Agreement contains the entire agreement of the parties
hereto. All prior and contemporaneous written or oral agreements between the
parties as to the formation of the Venture and the rules governing its operation
are revoked and superseded by this Agreement.
17.8. The captions used in this Agreement are for convenience only and
shall not be construed in interpreting this Agreement. Wherever from the
context it appears appropriate, each term stated in either the singular or the
plural shall include the singular and the plural, and pronouns stated in the
masculine, the feminine or the neuter gender shall include the masculine,
feminine and neuter. The term "person" means any individual, corporation,
partnership, trust or other entity. The foregoing, however, shall not be deemed
to allow the assignment, transfer, mortgage, hypothecation or other disposition
of any interest in the Venture without compliance with the terms of this
Agreement relating thereto.
17.9. The Venturers agree that the Project and other assets of the
Venture are owned by the Venture, as an entity. Each Venturer, accordingly, owns
a Venture interest and not an
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undivided interest in such assets and properties. No Venturer shall have any
right to partition the assets and properties of the Venture; and to the extent,
if any, that any Venturer would have such a right, each such Venturer hereby
irrevocably waives any and all rights to maintain any action for partition of
the assets and properties of the Venture, either as a partition in kind or a
partition by sale.
17.10. Notwithstanding anything herein appearing to the contrary, in
the event a Venturer is alleged to be in default hereunder, and such Venturer in
good faith believes itself not to be in default, before the Venture or any
other Venturer shall be entitled to exercise the rights and remedies provided
for herein against such Venturer alleged to be in default, such Venturer alleged
to be in default shall be entitled to have such dispute determined by
arbitration in accordance with the terms of Section 17.11 below, provided
notice of such election is given to the Venture and the other Venturers at
least ten (10) days prior to the date the Venture or Venturers otherwise shall
be authorized to exercise such other rights and remedies against such
Venturer. If such Venturer shall promptly comply with the determination of the
arbitrator, no other remedies hereunder shall be pursued against such Venturer
in connection with the particular event giving rise to such alleged default.
17.11. In any instance in this Agreement in which it is provided that
a value shall be established by appraisal or a dispute settled by arbitration,
the following procedure shall govern (and for purposes of this Section 17.11,
the term "appraisal" shall mean either "appraisal" or "arbitration," as
applicable, and the term "appraiser" shall mean either "appraiser" or
"arbitrator," as applicable):
The Venturer desiring appraisal shall give written notice to that
effect to each of the other Venturers, specifying in said notice the name and
address of the person designated to act as appraiser on its behalf. Within
fifteen (15) days after the service of such notice, those remaining Venturers
who own a majority share of the Distributive Shares owned by all such remaining
Venturers, which majority group is called the "other party" or "second party" in
this Section 17.11, shall give written notice to the first party specifying the
name and address of the person designated to act as appraiser on its behalf. If
the second party fails to notify the first party of the appointment of its
appraiser, as aforesaid, within or by the time above specified, then the
appointment of the second appraiser shall be made in the same manner as is
hereinafter provided for the appointment of a third appraiser in a case where
the two appraisers are
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appointed hereunder and the first two appraisers as well as the Venturers are
unable to agree upon such third appointment. The appraisers so chosen shall
meet within ten (10) days after the second appraiser is appointed and, if within
thirty (30) days after the second appaiser is appointed, the said two
appraisers, in the case of determination of value, shall not agree upon the
valuation and their respective determinations of value shall differ by in excess
of 5% (it being agreed that if such respective determinations shall differ by
51% or less, the average of such respective determinations shall be deemed the
value hereunder for all purposes), or if they shall not agree upon a manner of
resolution of the dispute (in the case of arbitration of a dispute), they shall
themselves appoint a third appraiser whom they believe to be competent and
impartial; and in the event of their being unable to agree on such appointment
within ten (10) days after the time aforesaid, the third appraiser shall be
selected by the Venturers themselves if they can all agree thereon within a
further period of fifteen (15) days. If the Venturers do not so agree, then any
Venturer, on behalf of all the Venturers, may request such appointment by the
United States District Judge for the Federal District of New Jersey in which the
Project is then situated, who is then senior in service (acting as an individual
and not in his judicial capacity), or should such judge refuse to make such
appointment, request for such appointment may be made to the American
Arbitration Association or its successor. In the event of the failure, refusal
or inability of any appraiser to act, a new appraiser shall be appointed in his
stead, which appointment shall be made in the same manner as hereinbefore
provided for the appointment of such appraiser so failing, refusing or unable to
act. The decision of the appraisers so chosen shall be given within a period of
thirty (30) days after the appointment of such third appraiser. The fair market
value figure or manner of resolution of any dispute in which any two appraisers
so appointed and acting hereunder shall concur shall in all cases be binding and
conclusive upon the Venturers and their successors in interest. If no two of
such appraisers agree within said thirty (30)-day period, then all such
appraisers shall state in writing their fair market value figure, in the case of
determination of fair market value, to the Venturers; the three fair market
value figures shall then be averaged, and such average amount shall be
considered to be the appraised fair market value of the subject matter being
appraised. If no two of such appraisers agree with the aforesaid thirty (30)-day
period, in the case of resolution of a dispute, then the last appraiser chosen
as set forth above shall be obligated to agree with the solution of one of the
other two appraisers, which determination shall be deemed the arbitrated
resolution of the disuute. The first and second parties shall each pay the fees
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and expenses of the one of the two appraisers appointed by such respective
parties or in whose stead, as above provided, such appraiser was appointed, and
the fees and expenses of the third appraiser and all other expenses, if any,
shall be borne half by the first party and the other half divided by the
Venturers of the second party in proportion to their respective Venture
interests. Any appraiser designated to serve hereunder shall have broad
experience in business activities similar to those conducted by the Venture.
Wnen an appraisal is sought in connection with the purchase of a Venture
interest pursuant to Article 13, the Offering Party shall be entitled to appoint
one (1) appraiser and the Purchasing Parties shall be entitled to appoint one
(1) appraiser, if done within the time periods and in accordance with the above
provisions of this Section.
17.12. In the event of a transfer of all or part of the
interest of a Venturer in the Venture by sale or exchange or on the
dissolution of a Venturer, the Managing Venturer, at the request of any
Venturer (subject to approval by a Majority Vote of Venturers), shall cause the
Venture to elect, pursuant to the Code, or corresponding provision of subsequent
law, to adjust the basis of the Venture property as provided by Section 743 of
the Code. All other elections required or permitted to be made by the Venture
under the Code shall be made by a 2/3 Vote of the Venturers in such manner as in
their reasonable judgment will be most advantageous to the Venturers. Each of
the Venturers will upon request supply the information necessary to properly
give effect to any such election.
17.13. Each Venturer hereby recognizes that a default by it with
respect ect to its obligations under this Agreement will cause irreparale harm,
injury and damage to the Venture and the other Venturers. Therefore, each
Venturer hereby agrees that in the event of a default by any Venturer in any
obligation hereunder, the other Venturers, or any one or more of them, may, at
their election, seek specific performance by the defaulting Venturer of such
obligation obligations as shall have accrued prior to any termination of the
Venture, and the defaulting Venturer agrees that it will not oppose such attempt
to obtain specific performance on the ground that there exists adequate legal
remedy (in damages or otherwise) for such default. The remedies referred to in
this Agreement shall be nonexclusive, cumulative of and additional to all other
remedies of the Venture and the Venturers.
17.14. Each Venturer hereby represents and warrants to the other
Venturers that, except with respect to arrangements previously made with Kidder,
Peabody & Co. Incorporated pursuant to the Kidder Peabody Agreement, there are
no claims for brokerage or other commissions or finders or
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other similar fees in connection with the transactions covered by this Agreement
insofar as such claims shall be based on arrangements or agreements made by
or on its behalf, and each Venturer hereby agrees to indemnify and hold harmless
the Venture and the other Venturers from and against all liabilities, costs,
damages, and expenses arising from any such claims arising from such
Venturer's breach of said representation and warranty.
17.15. No consent or waiver, express or implied, by any Venturer to or
of any breach or default by any one or more of the other Venturers in the
performance by any one or more of the other Venturers of their respective
obligations hereunder shall be deemed or construed to be a consent or waiver to
or of any other breach or default in the performance by other Venturers of the
same or any other obligations of such other Venturers of the same or any other
obligations of such other Venturers hereunder or its rights with respect to such
default. Failure on the part of any Venturer to complain of any act or failure
to act of any of the other Venturers or to declare any of the other Venturers in
default, irrespective of how long such failure continues, shall not constitute a
waiver of such Venturer of its rights hereunder.
17.16. If any provision of this Agreement or the application of any
provision hereof to any party or circumstance shall be invalid or unenforceable
to any extent, the remainder of this Agreement and the application of such
provision to other parties or circumstances shall not be affected thereby and
shall be enforced to the greatest extent permitted by law.
17.17. Recognizing that each Venturer may find it necessary from time
to time to establish to third parties such as accountants, banks, mortgagees or
the like, the then current status of performance hereunder, each Venturer agrees
upon the written request of any other Venturer, made from time to time, to
furnish promptly a written statement (in recordable form, if requested) on the
status of any matter pertaining to this Agreement.
17.18. Each of the Venturers acknowledges, on behalf of itself and the
Venture, that: (1) PSVO is an Affiliate of the proposed lender under the
contemplated construction loan agreement, of the system supplier under the
contemplated system supply agreement, of the contractor under the contemplated
operation and maintenance agreement and under the site preparation agreement
(all of which agreements are currently under negotiation) and may be an
Affiliate of the lender under the long term financing agreement; (2) it will
assert no claim (including counterclaims, cross-actions and
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<PAGE>
offsets), defense, or affirmative defense, whether legal or equitable in nature,
against (and hereby waives all objections to any claims, defenses, or
affirmative defenses of) such construction lender, system supplier, contractor,
or long term lender under, the aforesaid agreements or documents or agreements
related thereto, including its exercise of rights and remedies thereunder, which
claims, defenses, affirmative defenses, or objections are based in whole or in
part on the existence of such Affiliate relationship (except to the extent, such
claims, defenses, affirmative defenses or objections are expressly permitted
under such agreements); (3) waives all claims (including counterclaims, cross-
actions and offsets), defenses, and affirmative defenses, whether legal or
equitable in nature, against (and hereby waives all objections to any claims,
defenses, or affirmative defenses of) PSVO hereunder or under the above
described agreements, which claims, defenses, affirmative defenses; or
objections are based in whole or in part on the existence of such Affiliate
relationship (except to the extent the raising of such claims, defenses,
affirmative defenses or objections is expressly permitted under such
agreements). Nothing hereinabove set forth, however, shall excuse such
Affiliates of PSVO from performance of their duties under the above-described
agreements.
17.19. CEA hereby agrees to furnish to the Venture within thirty (30)
days after the date hereof, evidence reasonably satisfactory to the Venture, of
the ability of CEA to meet its financial obligations pursuant to Section 4.3
hereof; provided, however, if it shall be necessary to obtain governmental
approval of any proposed manner in which CEA is to establish such financial
ability, CEA shall promptly seek such approval and pursue such efforts with
diligence, in which event the thirty (30)-day period referred to in this Section
17.18 shall be extended for a reasonable period not to exceed, however, ninety
(90) days after the date hereof to enable CEA to obtain such governmental
approval. In the event CEA shall fail to so furnish such evidence within such
applicable time period, it shall be deemed to be in material default hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
multiple originals as of the day and in the year first above written.
ATTEST: COGEN TECHNOLOGIES NJ, INC.
/s/ [Signature appears here] By: /s/ [Signature appears here]
- ------------------------------ Name:
Secretary Title:
Address:
-55-
<PAGE>
ATTEST: ENRON COGENERATION FIVE COMPANY
/s/ [Signature appears here] By: /s/ [Signature appears here]
- ------------------------------ Name:
Secretary Title: Vice President
Address:
ATTEST: CEA BAYONNE, INC.
/s/ [Signature appears here] By: /s/ ARTHUR S. NISLICK
- ------------------------------ Name: Arthur S. Nislick
Secretary Title: President
Address: 1200 E. Ridgewood Ave.
Ridgewood, NJ 07450
ATTEST: PSVO BAYONNE, INC.
/s/ [Signature appears here] By: /s/ CLEMENS M. THOENNES
- ------------------------------ Name: Clemens M. Thoennes
Secretary Title: Vice President
Address: c/o General Electric
1 River Road, 21741
Schenectady, NJ 12345
ATTEST: TRANSCO COGENERATION COMPANY
/s/ [Signature appears here] By: /s/ ROBERT M. CHISTE
- ------------------------------ Name: Robert M. Chiste
Secretary Title: Sr. Vice President
Address:
-56-
<PAGE>
The undersigned, Enron Corp., hereby guarantees in favor of the
Venture, the complete and timely performance by ECFC of the obligations of ECFC
under Section 4.3 hereof (as such provisions may from time to time be modified
or amended pursuant to the terms of the foregoing Joint Venture Agreement), and
hereby waives all suretyship defenses in connection with such guarantee.
ENRON CORP.
By /s/ K. D. Kern
Name K. D. Kern
Title Executive Vice President and
Chief Financial Officer
The under signed, General Electric Company, hereby guarantees in favor
of the Venture, the complete and timely performance by PSVO of the obligations
of PSVO under Section 4.3 hereof (as such provisions may from time to time be
modified or amended pursuant to the terms of the foregoing Joint Venture
Agreement), and hereby waives all suretyship defenses in connection with such
guarantee.
GENERAL ELECTRIC COMPANY
By /s/ Delbert L. Williamson
Name Delbert L. Williamson
Title Vice President
The undersigned, Transco Energy Company, hereby guarantees in favor of
the Venture, the complete and timely performance by TCC of the obligations of
TCC under Section 4.3 hereof (as such provisions may from time to time be
modified or amended pursuant, to the terms of the foregoing Joint Venture
Agreement), and hereby waives all suretyship defenses in connection with such
guarantee.
TRANSCO ENERGY COMPANY
By /s/ Robert M. Chiste
Name Robert M. Chiste
Title Sr. Vice President
-57-
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Houston, Texas
May 22, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF COGEN TECHNOLOGIES, INC. AT MAY 20, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> MAY-20-1998
<PERIOD-END> MAY-20-1998
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1
<TOTAL-LIABILITY-AND-EQUITY> 1
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
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</TABLE>
